BCTX 10-Q
BriaCell Therapeutics Corp. (BCTX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐Accelerated filer | |
| ☒
|
||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of March 18, 2024, there were common shares, no par value per share, of the Company issued and outstanding.
BRIACELL THERAPEUTICS CORP.
Form 10-Q
Table of Contents
| 2 |
PART I-FINANCIAL
INFORMATION
Item 1. Financial Statements
BRIACELL THERAPEUTICS CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| January 31, 2024 | July 31, 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Amounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS: | ||||||||
| Investments | ||||||||
| Equity investment in BC Therapeutics | ||||||||
| Intangible assets, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Trade payables | $ | $ | ||||||
| Accrued expenses and other payables | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Warrant liability | ||||||||
| Total non-current liabilities | ||||||||
| SHAREHOLDERS’ DEFICIT: | ||||||||
| Share Capital of par value - Authorized: at January 31, 2024 and July 31, 2023, Issued and outstanding: shares January 31, 2024 and July 31, 2023, respectively | ||||||||
| Share-based payment reserve | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Non-controlling Interest | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
BRIACELL THERAPEUTICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2024
(Unaudited)
| Three months ended January 31, | Six months ended January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development expenses | $ | $ | $ | $ | ||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financial expenses, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Share of loss on equity investment | ( | ) | ( | ) | ||||||||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | $ | ( | ) | ( | ) | |||||
| Net loss attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net loss and Comprehensive loss for the period attributable to BriaCell | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss per share attributable to BriaCell – basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares used in computing net basic earnings per share of common stock | ||||||||||||||||
| Weighted average number of shares used in computing net diluted earnings per share of common stock | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
BRIACELL THERAPEUTICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2024
| Share capital | Additional paid in | Accumulated other comprehensive | Accumulated | Non- controlling | Total shareholders’ equity | |||||||||||||||||||||||
| Number | Amount | capital | loss | deficit | interest | (deficit) | ||||||||||||||||||||||
| Balance, October 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Issuance of options | - | |||||||||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance, January 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Share capital | Additional paid in | Accumulated other comprehensive | Accumulated | Non- controlling | Total shareholders’ | |||||||||||||||||||||||
| Number | Amount | capital | loss | deficit | interest | deficit | ||||||||||||||||||||||
| Balance, July 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Instruments issued to minority shareholders at the Arrangement Date | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Issuance of options | - | |||||||||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance, January 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Share capital | Additional paid in | Accumulated other comprehensive | Accumulated | Total equity | ||||||||||||||||||||
| Number | Amount | capital | loss | deficit | (deficit) | |||||||||||||||||||
| Balance, October 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of options | - | |||||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, January 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Share capital | Additional paid in | Accumulated other comprehensive | Accumulated | Total equity | ||||||||||||||||||||
| Number | Amount | capital | loss | deficit | (deficit) | |||||||||||||||||||
| Balance, July 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of options | - | |||||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, January 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 5 |
BRIACELL THERAPEUTICS CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JANUARY 31, 2024
(Unaudited)
| Six months ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flow from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Share-based compensation | ||||||||
| Share of loss on equity investment | ||||||||
| Change in fair value of warrants | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Increase in amounts receivable | ( | ) | ||||||
| Decrease in prepaid expenses | ( | ) | ||||||
| Increase in trade payable | ||||||||
| Decrease in accrued expenses and other payables | ( | ) | ( | ) | ||||
| Total cash flow from operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Equity Investment in BC Therapeutics (*) | ||||||||
| Total cash flow from investing activities | ||||||||
| Cash flows from financing activities | ||||||||
| Share and warrant buyback program | ( | ) | ||||||
| Total cash flow from financing activities | ( | ) | ||||||
| Decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of the period | ||||||||
| Cash and cash equivalents at end of the period | $ | $ | ||||||
| (*) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
BriaCell Therapeutics Corp
Notes to the Condensed Consolidated Financial Statements
(Unaudited, expressed in US Dollars, except share and per share data and unless otherwise indicated)
NOTE 1: GENERAL AND GOING CONCERN
| a. | BriaCell Therapeutics Corp. (“BriaCell” or the “Company”) was incorporated under the Business Corporations Act (British Columbia) on July 26, 2006 and is listed on the Toronto Stock Exchange (“TSX”) under the symbol “BCT” and on the Nasdaq Capital Market (“NASDAQ”) under the symbols “BCTX” and “BCTXW”. |
| b. | BriaCell Therapeutics Corporation. (the “Company”), is an immuno-oncology biotechnology company. The Company is currently advancing its Bria-IMT targeted immunotherapy program against end-stage breast cancer to Phase 3 study which has been approved by the FDA and is expected to start before end of 2023. BriaCell is also developing a personalized off-the-shelf immunotherapy, Bria-OTS™, and a soluble CD80 protein therapeutic which acts both as a stimulator of the immune system as well as an immune checkpoint inhibitor. |
| c. | Basis of presentation of the financial statements: |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the U.S Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments consisting of a normal recurring nature which are necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report for the year ended July 31, 2023, filed with the SEC on October 25, 2023. The interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.
