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 September 30,
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-37823
Kintara Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Nevada |
|
99-0360497 |
(State or other jurisdiction of |
|
(I.R.S. Employer |
|
92121 |
|
(Address of principal executive offices) |
|
(zip code) |
(858) 350-4364
(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(s) |
|
Name of Each Exchange on Which Registered |
Common Stock |
|
KTRA |
|
The Nasdaq Capital Market |
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.
Large accelerated filer |
☐ |
|
Accelerated filer |
☐ |
Non-accelerated filer |
☑ |
|
Smaller reporting company |
☑ |
Emerging growth company |
☐ |
|
|
|
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 ☑
Number of shares of common stock outstanding as of November 8, 2022 was 80,807,316.
TABLE OF CONTENTS
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Page No. |
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Item 1. |
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1 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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17 |
Item 3. |
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29 |
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Item 4 |
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29 |
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Item 1. |
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30 |
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Item 1A. |
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30 |
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Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds. |
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30 |
Item 3. |
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30 |
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Item 4. |
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30 |
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Item 5. |
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30 |
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Item 6. |
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31 |
i
PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements.
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Financial Statements
(Unaudited)
For the three months ended September 30, 2022
(expressed in US dollars unless otherwise noted)
1
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Balance Sheets
(In thousands, except par value amounts)
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September 30, |
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June 30, |
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|||
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Note |
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$ |
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$ |
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|||
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(unaudited) |
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Assets |
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Current assets |
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Cash and cash equivalents |
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7,085 |
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11,780 |
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Prepaid expenses, deposits and other |
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1,071 |
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1,478 |
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Total current assets |
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8,156 |
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13,258 |
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Clinical trial deposit |
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3 |
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4,300 |
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2,600 |
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Property and equipment, net |
|
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4 |
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|
754 |
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|
90 |
|
Total assets |
|
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13,210 |
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15,948 |
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Liabilities |
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Current liabilities |
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Accounts payable and accrued liabilities |
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2,943 |
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3,269 |
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Related party payables |
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5,6 |
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573 |
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|
721 |
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Total current liabilities |
|
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3,516 |
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3,990 |
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Milestone payment liability |
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76 |
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|
|
163 |
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Total liabilities |
|
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3,592 |
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4,153 |
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Stockholders' equity |
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Preferred stock |
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Authorized |
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5,000 shares, $0.001 par value |
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Issued and outstanding |
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279 Series A shares at September 30, 2022 (June 30, 2022 – 279) |
|
5,6 |
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279 |
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279 |
|
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17 Series C shares at September 30, 2022 (June 30, 2022 – 17) |
|
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6 |
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12,275 |
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12,275 |
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Common stock |
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Authorized |
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275,000 shares at September 30, 2022 (June 30, 2022 - 275,000), $0.001 par value |
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Issued and outstanding |
|
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80,807 issued at September 30, 2022 (June 30, 2022 – 65,533) |
|
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6 |
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81 |
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|
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66 |
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Additional paid-in capital |
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6 |
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138,278 |
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135,510 |
|
Accumulated deficit |
|
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(141,316 |
) |
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|
(136,356 |
) |
|
Accumulated other comprehensive income |
|
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21 |
|
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21 |
|
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Total stockholders’ equity |
|
|
|
|
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9,618 |
|
|
|
11,795 |
|
|
Total liabilities and stockholders’ equity |
|
|
|
|
|
13,210 |
|
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15,948 |
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|
Nature of operations, corporate history, going concern and management plans (note 1) |
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Subsequent events (note 9) |
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|||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
2
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
|
|
|
|
|
Three months ended |
|
||||||
|
|
Note |
|
|
2022 |
|
|
2021 |
|
|||
Expenses |
|
|
|
|
|
|
|
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|
|||
Research and development |
|
|
|
$ |
|
3,171 |
|
$ |
|
3,793 |
|
|
General and administrative |
|
|
|
|
|
1,475 |
|
|
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2,178 |
|
|
|
|
|
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|
|
(4,646 |
) |
|
|
(5,971 |
) |
|
Other income |
|
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|
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|
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|
|||
Foreign exchange |
|
|
|
|
|
11 |
|
|
|
4 |
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Interest, net |
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|
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|
39 |
|
|
|
1 |
|
|
|
|
|
|
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|
50 |
|
|
|
5 |
|
|
Net loss for the period |
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|
|
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|
(4,596 |
) |
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|
(5,966 |
) |
|
Computation of basic loss per share |
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|
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|
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|
|||
Net loss for the period |
|
|
|
|
|
(4,596 |
) |
|
|
(5,966 |
) |
|
Series A Preferred cash dividend |
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|
6 |
|
|
|
(2 |
) |
|
|
(2 |
) |
Series C Preferred stock dividend |
|
|
6 |
|
|
|
(362 |
) |
|
|
(2,462 |
) |
Net loss for the period attributable to common stockholders |
|
|
|
$ |
|
(4,960 |
) |
$ |
|
(8,430 |
) |
|
Basic and fully diluted loss per share |
|
|
|
$ |
|
(0.07 |
) |
$ |
|
(0.25 |
) |
|
Basic and fully diluted weighted average number of shares |
|
|
|
|
|
73,205 |
|
|
|
34,281 |
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Statements of Stockholders’ Equity
(Unaudited)
For the three months ended September 30, 2022
(In thousands)
|
|
Number |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Preferred |
|
|
Accumulated |
|
|
Total stockholders' |
|
|||||||
Balance - June 30, 2022 |
|
|
65,533 |
|
|
|
66 |
|
|
|
135,510 |
|
|
|
21 |
|
|
|
12,554 |
|
|
|
(136,356 |
) |
|
|
11,795 |
|
Issuance of shares - net of issue costs |
|
|
13,100 |
|
|
|
13 |
|
|
|
1,890 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,903 |
|
Stock option expense |
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|
— |
|
|
|
— |
|
|
|
518 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
518 |
|
Series A Preferred cash dividend |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
Series C Preferred stock dividend |
|
|
2,174 |
|
|
|
2 |
|
|
|
360 |
|
|
|
— |
|
|
|
— |
|
|
|
(362 |
) |
|
|
— |
|
Loss for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,596 |
) |
|
|
(4,596 |
) |
Balance - September 30, 2022 |
