BriaCell Therapeutics Corp. - Quarter Report: 2023 April (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-40101

BRIACELL THERAPEUTICS CORP.

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

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 ☒ No ☐

As of June 14, 2023, there were 15,981,726 common shares, no par value per share, of the Company issued and outstanding.

BRIACELL THERAPEUTICS CORP.

Form 10-Q

Table of Contents

PART I-FINANCIAL

INFORMATION

Item 1. Financial Statements

BRIACELL THERAPEUTICS CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of the condensed consolidated financial statements.

BriaCell Therapeutics Corp.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

The accompanying notes are an integral part of the condensed consolidated financial statements.

BRIACELL THERAPEUTICS CORP.

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity

The accompanying notes are an integral part of the condensed consolidated financial statements.

BriaCell Therapeutics Corp.

Unaudited Condensed Consolidated Statement of Cash Flows

The accompanying notes are an integral part of the condensed consolidated financial statements.

NOTE 1: GENERAL

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, 2022, filed with the SEC on October 28, 2022. 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.

Prior to 2021, the Company prepared its financial statements, including its condensed financial statements, in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), as permitted in the United States based on the Company’s qualification as a “foreign private issuer” under the rules and regulations of the SEC. In connection with the loss of the Company’s status as a foreign private issuer effective on August 1, 2022, the Company, as a domestic filer, prepares its consolidated financial statements in accordance with U.S. GAAP, and restated its condensed consolidated financial statements as of April 30, 2022, to be prepared in accordance with U.S. GAAP.

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, judgments, 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. Recently issued and adopted accounting standards:

The Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company as an “emerging growth company” to delay the 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 reflect this election.

NOTE 3: CONTINGENT LIABILITIES AND COMMITMENTS

On May 24, 2023, the Company reached a settlement agreement with an investor who made certain claims against the Company and was seeking monetary and injunctive relief, and against which the Company had filed counterclaims. Pursuant to the settlement agreement, the Company paid $230,000 for the full and final settlement of all of the investor’s claims, in full and final settlement of any and all existing claims that the Company and investor had or may have had against each other.

The Company is currently on a month-to-month lease arrangement for office and lab space in Philadelphia, PA, in the amount of approximately $16,000 per month.

NOTE 4: FAIR VALUE MEASUREMENTS

The following table presents information about our financial instruments that are measured at fair value on a recurring basis as of April 30, 2023, and July 31, 2022:

 SCHEDULE OF FAIR VALUE ON A RECURRING BASIS 

We classify our 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 5: SHAREHOLDERS’ EQUITY (DEFICIT)

The authorized share capital consists of an unlimited number of common shares with no par value.

During the nine-month period ended April 30, 2023, 300 warrants with an exercise price of $5.31 were exercised for gross proceeds of $1,594. The Company issued 300 shares in respect of the exercise of these warrants.

c. Share buyback program

On September 9, 2021, the Company approved a repurchase program whereby the Company may purchase through the facilities of the TSX or NASDAQ (i) up to 1,341,515 common shares (the “Common Shares”) and (ii) up to 411,962 publicly traded BCTXW warrants (the “Listed Warrants”) in total, representing 10% of the 13,415,154 Common Shares and 10% of the 4,119,622 Listed Warrants comprising the “public float” as of September 8, 2021, over the next 12 months (the “Buyback”). Independent Trading Group (ITG) Inc. acted as the Company’s advisor and dealer manager in connection with the Buyback. The Company received final regulatory approval on September 22, 2021. On September 27, 2022, the Company completed the share buyback program, repurchasing a total of 1,031,672 shares with a value of $9,098,014 (net of commissions), none of which were repurchased during the nine month period ended April 30, 2023, and 259,059 publicly traded warrants for $1,121,011 (net of commissions) with a fair value of $1,130,808, of which 15,736 were repurchased and cancelled during the nine-month period ended April 30, 2023. All of the warrants and shares repurchased have been cancelled.

During the three month period ending April 30, 2022 a total of 667,366 shares were canceled with a value of $5,589,945 (net of commissions). All of these shares were recognized upon their repurchase within the three-month period ending January 31, 2022.

d. Share Purchase Warrants

A summary of changes in share purchase warrants for the nine months ended April 30, 2023, is presented below:

 SUMMARY OF CHANGES IN WARRANTS 

As of April 30, 2023, warrants outstanding were as follows:

 SCHEDULE OF WARRANTS OUTSTANDING 

e) Compensation Warrants

  SCHEDULE OF WARRANTS OUTSTANDING 

f) Warrant liability continuity

The following table presents the summary of the changes in the fair value of the warrants:

 SCHEDULE OF CHANGE IN FAIR VALUE OF WARRANTS

The key inputs used in the valuation of the warrants as of April 30, 2023 and at July 31, 2022 were as follows:

 SCHEDULE OF VALUATION OF NON PUBLIC WARRANTS

NOTE 6: SHARE-BASED COMPENSATION

 SCHEDULE OF NUMBER OF OPTIONS GRANTED

The weighted-average grant date per-share fair value of stock options granted during nine-month period ended April 30, 2023, was $5.03. As of April 30, 2023, there are $1,103,450 of total unrecognized costs related to share-based compensation that is expected to be recognized over a period of up to 1.75 years.