| d. | The
Company continues to devote substantially all of its efforts toward research and development activities. In the course of such activities,
the Company has sustained operating losses and expects such losses to continue in the foreseeable future. The Company’s accumulated
deficit as of January 31, 2024 was $ |
| 7 |
BriaCell Therapeutics Corp
Notes to the Condensed Consolidated Financial Statements
(Unaudited, expressed in US Dollars, except share and per share data and unless otherwise indicated)
NOTE 1: GENERAL AND GOING CONCERN (Cont.)
| e. | The Company has two wholly-owned U.S. subsidiaries: (i) BriaCell Therapeutics Corp. (“BTC”), which was incorporated in April 3, 2014, under the laws of the state of Delaware. (ii) BTC has a wholly-owned subsidiary, Sapientia Pharmaceuticals, Inc. (“Sapientia”), which was incorporated in September 20, 2012, under the laws of the state of Delaware. The Company also has one Canadian subsidiary: BriaPro Therapeutics Corp, (“BriaPro”) which was incorporated on May 15, 2023, was incorporated under the Business Corporations Act (British Columbia). As of July 31, 2023, BriaPro was a wholly-owned subsidiary. |
| f. | On August 31, 2023, the Company closed a plan of arrangement spinout transaction (the “Arrangement”) pursuant to which certain pipeline assets of the Company, including Bria-TILsRx™ and protein kinase C delta (PKCδ) inhibitors for multiple indications including cancer (the “BriaPro Assets”), were spun-out to BriaPro Therapeutics Corp. (“BriaPro”), resulting in a 2/3rd owned subsidiary of the Company with the remaining 1/3rd held by BriaCell shareholders (“BriaCell Shareholders”). |
Pursuant to the terms of the Arrangement, BriaPro has acquired the entire right and interest in and to the BriaPro Assets in consideration for the issuance by BriaPro to the Company of BriaPro common shares. Under the terms of the Arrangement, for each BriaCell share held immediately prior to closing, BriaCell Shareholders receive one (1) common share of BriaPro, and one (1) new common share of BriaCell (retiring their old share) having the same terms and characteristics as the existing BriaCell common shares. The Company will remain listed on the NASDAQ Stock Market and Toronto Stock Exchange, and BriaPro is an unlisted reporting issuer in Canada.
Immediately
following the closing of the Arrangement, the Company controls 2/3rd of the BriaPro common shares representing approximately
As a result of the Arrangement, there are BriaPro common shares issued and outstanding. The Company now beneficially owns or controls approximately BriaPro common shares, representing 2/3rd of the issued and outstanding BriaPro common shares.
Pursuant to the Arrangement, each BriaCell warrant shall, in accordance with its terms, entitle the holder thereof to receive, upon the exercise thereof, one BriaCell Share and one BriaPro Share for the original exercise price.
Upon the exercise of BriaCell Warrants, BriaCell shall, as agent for BriaPro, collect and pay to BriaPro an amount for each one (1) BriaPro Share so issued that is equal to the exercise price under the BriaCell Warrant multiplied by the fair market value of one (1) BriaPro Share at the Effective Date divided by the total fair market value of one (1) BriaCell Share and one (1) BriaPro Share at the Effective Date (“BriaPro Warrant Shares”).
Pursuant to the Arrangement, all Briacell option holders received the same amount of BriaPro options (“BriaPro Option”) and under the BriaPro incentive plan. The exercise price of the BriaCell options was apportioned between the BriaCell options and the BriaPro options, as follows:
Each one (1) BriaPro Option to acquire one (1) Share shall have an exercise price equal to the product obtained by multiplying the original exercise price of the BriaCell Option by the quotient obtained by dividing (A) the fair market value of a BriaPro Share at the Effective Date by (B) the aggregate fair market value of a BriaCell Share and a BriaPro Share at the Effective Date.
Pursuant to the Arrangement, all BriaCell Restricted Shares Units (“RSU”) holders received the same amount of BriaPro RSU’s under the BriaPro incentive plan.
Transition Services Agreement
On
August 31, 2023, the Company and BriaPro executed a transition services agreement (the “Agreement”), pursuant to which BriaCell
will provide certain research and development and head office services (the “Services”) to BriaPro for a fixed monthly fee
of $
Briacell and BriaPro acknowledged the transitional nature of the Services and accordingly, as promptly as practicable, BriaPro agreed to use commercially reasonable efforts to transition each Service to its own internal organization or to obtain alternate third party providers to provide the Services.
In accordance with US GAAP’s Accounting Standards Codification 505 “Equity”, the Arrangement was determined to be a spinoff of nonmonetary assets which did not constitute a business. However, since the assets were transferred to an entity under the Company’s control, the assets is being recorded on the Company’s basis (carry value) and not at fair market value.
| 8 |
BriaCell Therapeutics Corp
Notes to the Condensed Consolidated Financial Statements
(Unaudited, expressed in US Dollars, except share and per share data and unless otherwise indicated)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
a. Use of estimates:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the consolidated financial statements, and the reported amount of expenses during the reporting periods. Actual results could differ from those estimates.
b. Equity method investments:
Investments in entities over which the Company does not have a controlling financial interest but has significant influence, are accounted for using the equity method, with the Company’s share of losses reported in loss from equity method investments on the statements of loss and comprehensive loss. Equity method investments are recorded at cost, plus the Company’s share of undistributed earnings or losses, and impairment, if any, within interest in equity investees on the statements of financial position.
c. Recently issued and adopted accounting standards:
As an “emerging growth company,” the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflects this election. The pronouncements below relate to standards that impact the Company.