|
|
80,807 |
|
|
|
81 |
|
|
|
138,278 |
|
|
|
21 |
|
|
|
12,554 |
|
|
|
(141,316 |
) |
|
|
9,618 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
4
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Statements of Stockholders’ Equity
(Unaudited)
For the three months ended September 30, 2021
(In thousands)
|
|
Number |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Preferred |
|
|
Accumulated |
|
|
Total stockholders' |
|
|||||||
Balance - June 30, 2021 |
|
|
32,740 |
|
|
|
33 |
|
|
|
106,821 |
|
|
|
21 |
|
|
|
14,931 |
|
|
|
(111,225 |
) |
|
|
10,581 |
|
Issuance of shares and warrants - net of issue costs |
|
|
7,200 |
|
|
|
7 |
|
|
|
13,627 |
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|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,634 |
|
Conversion of Series C Preferred stock to common stock |
|
|
1,467 |
|
|
|
1 |
|
|
|
1,255 |
|
|
|
— |
|
|
|
(1,256 |
) |
|
|
— |
|
|
|
— |
|
Exercise of 2020 Investor Warrants for cash |
|
|
69 |
|
|
|
— |
|
|
|
69 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
69 |
|
Exercise of pre-funded warrants for cash |
|
|
4,800 |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Warrants issued for services |
|
|
— |
|
|
|
— |
|
|
|
31 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
31 |
|
Stock option expense |
|
|
— |
|
|
|
— |
|
|
|
811 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
811 |
|
Series A Preferred cash dividend |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
Series C Preferred stock dividend |
|
|
1,698 |
|
|
|
2 |
|
|
|
2,460 |
|
|
|
— |
|
|
|
— |
|
|
|
(2,462 |
) |
|
|
— |
|
Loss for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,966 |
) |
|
|
(5,966 |
) |
Balance - September 30, 2021 |
|
|
47,974 |
|
|
|
48 |
|
|
|
125,074 |
|
|
|
21 |
|
|
|
13,675 |
|
|
|
(119,655 |
) |
|
|
19,163 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
|
|
|
Three months ended |
|
||||||
|
|
|
|
|
2022 |
|
|
2021 |
|
|||
|
|
Note |
|
|
$ |
|
|
$ |
|
|||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|||
Loss for the period |
|
|
|
|
|
(4,596 |
) |
|
|
(5,966 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
|
|||
Depreciation of property and equipment |
|
|
4 |
|
|
|
15 |
|
|
|
15 |
|
Change in fair value of milestone liability |
|
|
|
|
|
(87 |
) |
|
|
(3 |
) |
|
Warrants issued for services |
|
|
6 |
|
|
|
— |
|
|
|
31 |
|
Stock option expense |
|
|
6 |
|
|
|
518 |
|
|
|
811 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
|||
Prepaid expenses, deposits and other |
|
|
|
|
|
(40 |
) |
|
|
(13 |
) |
|
Clinical trial deposit |
|
|
|
|
|
(1,700 |
) |
|
|
— |
|
|
Accounts payable and accrued liabilities |
|
|
|
|
|
(331 |
) |
|
|
122 |
|
|
Related party payables |
|
|
|
|
|
(148 |
) |
|
|
(70 |
) |
|
Net cash used in operating activities |
|
|
|
|
|
(6,369 |
) |
|
|
(5,073 |
) |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|||
Purchase of equipment |
|
|
3 |
|
|
|
(232 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
|
|
|
(232 |
) |
|
|
— |
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|||
Net proceeds from the issuance of shares and warrants |
|
|
6 |
|
|
|
1,908 |
|
|
|
13,803 |
|
Warrants exercised for cash |
|
|
6 |
|
|
|
— |
|
|
|
74 |
|
Series A preferred cash dividend |
|
|
5 |
|
|
|
(2 |
) |
|
|
(2 |
) |
Net cash provided by financing activities |
|
|
|
|
|
1,906 |
|
|
|
13,875 |
|
|
(Decrease) increase in cash and cash equivalents |
|
|
|
|
|
(4,695 |
) |
|
|
8,802 |
|
|
Cash and cash equivalents – beginning of period |
|
|
|
|
|
11,780 |
|
|
|
10,537 |
|
|
Cash and cash equivalents – end of period |
|
|
|
|
|
7,085 |
|
|
|
19,339 |
|
|
Supplementary information (note 7) |
|
|
|
|
|
|
|
|
|
|||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
6
Kintara Therapeutics, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
September 30, 2022
(expressed in US dollars and in thousands, except par value and per share amounts, unless otherwise noted)
1 Nature of operations, corporate history, and going concern and management plans
Nature of operations
Kintara Therapeutics, Inc. (the “Company”) is a clinical-stage drug development company with a focus on the development of novel cancer therapies for patients with unmet medical needs. The Company is developing two late-stage, Phase 3-ready therapeutics - VAL-083 for glioblastoma multiforme and REM-001 for cutaneous metastatic breast cancer. In order to accelerate the Company’s development timelines, it leverages existing preclinical and clinical data from a wide range of sources. The Company may seek marketing partnerships in order to potentially offset clinical costs and to generate future royalty revenue from approved indications of its product candidates.
Corporate history
The Company is a Nevada corporation formed on June 24, 2009 under the name Berry Only, Inc. On January 25, 2013, the Company entered into and closed an exchange agreement (the “Exchange Agreement”), with Del Mar Pharmaceuticals (BC) Ltd. (“Del Mar (BC)”), 0959454 B.C. Ltd. (“Callco”), and 0959456 B.C. Ltd. (“Exchangeco”) and the security holders of Del Mar (BC). Upon completion of the Exchange Agreement, Del Mar (BC) became a wholly-owned subsidiary of the Company (the “Reverse Acquisition”).
On August 19, 2020, the Company completed its merger with Adgero Biopharmaceuticals Holdings, Inc., a Delaware corporation ("Adgero") in which Adgero continued its existence under Delaware law and became a direct, wholly-owned subsidiary of the Company. Following the completion of the merger, the Company changed its name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc. and began trading on The Nasdaq Capital Market LLC ("Nasdaq") under the symbol “KTRA”.
Kintara Therapeutics, Inc. is the parent company of Del Mar (BC), a British Columbia, Canada corporation and Adgero which are clinical-stage companies with a focus on the development of drugs for the treatment of cancer. The Company is also the parent company to Callco and Exchangeco which are British Columbia, Canada corporations. Callco and Exchangeco were formed to facilitate the Reverse Acquisition. In connection with the Adgero merger, the Company also became the parent company of Adgero Biopharmaceuticals, Inc. (“Adgero Bio”), formerly a wholly-owned subsidiary of Adgero.
References to the Company refer to the Company and its wholly-owned subsidiaries.
Going concern and management plans
These condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Company will continue its operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.
For the three months ended September 30, 2022, the Company reported a loss of $4,596 and a negative cash flow from operations of $6,369. The Company had an accumulated deficit of $141,316 and had cash and cash equivalents of $7,085 as of September 30, 2022. The Company is in the clinical stage and has not generated any revenues to date. The Company does not have the prospect of achieving revenues until such time that its product candidates are commercialized, or partnered, which may not ever occur. On August 2, 2022, the Company entered into a stock purchase agreement under which the Company ultimately received approximately $1,908 in net proceeds as of September 30, 2022 which is the current maximum available under the stock purchase agreement. Even with the proceeds from this financing, the Company will require additional funding to maintain its clinical trials, research and development projects, and for general operations. These circumstances indicate substantial doubt exists about the Company’s ability to continue as a going concern within one year from the date of filing of these condensed consolidated interim financial statements.
7
Consequently, management is pursuing various financing alternatives to fund the Company’s operations so it can continue as a going concern. However, the coronavirus (“COVID-19”) pandemic has created significant economic uncertainty and volatility in the credit and capital markets. Management plans to continue to pursue opportunities to secure the necessary financing through the issue of new equity, debt, and/or the entering into of strategic partnership arrangements but the ultimate impact of the COVID-19 pandemic on the Company’s ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and any new information which may emerge concerning the severity of the COVID-19 pandemic. The Company may not be able to raise sufficient additional capital and may tailor its drug candidate development programs based on the amount of funding the Company is able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.
These condensed consolidated financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
2 Significant accounting policies
Basis of presentation
The condensed consolidated interim financial statements of the Company have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) and are presented in United States dollars. The functional currency of the Company and each of its subsidiaries is the United States dollar.
The accompanying condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Adgero, Adgero Bio, Del Mar (BC), Callco, and Exchangeco. All intercompany balances and transactions have been eliminated in consolidation.
The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set out below and have been consistently applied to all periods presented.
Unaudited interim financial data
The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial information. Accordingly, they do not include all of the information and the notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements should be read in conjunction with the June 30, 2022 audited consolidated financial statements of the Company included in the Company’s Form 10-K filed with the SEC on September 27, 2022. In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation. The results for three months ended September 30, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2023, or for any other future annual or interim period.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, expenses, contingent assets, and contingent liabilities as at the end of, or during, the reporting period. Actual results could significantly differ from those estimates. Significant areas requiring management to make estimates include the valuation of equity instruments issued for services and clinical trial accruals. Further details of the nature of these assumptions and conditions may be found in the relevant notes to these condensed consolidated interim financial statements.
Loss per share
Income or loss per share is calculated based on the weighted average number of common shares outstanding. For the three-month periods ended September 30, 2022, and 2021, diluted loss per share does not differ from basic loss per share since the effect of the Company’s warrants, stock options, and convertible preferred shares is anti-dilutive. As of September 30, 2022, potential common shares of 35,704 (2021 – 19,152) related to outstanding common share warrants, 2,100 (2021 – 2,100) related to outstanding Series C preferred stock warrants, 12,291 (2021 – 6,809) related to stock options, and 14,496 (2021 – 15,828) relating to outstanding Series C convertible preferred shares were excluded from the calculation of net loss per common share.
8
Property and equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over its estimated useful life of to seven years.
Recently issued accounting standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated interim financial statements.