 SCHEDULE OF FAIR VALUE MEASUREMENT OF EQUITY-SETTLED SHARE OPTIONS

 SCHEDULE OF OUTSTANDING AND EXERCISABLE OPTIONS

The following table summarizes the number of RSU’s granted to directors under the Omnibus Plan for nine-month period ended April 30, 2023:

 SCHEDULE OF RESTRICTED STOCK UNITS GRANTED

f. The total share-based compensation expense related to all of the Company’s equity-based awards, recognized for the three and nine months ended April 30, 2023 and 2022 is comprised as follows:

SCHEDULE OF SHARE-BASED COMPENSATION EXPENSES

NOTE 7: LOSS ON SETTLEMENT

On May 24, 2023, the Company reached a settlement agreement with an investor who made certain claims against the Company and was seeking monetary and injunctive relief, and against which the Company had filed counterclaims. Pursuant to the settlement agreement, the Company paid $230,000 for the full and final settlement of all of the investor’s claims, in full and final settlement of any and all existing claims that the Company and investor had or may have had against each other.

NOTE 8: FINANCIAL INCOME (EXPENSES), NET

 SCHEDULE OF FINANCIAL INCOME (EXPENSE), NET

NOTE 9: SUBSEQUENT EVENTS

Pursuant to the Arrangement Agreement, SpinCo will acquire the entire right and interest in and to the SpinCo Assets in consideration for the issuance by SpinCo to the Company of SpinCo common shares (the “SpinCo Shares”). Under the terms of the Arrangement, for each common share of the Company held immediately prior to closing, shareholders shall receive one (1) common share of SpinCo, and one (1) new common share of the Company having the same terms and characteristics as the existing Company common shares. SpinCo Shares issued to Company shareholders shall, in the aggregate, represent 33.33% ownership of SpinCo Shares upon closing of the Arrangement, with the Company initially retaining a 66.67% ownership interest in SpinCo. Company shareholders who receive SpinCo Shares will ultimately own shares in both the Company and SpinCo. Holders of existing Company warrants shall receive upon exercise of each warrant, for the original exercise price: one (1) Company common share and one (1) SpinCo Share for each Company common share that was issuable upon exercise of the warrant.

Following the Arrangement, the Company’s common shares shall remain listed on NASDAQ and the TSX, and the Company’s public warrants shall remain listed on NASDAQ. SpinCo shall be an unlisted reporting issuer in Canada.

The board of directors of the Company unanimously (a) determined that the Arrangement is in the best interests of the Company and fair, from a financial point of view, to shareholders, (b) approved the Arrangement and the Arrangement Agreement, and (c) recommended that shareholders vote in favor of the Arrangement at the special shareholder meeting described below.

In determining to support the Arrangement, the Company’s board relied in part on the opinion of BDO Canada LLP that the consideration to be received by BriaCell shareholders under the Arrangement is fair, from a financial point of view, to shareholders. The Arrangement requires approval by the Company’s shareholders at a special meeting of shareholders expected to be held in July 2023. Approval of the Arrangement must be obtained by a special resolution passed by a majority of not less than two-thirds of the votes cast by shareholders who vote in respect of the resolution. The Arrangement must also be approved by the TSX as well as the Supreme Court of British Columbia (the “Court”). An interim order of the Court will be applied for to prescribe certain procedural matters relating to the special meeting of shareholders, followed by an application for a final order to approve the Arrangement after the special meeting of shareholders.

Subject to the satisfaction of all conditions to closing set out in the Arrangement Agreement, it is anticipated that the Arrangement will be completed by August 2023. Conditions to closing include, inter alia, shareholder approval, required court orders and TSX and NASDAQ approvals.

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, 2022 (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:

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 (the “Company”) is an immuno-oncology biotechnology company with a strong focus on cancer immunotherapy. Immunotherapies have come to the forefront in the fight against cancer since they harness the body’s own immune system to recognize and destroy cancer cells. BriaCell owns the U.S. and Japanese patents to SV-BR-1-GM (“Bria-IMT™”), a whole-cell targeted immunotherapy for cancer (U.S. Patent No. 7,674,456, U.S. Patent No. 11,559,574 B2, Japanese Patent No. 6901505), as well as patents related to PKCδ inhibitors (U.S. Patent Nos. 9,364,460 and 9,572,793). The Company is currently advancing our targeted immunotherapy program by prioritizing a Phase II clinical trial with Bria-IMT™ in combination with an immune checkpoint inhibitor. The Bria-IMT™ regimen was evaluated in four patients in a prior study in 2004-2006 by Dr. Charles Wiseman, the scientific founder, former member of the board of directors of the Company and principal scientific advisor. Encouraging results were obtained, especially in a patient who matched Bria-IMT™ at HLA-DR alleles and had a grade II tumor. In 2017-2018 BriaCell evaluated 23 patients with advanced breast cancer with the Bria-IMT™ regimen and obtained confirmation of the ability of the Bria-IMT™ regimen to induce regression of metastatic breast cancer in patients who match Bria-IMT™ at least at one HLA allele and/or if they had grade I or grade II tumors. A combination study with the immune checkpoint inhibitor pembrolizumab (KEYTRUDA®) was initiated and the first patient dosing in the “combination therapy” clinical trial occurred in September 2018. BriaCell purchased the KEYTRUDA® for this study as BriaCell does not have an agreement with Merck & Co., Inc. for the supply of KEYTRUDA®. Eleven patients were dosed in the combination therapy trial with Bria-IMT™ and the immune checkpoint inhibitor KEYTRUDA® and subsequently dosing with this combination was discontinued. The study was modified under an amended protocol which evaluates the combination of the Bria-IMT™ regimen with Incyte Corporation experimental drugs retifanlimab (anti-PD-1 antibody similar to pembrolizumab). The study completed Phase I and Phase II is ongoing. Bria-IMT™ has obtained Fast Track designation from the U.S. Food and Drug Administration, or FDA, and is progressing to a pivotal study in advanced breast cancer patients following an end of phase II meeting with the FDA with agreement on the primary endpoint. BriaCell is also developing Bria-OTS™, an off-the-shelf personalized approach to whole cell cancer immunotherapy.

Recent Developments

On August 4, 2022, the Company announced that it has secured an exclusive license from University of Maryland, Baltimore County (UMBC) to develop and commercialize Soluble CD80, or sCD80, as a biologic agent for the treatment of cancer.

The novel technology, originally developed by Suzanne Ostrand-Rosenberg, Ph.D., Emeritus Faculty at UMBC, and member of BriaCell’s scientific advisory board, is titled “Soluble CD80 as a Therapeutic to Reverse Immune Suppression in Cancer Patients” and covered under U.S. Patent Number 8,956,619 B2, U.S. Patent Number 9,650,429 B2, and U.S. Patent Number 10,377,810 B2. In animal models, sCD80 was well-tolerated and stopped tumor growth by potentially restoring natural anti-tumor immunity. Importantly, as demonstrated in the same studies, sCD80’s unique actions may involve both awakening and boosting the immune system to recognize and destroy tumor cells.

Under the terms of the agreement, BriaCell gains the worldwide rights to develop and commercialize sCD80, while UMBC maintains ownership of the patents. BriaCell will pay royalties to UMBC upon the commercialization of the product plus patent management costs. The licensing agreement was coordinated by UMBC’s Office of Technology Development.

Bria-IMT™ regimen combined with Incyte’s retifanlimab

The Company’s data showed clinical benefit including extended survival time and tumor reductions in heavily pre-treated advanced breast cancer patients who matched our lead candidate, Bria-IMT™, at HLA type/s, and these findings guided the development of further optimized off-the-shelf personalized immunotherapies for advanced breast cancer and other cancers.

On September 14, 2022, the Company signed an agreement with Caris Life Sciences® (“Caris”), a leading molecular science and technology company actively developing and delivering innovative solutions to revolutionize healthcare.

Under the terms of the agreement, Caris will help BriaCell with efficient patient identification, accelerating enrollment for its current Phase I/II clinical trial in advanced metastatic breast cancer of certain genetically defined subgroups. The partnership between BriaCell and Caris leverages Caris’ Right-In-Time (RIT) Clinical Trial Network, a group of over 495 oncology sites that are able to quickly identify and enroll eligible patients in biomarker-directed clinical trials. This service offers patients and physicians access to the most cutting-edge precision medicine in development. Additionally, through Caris’ comprehensive molecular profiling (Whole Exome and Whole Transcriptome Sequencing), Caris will perform tumor profiling for the patients enrolled in the clinical trial.

On October 12, 2022, the Company added Mayo Clinic, Jacksonville, Florida as a clinical site in the Phase I/II study of BriaCell’s lead candidate, Bria-IMT™, with Incyte’s PD-1 inhibitor, retifanlimab, in advanced breast cancer.

On November 10, 2022, the Company announced positive initial efficacy data in its 2021-2022 cohort of 12 advanced breast cancer patients. Disease control, tumor shrinkage, and potential survival benefit were observed amongst 12 patients in the Phase I/IIa clinical study of Bria-IMT™ in combination with Incyte’s retifanlimab. Researchers also noted that:

Similarly positive data was presented at the San Antonio Breast Cancer meeting in December 2022. Briefly,