| 1. | In March 2022, the FASB issued ASU 2022-02 - Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This standard eliminates the accounting guidance on TDRs for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for any entities that have adopted ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The adoption of this standard did not result in amended disclosures in the Company’s Condensed Consolidated Financial Statements, nor did this standard have a material impact the Company’s results of operations. |
| 9 |
BriaCell Therapeutics Corp
Notes to the Condensed Consolidated Financial Statements
(Unaudited, expressed in US Dollars, except share and per share data and unless otherwise indicated)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| 2. | In July 2023, the FASB issued 2023-03 — Presentation of Financial Statements (Topic 205), Income Statement — Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation — Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022, EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 — General Revision of Regulation S-X: Income or Loss Applicable to Common Stock (SEC Update). The adoption of this standard did not result in amended disclosures in the Company’s Condensed Consolidated Financial Statements, nor did this standard have a material impact the Company’s results of operations. |
NOTE 3: INVESTMENT IN BC THERAPEUTICS INC.
On December 21, 2021, the Company and BC Therapeutics, Inc. (“BC Therapeutics” or “the Investee”) entered a share purchase agreement (“SPA”), pursuant to which the Company invested $ at $ per BC Therapeutics share for a % interest in the Investee. Pursuant to the SPA, Briacell also received two options to invest an additional $ per option at $ per BC Therapeutics share. The first option expires on February 15, 2024 and the second option expires on June 30, 2024 (“BC Therapeutics Options”). In accordance with ASC 321 and ASC 815, the BC Therapeutics Options were valued at $ in accordance with the Black Scholes Option Price Model, using the following assumptions: Share price: $, Exercise price: $, Dividend yield: %, Risk free interest rate: $%, Volatility: %.
Subsequent to January 31, 2024, the Company exercised the first option on February 1, 2024 and now holds % of BC Therapeutics.
BC Therapeutics has a board of four representatives, with two representatives appointed by BriaCell and two representatives appointed by the existing shareholders. All significant decisions related to BC Therapeutics require the approval of at least a majority of the board members.
Changes in the Company’s Investment in BC Therapeutics is summarized as follows:
| Balance – August 1, 2023 | $ | |||
| Funding (including the value of the BC Therapeutics Options) | ||||
| Share of losses: | ||||
| Operating expenses | ( | ) | ||
| Balance – January 1, 2024 | $ |
The following amounts represent the Company’s % share of the assets and liabilities of BC Therapeutics:
As of January 31, 2024 | ||||
| Current assets: Cash | $ | |||
| Net assets | $ | |||
NOTE 4: CONTINGENT LIABILITIES AND COMMITMENTS
| a. | BriaPro Warrants |
As
detailed in note 1(f), upon the exercise of BriaCell Warrants, BriaCell shall, as agent for BriaPro, collect and pay to BriaPro an amount
of up to $
| b. | Lease |
The
Company is currently in a
| 10 |
BriaCell Therapeutics Corp
Notes to the Condensed Consolidated Financial Statements
(Unaudited, expressed in US Dollars, except share and per share data and unless otherwise indicated)
NOTE 5: FAIR VALUE MEASUREMENTS
The following table presents information about our financial instruments that are measured at fair value on a recurring basis as of January 31, 2024, and July 31, 2023:
| Fair Value Measurements at | ||||||||||||||||||||||||
| January 31, 2024 | July 31, 2023 | |||||||||||||||||||||||
| Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||||
| Financial Assets: | ||||||||||||||||||||||||
| Cash and cash equivalents | ||||||||||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||
| Warrants liability | ||||||||||||||||||||||||
| Total liabilities measured at fair value | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The Company classifies its cash and cash equivalents and the liability in respect of publicly traded warrants within Level 1 because we use quoted market prices in active markets.
The fair value of the warrant liability for non-public warrants is measured using inputs other than quoted prices included in Level 1 that are observable for the liability either directly or indirectly, and thus are classified as Level 2 financial instruments.
NOTE 6: SHAREHOLDERS’ EQUITY
a. Authorized share capital
The authorized share capital consists of an number of common shares with par value.
b. Issued share capital
shares were issued during the six-month period ended January 31, 2024.
c. Share Purchase Warrants
| (i) | There were no changes in share purchase warrants for the six-month period ended January 31, 2024 as presented below: |
Number of warrants outstanding | Weighted average exercise price | |||||||
| Balance, July 31, 2023 and January 31, 2024 | $ | |||||||
| (ii) | As of January 31, 2024, warrants outstanding were as follows: |
Number of Warrants |
Exercise Price(*) | Exercisable At January 31, 2024 |
Expiry Date | |||||||||
| $ | ||||||||||||
| $ | – | |||||||||||
| $ | ||||||||||||
| (*) |
| 11 |
BriaCell Therapeutics Corp
Notes to the Condensed Consolidated Financial Statements
(Unaudited, expressed in US Dollars, except share and per share data and unless otherwise indicated)
NOTE 6: SHAREHOLDERS’ EQUITY (Cont.)