3 Clinical trial deposit
In October 2020, the Company announced that it had entered into a final agreement with a contract research organization (“CRO”) for the management of the Company’s registration study for glioblastoma multiforme. Under the agreement, the Company will supply the drug for the study and the CRO will manage all operational aspects of the study including site activation and patient enrollment. The Company is required to make certain payments under the agreement related to patient enrollment milestones. For the three months ended September 30, 2022, the Company has recognized $1,840 (2021 – $1,952), respectively, of expenses for this study in relation to clinical site initiation and patient enrollment.
During the three months ended September 30, 2022 the Company paid an additional $1,700 to the CRO in relation to the study deposit. As of September 30, 2022, the Company has made deposit payments totaling $4,300 to the CRO. It is anticipated that the deposit will be applied to future invoices, or refunded to the Company, beyond twelve months from September 30, 2022. The Company can terminate the study at any time. Upon termination, the Company will be liable for any payments due to the effective date of the termination as well as any non-refundable costs incurred by the CRO prior to the date of termination.
4 Property and equipment, net
|
|
$ |
|
|
Balance, June 30, 2022 |
|
|
90 |
|
Additions |
|
|
679 |
|
Less depreciation |
|
|
(15 |
) |
Balance, September 30, 2022 |
|
|
754 |
|
At September 30, 2022, the total capitalized cost of property and equipment was $859 (June 30, 2022 - $180), of which $679 is not in use. The Company has recognized $15 in depreciation expense in each of the periods ended September 30, 2022 and 2021 on equipment in use of $180.
5 Related party transactions
Valent Technologies, LLC Agreements
One of the Company’s officers is a principal of Valent Technologies, LLC (“Valent”) and as a result Valent is a related party to the Company.
On September 12, 2010, the Company entered into a Patent Assignment Agreement (the “Valent Assignment Agreement”) with Valent pursuant to which Valent transferred to the Company all its right, title and interest in, and to, the patents for VAL-083 owned by Valent. The Company now owns all rights and title to VAL-083 and is responsible for further development and commercialization. In accordance with the terms of the Valent Assignment Agreement, Valent is entitled to receive a future royalty on all revenues derived from the development and commercialization of VAL-083. In the event that the Company terminates the agreement, the Company may be entitled to receive royalties from Valent’s subsequent development of VAL-083 depending on the development milestones the Company has achieved prior to the termination of the Valent Assignment Agreement.
On September 30, 2014, the Company entered into an exchange agreement (the “Valent Exchange Agreement”) with Valent and Del Mar (BC). Pursuant to the Valent Exchange Agreement, Valent exchanged its loan payable in the outstanding amount of $279 (including aggregate accrued interest to September 30, 2014, of $29), issued to Valent by Del Mar (BC), for 279 shares of the Company’s Series A Preferred Stock. The Series A Preferred Stock has a stated value of $1.00 per share (the “Series A Stated Value”) and is not convertible into common stock. The holder of the Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in arrears. For the three months ended September 30, 2022, and 2021, respectively, the Company recorded $2 related to the dividend paid to Valent. The dividends have been recorded as a direct increase in accumulated deficit.
9
Related party payables
As of September 30, 2022, there is an aggregate amount of $573 (June 30, 2022 - $721) payable to the Company’s officers and directors for fees, expenses, and accrued bonuses and other liabilities.
6 Stockholders’ equity
Preferred stock
Series C Preferred Stock
|
|
Series C Preferred Stock |
|
|||||
|
|
Number |
|
|
$ |
|
||
Balance – June 30, 2022 and September 30, 2022 |
|
|
16,838 |
|
|
|
12,275 |
|
In August 2020, the Company issued 25,028 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) in three separate closings of a private placement (Series C-1, C-2, and C-3). Each share of Series C Preferred Stock was issued at a purchase price of $1,000 per share and is convertible into shares of common stock based on the respective conversion prices which were determined at the closing of each round of the private placement. The conversion prices for the Series C-1 Preferred Stock, Series C-2 Preferred Stock, and the Series C-3 Preferred Stock are $1.16, $1.214, and $1.15, respectively. Subject to ownership limitations, the owners of the Series C Preferred Stock are entitled to receive dividends, payable in shares of common stock at a rate of 10%, 15%, 20% and 25% of the number of shares of common stock issuable upon conversion of the Series C Preferred Stock, on the 12th, 24th, 36th and 48th month, anniversary of the initial closing of the private placement. The Company paid the 12th and 24th month anniversary dividends of 10% and 15% common stock dividends on August 19, 2021 and 2022, respectively.
The Series C Preferred Stock dividends do not require declaration by the board of directors and are accrued annually as of the date the dividend is earned in an amount equal to the fair value of the Company’s common stock on the dates the respective dividends are paid. The fair value of the Series C Preferred Stock dividend paid on August 19, 2022, was determined by multiplying the dividends paid of 2,174 by the Company’s closing share price on August 19, 2022, of $0.1667 per share for a total fair value of $362. Any outstanding shares of Series C Preferred Stock will automatically convert to shares of common stock on August 19, 2024. In addition, as part of the Series C Preferred financing, the Company issued warrants to the placement agent (“Series C Agent Warrants”).
The Company’s Series C Preferred Stock outstanding, conversion shares, and aggregate dividends as of September 30, 2022, are as follows:
Series |
|
Number |
|
|
Conversion |
|
|
Number of |
|
|
Dividend Shares (in thousands) |
|
||||
Series 1 |
|
|
13,945 |
|
|
|
1.16 |
|
|
|
12,022 |
|
|
|
8,641 |
|
Series 2 |
|
|
898 |
|
|
|
1.21 |
|
|
|
740 |
|
|
|
518 |
|
Series 3 |
|
|
1,995 |
|
|
|
1.15 |
|
|
|
1,734 |
|
|
|
1,237 |
|
|
|
|
16,838 |
|
|
|
|
|
|
14,496 |
|
|
|
10,396 |
|
|
Series C Dividends |
|
Dividend Shares |
|
|
10% - August 19, 2021 (actual) |
|
|
1,698 |
|
15% - August 19, 2022 (actual) |
|
|
2,174 |
|
20% - August 19, 2023 (estimated) |
|
|
2,899 |
|
25% - August 19, 2024 (estimated) |
|
|
3,625 |
|
|
|
|
10,396 |
|
The Series C Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock and (ii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series C Preferred Stock. The Series C Preferred Stock shall be pari passu in liquidation to the Company’s Series A Preferred Stock. The liquidation value of the Series C Preferred Stock at September 30, 2022, is the stated value of $16,838 (June 30, 2022 - $16,838).
10
Series B Preferred Stock
The Company previously issued Series B Preferred Stock that has since been fully converted to shares of common stock. As part of the Series B Preferred Stock financing, the Company and the Series B Preferred Stockholders entered into a royalty agreement, pursuant to which the Company will pay the holders of the Series B Preferred Stock, in aggregate, a single-digit royalty based on their pro rata ownership of the Series B Preferred Stock on products sold directly by the Company or sold pursuant to a licensing or partnering arrangement, should such events occur.
Series A Preferred Stock
Effective September 30, 2014, the Company filed a Certificate of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of Nevada. Pursuant to the Series A Certificate of Designation, the Company designated 279 shares of preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have a stated value of $1.00 per share (the “Series A Stated Value”) and are not convertible into common stock. The holder of the Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in arrears. Upon any liquidation of the Company, the holder of the Series A Preferred Stock will be entitled to be paid, out of any assets of the Company available for distribution to stockholders, the Series A Stated Value of the shares of Series A Preferred Stock held by such holder, plus any accrued but unpaid dividends thereon, prior to any payments being made with respect to the common stock. The Series A Preferred Stock is held by Valent (note 4).
The Series A Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock, and (ii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series A Preferred Stock. The Series A Preferred Stock shall be pari passu in liquidation to the Company’s Series C Preferred Stock. The liquidation value of the Series A Preferred stock at September 30, 2022 is its stated value of $279 (June 30, 2022 - $279).
There was no change to the Series A Preferred stock for the three months ended September 30, 2022 or 2021.