d. Compensation Warrants
| (i) | There were no changes to compensation warrants for the six-month period ended January 31, 2024. |
| (ii) | As of January 31, 2024, compensation warrants outstanding were as follows: |
Number of Warrants | Exercise Price(*) | Exercisable At January 31, 2024 | Expiry Date | |||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| (*) |
e. Warrant liability continuity
The following table presents the summary of the changes in the fair value of the warrants:
| Warrants liability | ||||
| Balance as of August 1, 2023 | $ | |||
| Fair value of BriaPro Warrant Shares at Effective Date | $ | |||
| Change in fair value during the period | $ | ( | ) | |
| Balance as of January 31, 2024 | $ | |||
The key inputs used in the valuation of the non-public warrants as of January 31, 2024 and at July 31, 2023 were as follows:
| 12 |
BriaCell Therapeutics Corp
Notes to the Condensed Consolidated Financial Statements
(Unaudited, expressed in US Dollars, except share and per share data and unless otherwise indicated)
NOTE 6: SHAREHOLDERS’ EQUITY (Cont.)
| January 31, 2024 | July 31, 2023 | |||||||
| Share price | $ | $ | ||||||
| Exercise price | $ | - | $ | - | ||||
| Expected life (years) | - | - | ||||||
| Volatility | % | % | ||||||
| Dividend yield | % | % | ||||||
| Risk free rate | - | % | % | |||||
The key inputs used in the valuation of the of the BriaPro Warrant Shares as of January 31, 2024 were as follows:
January 31, 2024 | August 31, 2023 (Effective Date) |
|||||||
| Share price | $ | $ | ||||||
| Exercise price | $ | - | $ | - | ||||
| Expected life (years) | - | - | ||||||
| Volatility | % | % | ||||||
| Dividend yield | % | % | ||||||
| Risk free rate | - | % | % | |||||
| a. | On
August 2, 2022, the Company approved an omnibus equity incentive plan (“Omnibus Plan),
which will permit the Company to grant incentive stock options, preferred share units, RSU, and deferred share units (collectively, the “Awards”)
for the benefit of any employee, officer, director, or consultant of the Company or any subsidiary
of the Company. The maximum number of shares available for issuance under the Omnibus Plan
shall not exceed
| |
| b. | The following table summarizes the number of options granted to directors, officers, employees and consultants under the option plan for six-month period ended January 31, 2023 and related information: |
| Number of options | Weighted average exercise price | Weighted average remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
| Balance as of July 31, 2023 | $ | $ | ||||||||||||||
| Balance as of January 31, 2024 | ||||||||||||||||
| Exercisable as of January 31, 2024 | $ | $ | ||||||||||||||
As of January 31, 2024 there are $ of total unrecognized costs related to share-based compensation that is expected to be recognized over a period of up to years.
| 13 |
BriaCell Therapeutics Corp
Notes to the Condensed Consolidated Financial Statements
(Unaudited, expressed in US Dollars, except share and per share data and unless otherwise indicated)
NOTE 7: SHARE-BASED COMPENSATION (Cont.)
| c. | The following table summarizes information about the Company’s outstanding and exercisable options granted to employees as of January 31, 2024. |
Exercise price | Options outstanding as of January 31, 2024 | Weighted average remaining contractual term (years) | Options exercisable as of January 31, 2024 | Weighted average remaining contractual term (years) | Expiry Date | |||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| d. | As result of the Arrangement, BriaPro Options were issued and are outstanding as of January 31, 2024: |
Exercise Price | Options outstanding as of January 31, 2024 | Options exercisable as of January 31, 2024 | Expiry Date | |||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| e. | Restricted Share Unit Plan |
Number of RSU’s outstanding | Aggregate intrinsic value | |||||||
| Balance, July 31, 2023 | $ | |||||||
| Balance, January 31, 2024 | $ | |||||||
| 14 |
BriaCell Therapeutics Corp
Notes to the Condensed Consolidated Financial Statements
(Unaudited, expressed in US Dollars, except share and per share data and unless otherwise indicated)
NOTE 7: SHARE-BASED COMPENSATION (Cont.)
f. The total share-based compensation expense related to all of the Company’s equity-based awards, recognized for the three and six-month period ended January 31, 2024 and 2023 is comprised as follows:
| Three months ended January 31, | Six months ended January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Research and development expenses | $ | $ | ||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total share-based compensation | $ | $ | ||||||||||||||
NOTE 8: FINANCIAL INCOME (EXPENSES), NET
Three months ended January 31, | Six months ended January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Interest income | $ | $ | ||||||||||||||
| Change in fair value of warrant liability | ( | ) | ( | ) | ( | ) | ||||||||||
| Foreign exchange gain (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Financial income (expenses), net | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
NOTE 9: SUBSEQUENT EVENT
The Company evaluated the possibility of subsequent events existing in the Company’s unaudited condensed consolidated financial statements through March 18, 2024, the date that the condensed consolidated financial statements were available for issuance. The Company is not aware of any subsequent events which would require recognition or disclosure in the consolidated financial statements, except as follows:
| a. | As disclosed in note 3, subsequent to January 31, 2024, on February 1, 2024 the Company exercised an option
to acquire an additional interest in BC Therapeutics and now owns |
| 15 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to BriaCell Therapeutics Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Introduction
This Management’s Discussion and Analysis (“MD&A”) should be read together with other information, including our unaudited condensed interim consolidated financial statements and the related notes to those statements included in Part I, Item 1 of this Quarterly Report (the “Condensed Consolidated Financial Statements”), our consolidated financial statements appearing in our Annual Report on Form 10-K for the year ended July 31, 2023 (the “Annual Report”) and Part I, Item 1A, Risk Factors, of the Annual Report. This MD&A provides additional information on our business, recent developments, financial condition, cash flows and results of operations, and is organized as follows:
| ● | Part 1 - Business Overview. This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends. | |
| ● | Part 2 - Results of Operations. This section provides an analysis of our results of operations for the first half and second quarter of fiscal 2024 in comparison to the first half and second quarter of fiscal 2023. | |
| ● | Part 3 - Financial Liquidity and Capital Resources. This section provides an analysis of our cash flows and outstanding debt and commitments. Included in this analysis is a discussion of the amount of financial capacity available to fund our ongoing operations and future commitments. |
We prepare and report our unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP. Our unaudited Condensed Consolidated Financial Statements, and the financial information contained herein, are reported in U.S Dollars.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
BriaCell Therapeutics Corp. (the “Company”), is a clinical-stage biotechnology company that is developing novel immunotherapies to transform cancer care. Immunotherapies have come to the forefront in the fight against cancer as they harness the body’s own immune system to recognize and destroy cancer cells. The Company is currently advancing its Bria-IMT™ targeted immunotherapy in combination with an immune check point inhibitor (Retifanlimab) in a pivotal1 Phase 3 study in advanced metastatic breast cancer. Bria-IMT™ is currently under Fast Track Designation by the U.S. FDA intended to accelerate the review process of novel treatments that address unmet medical needs. Positive completion of the pivotal study, following review by FDA, could lead to full approval of the Bria-IMT™ immune checkpoint inhibitor combination in advanced metastatic breast cancer. BriaCell reported benchmark-beating patient survival and clinical benefit in advanced metastatic breast cancer with median overall survival of 13.4 months in BriaCell’s advanced metastatic breast cancer patients vs. 6.7-9.8 months for similar patients reported in the literature in its Phase 2 study of Bria-IMT™ combination study with retifanlimab at the 2023 San Antonio Breast Cancer Symposium. A completed Bria-IMT™ Phase 1 combination study with retifanlimab (an anti-PD1 antibody manufactured by Incyte) confirmed tolerability and early-stage efficacy. BriaCell is also developing a personalized off-the-shelf immunotherapy, Bria-OTS™, which provides a platform technology to develop personalized off-the-shelf immunotherapies for numerous types of cancer, and a soluble CD80 protein therapeutic which acts both as a stimulator of the immune system as well as an immune checkpoint inhibitor.
1“Pivotal” is an industry term referring to a Phase 3 clinical study intended to show and confirm the safety and efficacy of a treatment.
| 16 |
Recent Developments
On August 31, 2023, the Company closed the previously announced plan of arrangement spinout transaction (the “Arrangement”) pursuant to which certain pipeline assets of the Company, including Bria-TILsRx™ and protein kinase C delta (PKCδ) inhibitors for multiple indications including cancer (the “BriaPro Assets”), were spun-out to BriaPro Therapeutics Corp. (“BriaPro”), resulting in a 2/3rd owned subsidiary of the Company with the remaining 1/3rd held by BriaCell shareholders (“BriaCell Shareholders”).
Pursuant to the terms of the Arrangement, BriaPro has acquired the entire right and interest in and to the BriaPro Assets in consideration for the issuance by BriaPro to the Company of BriaPro common shares. Under the terms of the Arrangement, for each BriaCell share held immediately prior to closing, BriaCell Shareholders receive one (1) common share of BriaPro, and one (1) new common share of BriaCell (retiring their old share) having the same terms and characteristics as the existing BriaCell common shares. The Company will remain listed on the NASDAQ Stock Market and Toronto Stock Exchange, and BriaPro is an unlisted reporting issuer in Canada.
As noted above, immediately following the closing of the Arrangement, the Company controlled 2/3rd of the BriaPro common shares representing approximately 66.6% of the issued and outstanding common shares of BriaPro As a result of the Arrangement, there were approximately 47,945,178 BriaPro common shares issued and outstanding immediately following consummation of the Arrangement. The Corporation now beneficially owns or controls approximately 31,963,452 BriaPro common shares, representing 2/3rd of the issued and outstanding BriaPro common shares.
On October 3, 2023, BriaCell initiated its pivotal Phase 3 Study of Bria-IMT™ in advanced metastatic breast Cancer. The study will evaluate the efficacy and safety of the Bria-IMT™ combination regimen with an immune check point inhibitor (Retifanlimab) in patients who have failed at least two approved therapies for the disease. Bria-IMT™ is currently under Fast Track Designation by the U.S. FDA intended to accelerate the review process of novel treatments that address unmet medical needs. Positive completion of the pivotal study, following review by FDA, could lead to full approval of the Bria-IMT™ immune checkpoint inhibitor combination in advanced metastatic breast cancer. FDA has agreed that improvement in overall survival in the Bria-IMT™ combination arm as compared to the physician’s choice of treatment arm will be the primary endpoint of the study. The study will enroll 177 patients in the Bria-IMT™ combination therapy arm and 177 patients in the treatment of physician’s choice arm. To gather additional information on the Bria-IMT™ regimen alone, 50 patients will be enrolled in this regimen and will be eligible for combination therapy following their initial post treatment evaluation. BriaCell expects frequent and responsive FDA communication under its Fast Track status during the pivotal Phase 3 study. The successful completion of the pivotal Phase 3 study would allow BriaCell to subsequently submit a Biologics License Application and accelerate the path to commercialization.