Common stock
Common stock issuances during the three months ended September 30, 2022
On August 2, 2022, the Company entered into a purchase agreement, dated as of August 2, 2022 (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park committed to purchase up to $20,000 of shares (the “Purchase Shares”) of the Company’s common stock. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to take certain actions relating to the registration of the offer and sale of the shares of common stock available for issuance under the Purchase Agreement. Upon execution of the Purchase Agreement, the Company issued 1,630 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the Purchase Agreement.
Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to present Lincoln Park with a purchase notice directing Lincoln Park to purchase up to 500 Purchase Shares provided that the closing sale price of the common stock on the purchase date is not below a threshold price set forth in the Purchase Agreement (a “Regular Purchase”). The Company and Lincoln Park may mutually agree to increase the Regular Purchase amount with respect to any Regular Purchase under the Purchase Agreement, provided that Lincoln Park’s maximum committed purchase obligation under any single Regular Purchase shall not exceed $2,000. The purchase price per share for each Regular Purchase is based on prevailing market prices of the common stock immediately preceding the time of sale as computed in accordance with the terms set forth in the Purchase Agreement. There are no upper limits on the price per share that Lincoln Park must pay for shares of common stock under the Purchase Agreement.
If the Company directs Lincoln Park to purchase the maximum number of shares of common stock that the Company may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park to purchase additional shares of common stock in an “accelerated purchase” (each, an “Accelerated Purchase”) and an “additional accelerated purchase” (each, an “Additional Accelerated Purchase”) (including multiple Additional Accelerated Purchases on the same trading day) as provided in the Purchase Agreement. The purchase price per share for each Accelerated Purchase and Additional Accelerated Purchase will be based on market prices of the common stock on the applicable purchase date for such Accelerated Purchases and such Additional Accelerated Purchases.
The aggregate number of shares that the Company can issue or sell to Lincoln Park under the Purchase Agreement may in no case exceed 13,100 shares of the common stock (which is equal to approximately 19.99% of the shares of the common stock outstanding immediately prior to the execution of the Purchase Agreement) (the “Exchange Cap”), unless (i) stockholder approval is
11
obtained to issue Purchase Shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of our common stock to Lincoln Park under the Purchase Agreement equals or exceeds $0.2024 per share (which represents the lower of (A) the official closing price of the Company's common stock on Nasdaq on the trading day immediately preceding the date of the Purchase Agreement and (B) the average official closing price of the Company's common stock on Nasdaq for the five consecutive trading days ending on the trading day on the date of the Purchase Agreement, adjusted such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules). The Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the Purchase Agreement.
During the three months ended September 30, 2022, the Company sold 11,470 shares of common stock for total net proceeds of approximately $1,903 under this facility. As of September 30, 2022, the sales made under the Purchase Agreement are the maximum amounts available due to ownership limitations under Nasdaq rules.
Common stock issuances during the three months ended September 30, 2021
Registered direct financing
On September 28, 2021, the Company closed on the sale of (i) 7,200 shares of its common stock, par value $0.001 per share, (ii) pre-funded warrants (“PFW”) to purchase an aggregate of 4,800 shares of common stock and (iii) common warrants to purchase an aggregate of 12,000 shares of common stock (“2022 Investor Warrants”) in the Company’s registered direct offering (the “September Offering”). Each share of common stock, or PFW as applicable, was sold together with a 2022 Investor Warrant to purchase one share of common stock at a combined effective price of $1.25 per share of common stock and accompanying 2022 Investor Warrant. The 2022 Investor Warrants have been valued at $7,023 and have been treated as equity. They have been valued using a Black-Scholes valuation with a risk-free rate of 0.55%, a contractual term of 3.5 years, a volatility of 116.7%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant.
The net proceeds from the September Offering were $13,634 after deducting commissions and other offering expenses.
The 2022 Investor Warrants are exercisable at $1.25 per share until their expiry on March 28, 2025, and the PFW are exercisable at $0.001 per share at any time after September 28, 2021. The Company also issued 600 agent warrants that are exercisable at $1.5265 per share commencing September 28, 2021, until their expiry on March 28, 2025 (the “2022 Agent Warrants”). The 2022 Agent Warrants have been valued at $333 and have been treated as non-cash issue costs of the common stock, 2022 Investor Warrants, and PFW. The 2022 Agent Warrants have been valued using a Black-Scholes valuation with a risk-free rate of 0.55%, a contractual term of 3.5 years, a volatility of 116.7%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant.
During the three months ended September 30, 2021, all of the 4,800 PFW were exercised at $0.001 per PFW for proceeds of $4.8.
Stock options
2017 Omnibus Incentive Plan
As subsequently approved by the Company’s stockholders at an annual meeting of stockholders on April 11, 2018, the Company’s board of directors approved the adoption of the Company’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”), as amended. The board of directors also approved a form of Performance Stock Unit Award Agreement to be used in connection with grants of performance stock units (“PSUs”) under the 2017 Plan. As approved by the Company’s stockholders on June 21, 2022, the number of common shares available under the 2017 Plan is 22,000 shares. Under the 2017 Plan, 22,000 shares of Company common stock are currently reserved for issuance, less the number of shares of common stock issued under the Del Mar (BC) 2013 Amended and Restated Stock Option Plan (the “Legacy Plan”), or that are subject to grants of stock options made, or that may be made, under the Legacy Plan, or that have been previously exercised. A total of 117 shares of common stock have been issued under the Legacy Plan and/or are subject to outstanding stock options granted under the Legacy Plan, and a total of 12,174 shares of common stock have been issued under the 2017 Plan and/or are subject to outstanding stock options granted under the 2017 Plan leaving 9,515 shares of common stock available at September 30, 2022 for issuance under the 2017 Plan if all such options under the Legacy Plan were exercised, net of stock options previously exercised.
12
The maximum number of shares of Company common stock with respect to which any one participant may be granted awards during any calendar year is 8% of the Company’s fully diluted shares of common stock on the date of grant (excluding the number of shares of common stock issued under the 2017 Plan and/or the Legacy Plan or subject to outstanding awards granted under the 2017 Plan and/or the Legacy Plan). No award will be granted under the 2017 Plan on, or after, July 7, 2027.
During the three months ended September 30, 2022, a total of 3,481 stock options to purchase shares of common stock were granted to directors and officers of the Company. Of the total stock options granted, 300 have an exercise price of $0.255 per share and vest in 12 equal monthly installments beginning on August 1, 2022. The remaining 3,181 stock options granted have an exercise price of $0.1757 per share and vest as to 25% on August 1, 2023, with the remaining portion vesting in equal monthly installments over a period of 36 months commencing on September 1, 2023. All of the options to purchase shares of common stock granted have a 10-year term and are subject to cancellation upon the grantees’ termination of service for the Company, with certain exceptions.