| 17 |
Results of Operations for the Three Months Ended January 31, 2024 and 2023
| Three months ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating Expenses: | ||||||||
| Research and development expenses | $ | 8,257,455 | $ | 3,053,357 | ||||
| General and administrative expenses | 1,571,991 | 1,432,966 | ||||||
| Total operating expenses | 9,829,446 | 4,486,323 | ||||||
| Operating loss | (9,829,446 | ) | (4,486,323 | ) | ||||
| Financial expenses, net | (1,486,119 | ) | (7,395,439 | ) | ||||
| Share of loss on equity investments | (18,345 | ) | - | |||||
| Net loss for the period | $ | (11,333,910 | ) | $ | (11,881,762 | ) | ||
| Net loss attributable to non-controlling interest | (39,307 | ) | - | |||||
| Net loss for the period attributable to BriaCell | (11,294,603 | ) | (11,881,762 | ) | ||||
| Net loss per share attributable to BriaCell – basic and diluted | $ | (0.71 | ) | $ | (0.77 | ) | ||
Research and Development Costs
Research costs are comprised primarily of (i) salaries and wages to Company employees at our laboratory; and (ii) clinical trials and investigational drug costs, which include the testing and manufacture of our investigational drugs and costs of our clinical trials.
The following is a breakdown of our research and development costs by project:
| Three months ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Clinical trials | $ | 4,359,850 | $ | 1,438,231 | ||||
| Pre-clinical projects | 2,992,990 | 745,236 | ||||||
| Chemical, Manufacturing and Control Costs (“CMC Costs”) | 420,112 | 331,590 | ||||||
| Other | 484,503 | 538,300 | ||||||
| $ | 8,257,455 | $ | 3,053,357 | |||||
Our clinical trial expenses include the extra costs for our immunotherapy program, Bria-IMT™, Phase I/IIa clinical trial. Clinical trial expenses increased in 2024 as patients stayed in the trial for a longer period of time (i.e. a longer than expected overall survival). Additionally, our costs increased significantly compared with the same period in 2023 for much higher set up costs for the pivotal Phase 3 study of Bria-IMT™ combination regimen with Retifanlimab in advanced breast cancer, and additional expenses in preparation for the upcoming clinical studies of Bria-OTS™.
Pre-clinical projects include expenses incurred in our off-the-shelf personalized immunotherapies, including Bria-OTS+™, and Bria-PROS™. Our pre-clinical costs have increased in 2024 as we hired more staff to accelerate our existing pre-clinical program and added an additional pre-clinical program (sCD80).
Other costs are ancillary expenses we incur such as costs to maintain our patents, investigation of early-stage projects, scientific advisory board expenses, contracts with vendors for pre-clinical work, and administration costs associated with all our research and development expenditure. Other costs increased in 2024 as we investigated additional potential pre-clinical projects.
The following is a breakdown of our research and development costs by nature of expenses:
| Three months ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Clinical trial sites and investigational drug costs | $ | 6,200,980 | $ | 1,288,577 | ||||
| Wages and salaries | 1,401,679 | 1,282,441 | ||||||
| Laboratory Rent | 108,000 | 48,000 | ||||||
| Supplies | 312,543 | 207,061 | ||||||
| Professional fees | - | 2,187 | ||||||
| Share-based compensation | 234,253 | 225,091 | ||||||
| $ | 8,257,455 | $ | 3,053,357 | |||||
| 18 |
For the three-month period ended January 31, 2024, total research costs amounted to $8,257,455 as compared to $3,053,357 for the three-month period ended January 31, 2023. The rise in these costs is primarily attributed to the continued expansion of the Company’s clinical trials, specifically our Bria-IMT™ trial. Clinical trials and investigational drug costs increased from $1,288,577 in 2023 to $6,200,980 in 2024. Laboratory costs increase during 2024 as well, including the hiring of additional lab employees which increased from $1,282,441 in 2023 to $1,401,679 in 2024 and increased supplies from $207,061 in 2023 to $312,543 in 2024. Finally, the increase in share-based compensation (non-cash) expenses, from $225,091 in 2023 to $234,253 in 2024 also contributed to the increase in research and development expenses.
General and Administrative Expenses
For the three-month period ended January 31, 2024, general and administrative expenses amounted to $1,571,991 as compared to $1,432,966 for the three-month period ended January 31, 2023. The increase relates primarily to shareholder communication expenses and in share-based compensation (non-cash) expense, offset by a decrease in insurance expenses and professional fees.
Financial income (expenses), net
For the three-month period ended January 31, 2024, financial expense, net, amounted to $1,486,119 as compared to $7,395,439 for the three-month period ended January 31, 2023. The large difference is due to the change in value of the Company’s warrant liability which amounted to a loss of $1,567,746 in the three-month period ending January 31, 2024, and a loss of $7,629,502 in the three-month period ending January 31, 2023.
Loss for the period
The Company reported a loss for the three-month period ended January 31, 2024, of $11,294,603, as compared to a loss of $11,881,762 for the three-month period ended January 31, 2023. The loss in 2024 is due to a significant increase in operational spending. The loss in the prior period is primarily due to the large increase in fair value of the warrant liability.
Results of Operations for the Six Months Ended January 31, 2024 and 2023
| Six months ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating Expenses: | ||||||||
| Research and development expenses | $ | 15,114,712 | $ | 6,308,572 | ||||
| General and administrative expenses | 3,217,762 | 3,580,902 | ||||||
| Total operating expenses | 18,332,474 | 9,889,474 | ||||||
| Operating loss | (18,332,474 | ) | (9,889,474 | ) | ||||
| Financial expenses, net | 12,975,781 | (3,098,829 | ) | |||||
| Share of loss on equity investments | (18,345 | ) | - | |||||
| Net loss for the period | $ | (5,375,038 | ) | (12,988,303 | ) | |||
| Net loss attributable to non-controlling interest | (81,978 | ) | - | |||||
| Net loss for the period attributable to BriaCell | (5,293,060 | ) | (12,988,303 | ) | ||||
| Net loss per share attributable to BriaCell – basic and diluted | $ | (0.33 | ) | $ | (0.84 | ) | ||
| Weighted average number of shares used in computing net basic earnings per share of common stock | 15,981,726 | 15,518,018 | ||||||
| Weighted average number of shares used in computing net diluted earnings per share of common stock | 15,981,726 | 15,518,018 | ||||||
| 19 |
Research and Development Costs
Research costs are comprised primarily of (i) salaries and wages to Company employees at our laboratory; and (ii) Clinical trials and investigational drug costs, which include the testing and manufacture of our investigational drugs and costs of our clinical trials.
The following is a breakdown of our research and development costs by project:
| Six months ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Clinical trials | $ | 7,987,140 | $ | 3,041,327 | ||||
| Pre-clinical projects | 5,061,969 | 1,608,402 | ||||||
| CMC Costs | 967,309 | 741,608 | ||||||
| Other | 1,098,294 | 917,235 | ||||||
| $ | 15,114,712 | $ | 6,308,572 | |||||
Our clinical trial expenses include the extra costs for our immunotherapy program, Bria-IMT™, Phase I/IIa clinical trial. Clinical trial expenses increased in 2024 as patients stayed in the trial for a longer period of time (i.e. longer than expected overall survival). Additionally, our costs increased significantly compared with those in the same period in 2023 for much higher set up costs for the pivotal Phase 3 study of Bria-IMT™ combination regimen with Retifanlimab in advanced breast cancer, and additional expenses in preparation for the upcoming clinical studies of Bria-OTS™.
Pre-clinical projects include expenses incurred in our off-the-shelf personalized immunotherapies, including Bria-OTS+™, and Bria-PROS™. Our pre-clinical costs have increased in 2023 as we hired more staff to accelerate our existing pre-clinical program and added an additional pre-clinical program (sCD80).
CMC Costs include the manufacturing of Bria-IMT™ and Bria-OTS™. CMC Costs increased in 2024 to support the pivotal Phase 3 study, and the upcoming clinical studies of Bria-OTS™.
Other costs are ancillary expenses we incur such as costs to maintain our patents, investigation of early-stage projects, scientific advisory board expenses, contracts with vendors for pre-clinical work, and administration costs associated with all our research and development expenditure. Other costs increased in 2024 as we investigated additional potential pre-clinical projects.
The following is a breakdown of our research and development costs by nature of expenses:
| Six months ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Clinical trial sites and Investigational drug costs | $ | 11,598,418 | $ | 3,330,516 | ||||
| Wages and salaries | 2,422,404 | 1,998,985 | ||||||
| Laboratory Rent | 196,480 | 96,000 | ||||||
| Supplies | 401,566 | 300,425 | ||||||
| Professional fees | 3,782 | 7,299 | ||||||
| Share-based compensation | 492,062 | 575,347 | ||||||
| $ | 15,114,712 | $ | 6,308,572 | |||||
For the six-month period ending January 31, 2024, research costs amounted to $15,114,712, a significant increase from the $6,308,572 incurred during the same period in 2023. This upturn was primarily fuelled by the expansion of the Company’s Phase 2 trial, and initiation of the Phase 3 trial of the Bria-IMT™ regimen, and heightened costs associated with clinical trials and investigational drugs, surging from $3,330,516 in 2023 to $11,598,418 in 2024. Concurrently, laboratory costs increased due to the recruitment of additional employees, growing from $96,000 to $196,480. Notably, non-cash share-based compensation expenses decreased from $575,347 in 2023 to $492,062 in 2024, mitigating some of the overall increase in research and development expenses.
General and Administrative Expenses
For the six-month period ended January 31, 2024, general and administrative expenses amounted to $3,217,762 as compared to $3,580,902 for the six-month period ended January 31, 2023. This reduction is mainly attributed to a decrease in non-cash share-based compensation expenses, which declined from $803,438 in 2023 to $541,909 in 2024 and insurance expenses which declined from $847,241 in 2023 to $583,997 in 2024.
Financial income (expenses), net
For the six-month period ending January 31, 2024, net financial income amounted to $12,975,781, a significant increase from the loss of $3,098,829 recorded in the same period of 2023. This substantial difference is primarily attributed to the change in the value of the Company’s warrant liability, which is directly affected by the shortened life of the warrants and decrease in share price, resulting in a gain of $12,714,331 for the six-month period ended January 31, 2024, compared to a loss of $3,511,712 in the six-month period ended January 31, 2023.
| 20 |
Loss for the period
The Company reported a loss for the period ended January 31, 2024, of $5,375,038, as compared to $12,988,303 for the period ended January 31, 2023. The reduced loss in 2024 was primarily due to a significant increase in operational spending, offset by a large gain resulting from the decrease in the fair value of the warrant liability. In contrast, the larger loss in the prior period was primarily due to higher operational spending and an increase in the value of the Company’s warrant liability.