The following table sets forth changes in stock options outstanding under all plans:
|
|
Number of |
|
|
Weighted |
|
||
Balance – June 30, 2022 |
|
|
8,810 |
|
|
|
1.74 |
|
Granted |
|
|
3,481 |
|
|
|
0.18 |
|
Balance – September 30, 2022 |
|
|
12,291 |
|
|
|
1.30 |
|
The following table summarizes stock options outstanding and exercisable under all plans at September 30, 2022:
Exercise price |
|
|
Number |
|
|
Weighted |
|
|
Number |
|
||||
|
0.18 |
|
|
|
3,181 |
|
|
|
9.84 |
|
|
|
— |
|
|
0.26 |
|
|
|
300 |
|
|
|
9.76 |
|
|
|
25 |
|
|
0.33 |
|
|
|
10 |
|
|
|
9.47 |
|
|
|
— |
|
|
0.61 |
|
|
|
816 |
|
|
|
3.27 |
|
|
|
816 |
|
|
0.74 |
|
|
|
250 |
|
|
|
7.12 |
|
|
|
167 |
|
|
0.96 |
|
|
|
3,519 |
|
|
|
9.11 |
|
|
|
— |
|
|
1.24 |
|
|
|
335 |
|
|
|
8.98 |
|
|
|
335 |
|
|
1.36 |
|
|
|
300 |
|
|
|
7.98 |
|
|
|
199 |
|
|
1.37 |
|
|
|
75 |
|
|
|
8.58 |
|
|
|
30 |
|
|
1.70 |
|
|
|
3,282 |
|
|
|
2.80 |
|
|
|
3,052 |
|
|
6.10 |
|
|
|
17 |
|
|
|
6.11 |
|
|
|
17 |
|
|
8.70 |
|
|
|
12 |
|
|
|
0.40 |
|
|
|
12 |
|
|
9.83 |
|
|
|
83 |
|
|
|
0.40 |
|
|
|
83 |
|
|
10.60 |
|
|
|
4 |
|
|
|
5.54 |
|
|
|
4 |
|
|
11.70 |
|
|
|
30 |
|
|
|
0.41 |
|
|
|
30 |
|
|
21.10 |
|
|
|
7 |
|
|
|
2.58 |
|
|
|
7 |
|
|
29.60 |
|
|
|
2 |
|
|
|
2.35 |
|
|
|
2 |
|
|
37.60 |
|
|
|
5 |
|
|
|
3.37 |
|
|
|
5 |
|
|
41.00 |
|
|
|
4 |
|
|
|
4.12 |
|
|
|
4 |
|
|
42.00 |
|
|
|
30 |
|
|
|
0.88 |
|
|
|
30 |
|
|
44.80 |
|
|
|
3 |
|
|
|
3.37 |
|
|
|
3 |
|
|
49.50 |
|
|
|
13 |
|
|
|
4.39 |
|
|
|
13 |
|
|
53.20 |
|
|
|
8 |
|
|
|
3.60 |
|
|
|
8 |
|
|
61.60 |
|
|
|
2 |
|
|
|
0.50 |
|
|
|
2 |
|
|
92.00 |
|
|
|
3 |
|
|
|
0.67 |
|
|
|
3 |
|
|
|
|
|
12,291 |
|
|
|
|
|
|
4,847 |
|
||
13
Stock options granted during the three months ended September 30, 2022, have been valued using a Black-Scholes pricing model with the following assumptions:
|
|
September 30, 2022 |
|
|
|
Dividend rate |
|
|
— |
|
% |
Estimated volatility |
|
|
91.40 |
|
% |
Risk-free rate |
|
|
2.67 |
|
% |
Expected term – years |
|
|
6.08 |
|
|
The estimated volatility of the Company’s common stock at the date of issuance of the stock options is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining term of the stock options at the valuation date. The expected term of the stock options has been estimated using the plain vanilla method.
The Company has recognized the following amounts as stock option expense for the periods noted (in thousands):
|
|
Three months ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Research and development |
|
|
140 |
|
|
|
244 |
|
General and administrative |
|
|
378 |
|
|
|
567 |
|
|
|
|
518 |
|
|
|
811 |
|
All of the stock option expense for the periods ended September 30, 2022, and 2021, has been recognized as additional paid in capital. The aggregate intrinsic value of stock options outstanding at September 30, 2022 was $nil (2021 - $235) and the aggregate intrinsic value of stock options exercisable at September 30, 2022 was $nil (2021 - $197). As of September 30, 2022, there was $1,757 in unrecognized compensation expense that will be recognized over the next 3.32 years.
The following table sets forth changes in unvested stock options under all plans:
|
|
Number of |
|
|
Weighted |
|
||
Unvested at June 30, 2022 |
|
|
4,199 |
|
|
|
1.02 |
|
Granted |
|
|
3,481 |
|
|
|
0.18 |
|
Vested |
|
|
(236 |
) |
|
|
1.05 |
|
Unvested at September 30, 2022 |
|
|
7,444 |
|
|
|
0.63 |
|
The aggregate intrinsic value of unvested stock options at September 30, 2022 was $332 (2021 - $38). The unvested stock options have a remaining weighted average contractual term of 9.37 years (2021 – 9.03).
Restricted stock units
As of September 30, 2022, the Company has issued 880 restricted stock units ("RSU") to its officers. Subject to providing continuous service to the Company, the RSU vest in four equal annual installments commencing August 1, 2023.
Common stock warrants
The following table sets forth changes in outstanding common stock warrants:
|
|
Number of |
|
|
Weighted |
|
||
Balance – June 30, 2022 |
|
|
36,024 |
|
|
|
0.99 |
|
Expiry of 2018 Investor warrants |
|
|
(280 |
) |
|
|
12.50 |
|
Expiry of 2018 Agent warrants |
|
|
(40 |
) |
|
|
12.50 |
|
Balance – September 30, 2022 |
|
|
35,704 |
|
|
|
0.88 |
|
14
The following table summarizes the Company’s outstanding common stock warrants as of September 30, 2022:
Description of warrants |
|
Number |
|
|
Exercise |
|
|
Expiry date |
||
|
|
|
|
|
|
|
|
|
||
2022 April Investor warrants |
|
|
16,226 |
|
|
|
0.41 |
|
|
April 14, 2027 |
2022 Investor warrants |
|
|
12,000 |
|
|
|
1.25 |
|
|
March 28, 2025 |
2020 Investor warrants |
|
|
3,264 |
|
|
|
1.00 |
|
|
August 16, 2024 |
2019 Investor warrants |
|
|
760 |
|
|
|
3.10 |
|
|
June 5, 2024 |
NBTS Warrants |
|
|
125 |
|
|
|
1.09 |
|
|
June 19, 2025 |
Warrants issued for services |
|
|
6 |
|
|
|
17.80 |
|
|
January 25, 2023 |
Warrants issued for services |
|
|
34 |
|
|
|
11.70 |
|
|
February 27, 2023 |
Warrants issued for services |
|
|
14 |
|
|
|
9.00 |
|
|
October 11, 2023 |
Warrants issued for services |
|
|
280 |
|
|
|
0.75 |
|
|
November 18, 2023 |
Warrants issued for services |
|
|
125 |
|
|
|
0.64 |
|
|
January 20, 2024 |
Warrants issued for services |
|
|
280 |
|
|
|
1.49 |
|
|
September 22, 2023 |
Warrants issued for services |
|
|
50 |
|
|
|
1.49 |
|
|
September 22, 2023 |
Warrants issued for services |
|
|
50 |
|
|
|
1.82 |
|
|
November 13, 2023 |
Warrants issued for services |
|
|
100 |
|
|
|
1.47 |
|
|
January 7, 2024 |
Warrants issued for services |
|
|
70 |
|
|
|
2.75 |
|
|
February 17, 2024 |
Warrants issued for services |
|
|
50 |
|
|
|
2.38 |
|
|
February 25, 2024 |
2022 April Agent warrants |
|
|
1,623 |
|
|
|
0.66 |
|
|
October 14, 2026 |
2022 Agent warrants |
|
|
600 |
|
|
|
1.56 |
|
|
March 28, 2025 |
2019 Agent warrants |
|
|
47 |
|
|
|
3.88 |
|
|
June 3, 2024 |
|
|
|
35,704 |
|
|
|
|
|
|
|
Series C Preferred Stock warrants
In connection with the Series C Preferred Stock private placement, the Company issued 2,504 Series C Agent Warrants. The Series C Agent Warrants have an exercise price of $1,000 per share, provide for a cashless exercise feature, and are exercisable for a period of four years from August 19, 2020. The Series C Preferred Stock issuable upon exercise of the Series C Agent Warrants is convertible into shares of common stock in the same manner as each respective underlying series of outstanding Series C Preferred Stock and will be entitled to the same dividend rights as each respective series.
The following table sets forth changes in outstanding Series C Agent Warrants:
|
|
Balance |
|
|
Number of |
|
|
Number of |
|
|
Balance, |
|
|
Conversion |
|
|||||
Preferred Series C-1 Agent Warrants |
|
|
1,929 |
|
|
|
— |
|
|
|
— |
|
|
|
1,929 |
|
|
|
1.16 |
|
Preferred Series C-2 Agent Warrants |
|
|
219 |
|
|
|
— |
|
|
|
— |
|
|
|
219 |
|
|
|
1.21 |
|
Preferred Series C-3 Agent Warrants |
|
|
296 |
|
|
|
— |
|
|
|
— |
|
|
|
296 |
|
|
|
1.15 |
|
|
|
|
2,444 |
|
|
|
— |
|
|
|
— |
|
|
|
2,444 |
|
|
|
|
|
The following table summarizes the Company’s outstanding Series C Agent Warrants as of September 30, 2022:
Series C Agent Warrants |
|
Number |
|
|
Conversion |
|
|
Number of |
|
|
Cumulative |
|
||||
Series 1 |
|
|
1,929 |
|
|
|
1.16 |
|
|
|
1,663 |
|
|
|
1,164 |
|
Series 2 |
|
|
219 |
|
|
|
1.21 |
|
|
|
180 |
|
|
|
126 |
|
Series 3 |
|
|
296 |
|
|
|
1.15 |
|
|
|
257 |
|
|
|
180 |
|
|
|
|
2,444 |
|
|
|
|
|
|
2,100 |
|
|
|
1,470 |
|
|
15
7 Supplementary statement of cash flows information
The Company incurred the following non-cash investing and financing transactions (in thousands):
|
|
Three months ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Series C Preferred Stock common stock dividend (note 6) |
|
|
362 |
|
|
|
2,462 |
|
Non-cash issue costs (note 6) |
|
|
289 |
|
|
|
333 |
|
Issue costs in accounts payable and accrued liabilities |
|
|
48 |
|
|
|
169 |
|
Equipment additions reclassified from prepaid expenses |
|
|
447 |
|
|
|
— |
|
Income taxes paid |
|
|
— |
|
|
|
— |
|
Interest paid |
|
|
— |
|
|
|
— |
|
8 Financial instruments
The Company has financial instruments that are measured at fair value. To determine the fair value, the Company uses the fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market participants would use to value an asset or liability. The three levels of inputs that may be used to measure fair value are as follows:
Level one - inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level two - inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals; and
Level three - unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. As at September 30, 2022, the Company’s milestone payment liability was measured using level 3 inputs (note 3).
|
|
September 30, 2022 |
|
|||||||||
Liability |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
Milestone payment liability |
|
|
— |
|
|
|
— |
|
|
|
76 |
|
The Company’s financial instruments consist of cash and cash equivalents, other receivables, accounts payable, and related party payables. The carrying values of cash and cash equivalents, other receivables, accounts payable and related party payables approximate their fair values due to the immediate or short-term maturity of these financial instruments.
9 Subsequent events
REM-001 program pause
Subsequent to September 30, 2022, the Company made the decision to pause the REM-001 program. Costs relating to the decision to pause the program will be recognized as incurred and will be expensed as there is no future benefit to the REM-001 clinical development expenses created by the pause decision. No costs relating to the pause decision have been recognized as of September 30, 2022.
Stock Options
Subsequent to September 30, 2022, 267 stock options at an exercise price of $1.70 per share expired.
The Company has evaluated its subsequent events from September 30, 2022, through the date these condensed consolidated interim financial statements were issued and has determined that there are no subsequent events requiring disclosure in these condensed consolidated interim financial statements other than the items noted above.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis (“MD&A”) contains “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995, which represent our projections, estimates, expectations, or beliefs concerning, among other things, financial items that relate to management’s future plans or objectives or to our future economic and financial performance. In some cases, you can identify these statements by terminology such as “may”, “should”, “plans”, “believe”, “will”, “anticipate”, “estimate”, “expect” “project”, or “intend”, including their opposites or similar phrases or expressions. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation by us or any other person that our events or plans will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this report. Except as may be required under applicable securities laws, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this report or to reflect the occurrence of unanticipated events.
You should review the factors and risks we describe under “Risk Factors” in our report on Form 10-K for the year ended June 30, 2022, and in our other filings with the Securities and Exchange Commission, available at www.sec.gov. Actual results may differ materially from any forward-looking statement.
Impact of Coronavirus (“COVID-19”) on our Operations, Financial Condition, Liquidity and Results of Operations
In December 2019 a novel strain of coronavirus, COVID-19 was reported to have surfaced in Wuhan, China and on March 11, 2020, it was declared a pandemic by the World Health Organization. The ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the duration and severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or us, may determine are needed.
Regarding the VAL-083 study arm of the Global Coalition for Adaptive Research (“GCAR”) glioblastoma multiforme (“GBM”) Adaptive Global Innovative Learning Environment (“AGILE”) registrational Phase 2/3 clinical study (the “GBM AGILE Study”) that is currently being conducted at multiple sites in the United States, Canada and Europe, we have not experienced any significant COVID-19 impacts on patient enrollment or treatment. With respect to the REM-001 drug supply, we have experienced some delays in contract manufacturing schedules and supplies which we attribute to COVID-19. As a result of the Company's decision to pause the REM-001 program in order to conserve cash resources, the current delays should not have an impact on our REM-001 program timeline.
Including net proceeds of approximately $1.9 million received from sales under the Purchase Agreement with Lincoln Park, we estimate that we have cash available to fund planned operations for less than one year from the date of issuance of our September 30, 2022 condensed consolidated interim financial statements. The COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets. The ultimate impact of the COVID-19 pandemic on our ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and new information which may emerge concerning the severity of the COVID-19 pandemic. We may not be able to raise sufficient additional capital and may tailor our drug candidate development programs based on the amount of funding we are able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.
Background
Kintara Therapeutics, Inc. is a clinical stage, biopharmaceutical company focused on the development and commercialization of new cancer therapies. On August 19, 2020, the Company completed its merger with Adgero Biopharmaceuticals Holdings, Inc., a Delaware corporation ("Adgero") in which Adgero continued its existence under Delaware law and became a direct, wholly-owned subsidiary of the Company. Following the completion of the merger, we changed our name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc. and began trading on The Nasdaq Capital Market LLC ("Nasdaq") under the symbol “KTRA”.
We are the parent company of Del Mar (BC), a British Columbia, Canada corporation, and Adgero. We are also the parent company to Callco and Exchangeco which are British Columbia, Canada corporations. Callco and Exchangeco were formed to facilitate the Reverse Acquisition that occurred in 2013.
References to “we”, “us”, and “our”, refer to Kintara and our wholly-owned subsidiaries, Del Mar (BC), Adgero, Adgero Bio, Callco, and Exchangeco.
We are dedicated to the development of novel cancer therapies for patients with unmet medical needs. Our mission is to benefit patients by developing and commercializing anti-cancer therapies for patients whose solid tumors exhibit features that make them resistant to, or unlikely to respond to, currently available therapies, with particular focus on orphan cancer indications.
17
Our two lead candidates are VAL-083, a novel, validated, DNA-targeting agent, for the treatment of drug-resistant solid tumors such as glioblastoma multiforme (“GBM”) and potentially other solid tumors, including ovarian cancer, non-small cell lung cancer (“NSCLC”), and diffuse intrinsic pontine glioma (“DIPG”), and REM-001, a late-stage photodynamic therapy (“PDT”) for the treatment of cutaneous metastatic breast cancer (“CMBC”). PDT is a treatment that uses light sensitive compounds, or photosensitizers, that, when exposed to specific wavelengths of light, act as a catalyst to produce a form of oxygen that induces local tumor cell death. The Company has paused the REM-001 program in order to conserve cash resources.
Recent Highlights
Targeted Clinical Milestones
We expect topline results 12 months after the last patient is randomized for our GCAR GBM AGILE international registrational study for VAL-083 around the end of the fourth quarter of calendar 2023.
Product Pipeline
18
VAL-083
Background
VAL-083 is a first-in-class, small-molecule, DNA-targeting chemotherapeutic that has demonstrated activity against a range of tumor types in prior Phase 1 and Phase 2 clinical studies sponsored by the US National Cancer Institute (“NCI”). “First-in-class” means that VAL-083 embodies a unique molecular structure which is not an analogue, or derivative, of any approved product, or product under development, for the treatment of cancer. As part of our business strategy, we leverage and build upon these prior NCI investments and data from more than 40 NCI Phase 1 and Phase 2 clinical studies, which includes an estimated 1,200 patient safety database.
In GBM, we are part of the GBM AGILE Study which is a registrational Phase 2/3 clinical study for GBM. The study is a revolutionary, patient centered, adaptive platform study for registration evaluating multiple therapies for patients with newly-diagnosed and recurrent GBM. Patients in the GBM AGILE Study are tested for their O6-methyl guanine methyltransferase ("MGMT") methylation status prior to enrollment. VAL-083 is being evaluated in all three GBM patient subtypes in this study: newly-diagnosed methylated MGMT; newly-diagnosed unmethylated MGMT; and recurrent.