Going Concern Uncertainty
The financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future.
As of January 31, 2024, the Company has total assets of $12,231,047 (July 31, 2023 - $27,163,577) and a positive working capital balance of $7,817,634 (July 31, 2023 -$25,147,050). The Company had negative cash flows from operating activities during the six-month period ended January 31, 2024 of $15,006,564.
The Company is planning to finance its research and developmental activities from its existing and future working capital resources and will continue to evaluate additional sources of capital and financing. The uncertainty of the Company’s ability to raise such financial capital casts significant doubt on the Company’s ability to continue as a going concern.
Liquidity and Capital Resources
As of January 31, 2024, the Company has working capital of $7,817,634 (July 31, 2023 - $25,147,050) and an accumulated deficit of $85,945,291 (July 31, 2023 - $80,652,231).
As of January 31, 2024, the Company’s capital resources consist primarily of cash and cash equivalents, comprising mostly of cash on deposit with banks, investments in money market funds, investments in U.S. government securities, U.S. government agency securities, and investment grade corporate debt securities. Our investment policy and strategy are focused on preservation of capital and supporting our liquidity requirements.
Historically, the Company has financed its operation through private and public placement of equity securities, as well as debt financing. The Company’s ability to fund its longer-term cash requirements is subject to multiple risks, many of which are beyond its control. The Company intends to raise additional capital, either through debt or equity financings in order to achieve its business plan objectives. Management believes that it can be successful in obtaining additional capital; however, there can be no assurance that the Company will be able to do so. There is no assurance that any funds raised will be sufficient to enable the Company to attain profitable operations or continue as a going concern. To the extent that the Company is unsuccessful, the Company may need to curtail or cease its operations and implement a plan to extend payables or reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
During the six-month period ended January 31, 2024, the Company’s overall position of cash and cash equivalents decreased by $15,006,563 from the six-month period ended January 31, 2023 (including effects of foreign exchange). This decrease in cash can be attributed to the following:
The Company’s net cash used in operating activities during the six-month period ended January 31, 2024, was $15,006,564, as compared to $7,494,122 for the six-month period ended January 31, 2023.
Cash used in financing activities for the six-month period ended January 31, 2024, was nil, as compared to $47,294 for the six-month period ended January 31, 2023.
| 21 |
Off-Balance Sheet Arrangements
None.
Tabular Disclosure of Contractual Obligations
None.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided in the MD&A section in our Annual Report.
New Accounting Policies Adopted
The Company did not adopt any new accounting policies during the six-month period ended January 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company’s financial instruments consist of cash and cash equivalents, investments, trade payable , and accrued expenses and other payables. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted.
Management understands that the Company is exposed to financial risk arising from fluctuations in foreign exchange rates and the degree of volatility of these rates as a portion of the Company’s transactions occur in Canadian Dollars (mainly costs relating to being a public company in Canada), and the Company’s functional and presentation currency is the US dollar. The Company does not use derivative instruments to reduce its exposure to foreign currency risk.
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management process. The overall objectives of the Board are to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility.
The type of risk exposure and the way in which such exposure is managed is as follows:
Credit Risk
The Company has no significant concentration of credit risk arising from operations. Management believes that the credit risk concentration with respect to financial instruments is remote.
Liquidity Risk
The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities as they come due. As of January 31, 2024, the Company has total assets of $12,231,047 (July 31, 2023 - $27,163,577 ) and a positive working capital balance of $7,817,634 (July 31, 2023 –$25,147,050).
Market Risk
Interest rate risk
Interest Rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest rates. The Company does not believe it is exposed to material interest rate risk as it has no interest-bearing debt.
Price risk
As the Company has no revenues, price risk is remote.
| 22 |
Exchange risk
The Company is exposed to foreign exchange risk as a portion of the Company’s transactions occur in Canadian Dollars (mainly costs relating to being a public company in Canada) and, therefore, the Company is exposed to foreign currency risk at the end of the reporting period through its Canadian denominated trade payable and cash. As of January 31, 2024, a 5% depreciation or appreciation of the Canadian dollar against the US dollar would not have a material effect on the in total loss and comprehensive loss.
Fair Values
The carrying values of cash and cash equivalents, trade payable, and accrued expenses and other payables approximate their fair values due to their short terms to maturity.
Cash and cash equivalents are valued using quoted market prices in active markets. The fair value of the warrant liability is determined based on the nature of the warrant. For publicly traded warrants we use the quoted market price and for all other warrants we use the Black-Scholes pricing model.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our principal executive officer and principal accounting and financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our principal executive officer and principal accounting and financial officer have concluded that as of January 31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have not been material changes in our internal control over financial reporting during the quarter ended January 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 23 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors previously disclosed in our Annual Report for the year ended July 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of equity securities during the three months ended January 31, 2024
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
EXHIBIT INDEX
| * | Filed herewith. |
| 24 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BRIACELL THERAPEUTICS CORP. | ||
| March 18, 2024 | By: | /s/ William V. Williams |
| Name: | William V. Williams | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| March 18, 2024 | By: | /s/ Gadi Levin |
| Name: | Gadi Levin | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
| 25 |