We have also completed two open-label, biomarker-driven, Phase 2 studies in MGMT-unmethylated GBM. MGMT is a DNA-repair enzyme that is associated with resistance to temozolomide ("TMZ" or Temodar®), the current standard-of-care chemotherapy used in the treatment of GBM. More than 60% of GBM patients have MGMT-unmethylated tumors and exhibit a high expression of MGMT which is correlated with TMZ treatment failure and poor patient outcomes as indicated in the current National Comprehensive Cancer Network (“NCCN”) guidelines for GBM treatment. Our research demonstrates that VAL-083’s anti-tumor activity is independent of MGMT expression. In our completed Phase 2 studies we used MGMT as a biomarker to identify patients for treatment with VAL-083 in three distinct GBM patient populations.
In addition, we have undertaken research in ovarian cancer. Ovarian cancer is the fifth most common cancer in women and is the leading cause of death among women diagnosed with gynecological malignancies. We are in the process of evaluating the best path forward in ovarian cancer including the potential combination of VAL-083 with PARP inhibitors. The FDA granted orphan drug designation for the use of VAL-083 in the treatment of ovarian cancer.
We have a broad patent portfolio to protect our intellectual property. Our patents and patent applications claim methods of use of VAL-083 and related compounds, synthetic methods, and quality controls for the manufacturing process of VAL-083. We believe that our portfolio of intellectual property rights provides a defensible market position for the commercialization of VAL-083. In
19
addition, VAL-083 has been designated by the FDA as an orphan drug under the Orphan Drug Act and the European Medicines Agency (“EMA”) for the treatment of gliomas, including GBM. The FDA has also granted Orphan Drug description to VAL-083 for the treatment of medulloblastoma and ovarian cancer.
Our corporate strategy is to advance VAL-083 on an indication-by-indication basis, and then to consider out-licensing when a corporate development program has matured enough to warrant proper licensing valuations. In addition to VAL-083’s applicability to multiple solid tumor indications, we are also constantly evaluating licensing or acquiring additional product candidates, in order to establish a product pipeline and to position us for long-term sustainability and growth of shareholder value. We believe the experience of our clinical development team will position us to efficiently develop possible drug candidates that we may acquire, or license, in the future.
We intend to continue to evaluate options for our strategic direction. These options may include raising additional capital, the acquisition of another company and/or complementary assets, our sale, or another type of strategic partnership.
VAL-083 Clinical Studies
GBM AGILE Study
On October 21, 2020, we announced we had entered into a definitive agreement with GCAR and on January 13, 2021, we announced the initiation of patient recruitment for the VAL-083 study arm of the GBM AGILE Study. VAL-083 is currently being evaluated in all three GBM patient subtypes in the GBM AGILE Study: newly-diagnosed methylated MGMT; newly-diagnosed unmethylated MGMT; and recurrent. The GBM AGILE Study employs a cost-efficient, adaptive study design with a stage 1 (Phase 2) learning and adapting phase and a stage 2 (Phase 3) expansion and confirmation phase. The GBM AGILE Study is currently enrolling patients in our arm of the study at 39 clinical sites in the United States, four in Canada, and two in Europe. GCAR plans to enroll 150-200 patients in the Kintara arm of the study at over 40 sites in the U.S. Canada, and Europe with potential to increase this total to 65 clinical study centers worldwide. GCAR has previously announced that the GBM AGILE Study has screened over 1,000 patients and that enrollment rates for the study are 3 to 4 times greater than traditional GBM studies, with active sites averaging 0.75 to 1 patient per site per month.
The GBM AGILE Study, which was designed by GCAR with input from the FDA, calls for companies participating in this platform study to only disclose data at the end of the study to protect the integrity of the trial arm data. Therefore, we expect to announce topline data from the GBM AGILE Study around the end of calendar 2023.
The GBM AGILE Study is an international, innovative platform study designed to more rapidly identify and confirm effective therapies for patients with glioblastoma through response adaptive randomization and a seamless Phase 2/3 design. The study, conceived by over 130 key opinion leaders, is conducted under a master protocol, allowing multiple therapies or combinations of therapies from different pharmaceutical partners to be evaluated simultaneously. With its innovative design and efficient operational infrastructure, we believe data from the GBM AGILE Study can be used as the foundation for a New Drug Application (“NDA”) and biologics license application submissions and registrations to the FDA and other health authorities.
GCAR is a 501(c)(3) nonprofit organization uniting physicians, clinical researchers, advocacy and philanthropic organizations, biopharma, health authorities, and other key stakeholders in healthcare to expedite the discovery and development of treatments for patients with rare and deadly diseases by serving as a sponsor of innovative and complex studies including master protocols and platform studies. GCAR is the sponsor of GBM AGILE. Key strategic partners for the GBM AGILE study effort include the National Brain Tumor Society (“NBTS”), National Foundation for Cancer Research, and Asian Fund for Cancer Research.
Safety Across Studies
Consistent with prior studies, myelosuppression was the most common adverse event with VAL-083 in both the recurrent GBM and adjuvant treatment settings in our completed Phase 2 studies. In the 30 mg/m2/day starting dose cohort (the dose being studied in the GBM AGILE Study) five subjects experienced a serious adverse event (“SAE”) possibly related to VAL-083 in the recurrent group and one patient experienced a possible drug-related SAE in the newly-diagnosed adjuvant group.
In the newly-diagnosed first-line Phase 2 study three subjects experienced an SAE possibly related to VAL-083. Multiple treatment cycles of VAL-083 at the 30 mg/m2/day dose in combination with standard radiation treatment (2 Gray/day, 5 days/week) were shown to be generally safe and well-tolerated.
VAL-083 Fast Track Designation
The FDA has granted us FTD for VAL-083 in recurrent and newly-diagnosed unmethylated GBM.
The FTD is designed to expedite the review of drugs that show promise in treating life-threatening diseases and address unmet medical needs, with the goal of getting new treatments to patients earlier. FTD provides sponsors with an opportunity for increased frequency for communication with the FDA to ensure an optimal development plan and to collect appropriate data needed to support drug approval. Additional benefits of the FTD may include an Accelerated Approval, a Priority Review, and a Rolling Review.
20
Accelerated Approval is granted to drugs that demonstrate an effect on a surrogate, or intermediate endpoints, reasonably likely to predict clinical benefit. Priority Review shortens the FDA review process for a new drug from ten months to six months and is appropriate for drugs that demonstrate significant improvements in both safety and efficacy of an existing therapy. Rolling Review provides a drug company the opportunity to submit completed sections of its NDA for review by the FDA. Typically, NDA reviews do not commence until the drug company has submitted the entire application to the FDA. Through the FTD, the FDA attempts to ensure that questions raised during the drug development process are resolved quickly, often leading to earlier approval and increased access for patients.
Current Treatments for Gliomas and Glioblastoma Multiforme
Gliomas are a type of Central Nervous System (“CNS”) tumor that arises from glial cells in the brain or spine. Glial cells are the cells surrounding nerves. Their primary function is to provide support and protection for neurons in the CNS.
Common symptoms of GBM include headaches, seizures, nausea, weakness, paralysis and personality or cognitive changes such as loss of speech or difficulty in thinking clearly. GBM progresses quickly and patients’ conditions deteriorate rapidly progressing to death. The outlook for GBM patients is generally poor. The overall median survival in newly diagnosed GBM patients with best available treatments is less than 15 months, and two-year and five-year survival rates are approximately 30% and 10%, respectively. Median overall survival in newly-diagnosed, unmethylated GBM patients is 12.2 months.
The recommended treatment regimen for GBM includes surgical resection to remove as much of the tumor as possible (“debulking”) followed by radiotherapy with concomitant and adjuvant chemotherapy with TMZ with or without tumor treating fields (“TTF”). GBM patients whose tumors exhibit an unmethylated promoter for the gene encoding the DNA repair enzyme MGMT, a biomarker correlated with resistance to TMZ, may be treated with radiation alone following surgery.
Patients with an unmethylated MGMT promoter have high levels of MGMT, a naturally-occurring DNA repair enzyme that repairs tumor-fighting lesions induced by TMZ thus allowing a patient’s tumor to continue to grow despite treatment, which leads to poor outcomes. Measurement of MGMT methylation status has become routine in clinical practice as biomarker that correlates with response to TMZ and patient outcomes in GBM.
Probability of GBM Patient Survival Correlated to Expression of MGMT Enzyme (Unmethylated promoter = High MGMT Expression and Significantly Shorter Survival)
TTF (Optune®) is a non-invasive technique for adults with GBM. TTF uses alternating electrical fields to disrupt tumor cell division, or cause cell death, thereby preventing the tumor from growing or spreading as quickly. A clinical study reported that GBM patients treated with TTF combined with TMZ experienced longer survival than those treated with TMZ alone.
The majority of GBM patients’ tumors recur within 6 – 12 months of initial treatment. Experimental therapy through clinical studies is recommended under NCCN guidelines for eligible patients. NCCN guidelines also recommend treatment with systemic chemotherapy, such as lomustine (“CCNU”). For patients who are eligible for additional surgical debulking, local chemotherapy with carmustine (“BCNU”) wafers may be employed. CCNU and BCNU target the same DNA-site as TMZ and are also subject to MGMT-related resistance.
Avastin (Avastin®, an anti-VEGF antibody) recently received full approval in the US, Canada, Australia, and Japan as a single agent for patients with recurrent GBM following prior therapy. Avastin carries an FDA “black-box warning” related to severe,
21
sometimes fatal, side effects such as gastrointestinal perforations, wound healing complications and hemorrhage. There are no data demonstrating an improvement in disease-related symptoms or increased survival for GBM patients treated with Avastin.
Recurrent GBM patients, especially those whose tumors progress following treatment with Avastin, have limited or no treatment options and a very poor prognosis. According to published literature, the median survival for GBM patients whose tumors progress following Avastin is less than five months.
VAL-083 Mechanism of Action
Chemotherapy forms the basis of treatment in nearly all cancers. We believe that VAL-083 may be effective in treating tumors exhibiting biological features that cause resistance to currently available chemotherapy, particularly for patients who have failed, or become resistant to, other treatment regimens.
Based on published research and our own data, the cytotoxic functional groups, and the mechanism of action of VAL-083 are functionally different from alkylating agents commonly used in the treatment of cancer. VAL-083 has previously demonstrated activity in cell lines that are resistant to other types of chemotherapy. No evidence of cross-resistance has been reported in published clinical studies.
Our research suggests that VAL-083 attacks cancer cells via a unique mechanism of action that is distinct from other chemotherapies used in the treatment of cancer. Our data indicate that VAL-083 forms inter-strand crosslinks at the N7 position of guanine on the DNA of cancer cells. Our data also indicate that this crosslink forms rapidly and is not easily repaired by the cancer cell, resulting in cell-cycle arrest and lethal double-strand DNA breaks in cancer cells. VAL-083 readily crosses the blood brain barrier. Published preclinical and clinical research demonstrate that VAL-083 is absorbed more readily in tumor cells than in normal cells.
In vitro, our data also demonstrate that VAL-083’s distinct mechanism may be able to overcome drug resistance against a range of cancers. For example, VAL-083 is active against MGMT-unmethylated GBM cells which are resistant to treatment with TMZ and nitrosoureas. VAL-083 also retains a high level of activity in p53 mutated non-small cell lung cancer (“NSCLC”), ovarian cancer and medulloblastoma cell lines that are resistant to platinum-based chemotherapy.
Importantly, clinical activity against each of the tumors mentioned above was established in prior NCI-sponsored Phase 2 clinical studies. We believe that these historical clinical data and our own research support the development of VAL-083 as a potential new treatment for multiple types of cancer.
The main dose-limiting toxicity (“DLT”) related to the administration of VAL-083 in previous NCI-sponsored clinical studies and our own clinical studies is myelosuppression, particularly thrombocytopenia. Myelosuppression, including thrombocytopenia, is a common side effect of chemotherapy. Myelosuppression is the decrease in cells responsible for providing immunity, carrying oxygen, and causing normal blood clotting. Thrombocytopenia is a reduction in platelet counts which assist in blood clotting. Modern medicine allows for better management of myelosuppressive side effects. We believe this offers the potential opportunity to improve upon the drug’s already established efficacy profile by substantially increasing the dose of VAL-083 that can be safely administered to cancer patients.
REM-001
Background
Through REM-001, we are developing our photodynamic therapy (“PDT”) for the treatment of rare, unmet medical needs. PDT is a treatment that uses light sensitive compounds, or photosensitizers, that, when exposed to specific wavelengths of light, act as catalysts to produce a form of oxygen that induces local tumor cell death. REM-001 consists of three parts, the laser light source, the light delivery device, and the REM-001 drug product (collectively, the “REM-001 Therapy”). REM-001 consists of an active pharmaceutical ingredient (“API”) in a lipid formulation. The REM-001 API is SnET2 (“tin ethyl etiopurpurin”) which is a second-generation PDT photosensitizer agent. We believe REM-001 possesses multiple advantages over earlier generation PDT compounds.
Our lead indication for REM-001 is CMBC which is a disease that may strike individuals with advanced breast cancer and for which effective treatment options are limited. In four Phase 2 and/or Phase 3 clinical studies in CMBC patients, primarily targeting patients who had previously received chemotherapy and failed radiation therapy, REM-001 Therapy was able to reduce, or eliminate, a substantial number of the treated CMBC tumors. Specifically, our analysis of the data collected from these studies indicates that in approximately 80% of evaluable tumor sites treated with REM-001 Therapy, there was a complete response; meaning that follow-up clinical assessments indicated no visible evidence of the tumor remaining. We believe clinical data indicates that REM-001 Therapy holds promise as a treatment to locally eliminate, or slow the growth of, treated cutaneous cancerous tumors in this difficult-to-treat patient population.
22
Numerous approaches have been utilized to treat CMBC patients, including various forms of chemotherapy, radiation therapy, surgical excision, hyperthermia, cryotherapy, electro-chemotherapy, topical drugs, and intra-lesional chemotherapy injections. However, for the most part, we believe that these therapies are often inadequate given the limited efficacy, toxicities and/or side effects of each. We believe our REM-001 Therapy has several advantages for this indication: it can be highly directed to the tumor site, has minimal systemic effects or normal tissue toxicities, can be used in conjunction with other therapies, and can be periodically repeated.
Our REM-001 Therapy product consists of three parts: the DD series laser light source (or equivalent), the ML2-0400 light delivery device (or equivalent) and the drug REM-001. In use, REM-001 is first administered by intravenous infusion and allowed to distribute within the body and be taken up by the tumors. Tumors are then illuminated with light using the light delivery device, which is attached to the laser light source, so that the accumulated REM-001 can be activated for the desired clinical effect.
As a result of our review of the historical data, we submitted questions to the FDA under a Type C format to review the technology and results and determine the anticipated requirements for regulatory approval. On March 3, 2017, we received the FDA’s written response to these questions. Based on that response, we have successfully manufactured REM-001 and developed light delivery devices for our planned 15-patient Phase 2 study. We received a Study May Proceed letter from the FDA for our 15-patient study on August 9, 2022.
On October 19, 2022, we announced that the REM-001 program in CMBC was paused to conserve cash which will be used to support the funding of our ongoing international registrational study for VAL-083 in GBM. By pausing the REM-001 program, we expect to save approximately $3.0 million through 2023.
Corporate History
We are a Nevada corporation formed on June 24, 2009, under the name Berry Only Inc. On January 25, 2013, we entered into and closed an exchange agreement (the “Exchange Agreement”), with Del Mar Pharmaceuticals (BC) Ltd. (“Del Mar (BC)”), 0959454 B.C. Ltd. (“Callco”), and 0959456 B.C. Ltd. (“Exchangeco”) and the security holders of Del Mar (BC). Upon completion of the Exchange Agreement, Del Mar (BC) became a wholly-owned subsidiary of ours (the “Reverse Acquisition”).
On August 19, 2020, we acquired Adgero and changed our name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc. We are the parent company to the following entities:
Del Mar (BC), a British Columbia, Canada corporation incorporated on April 6, 2010, which is a clinical stage company with a focus on the development of drugs for the treatment of cancer;
Adgero, a Delaware corporation incorporated on October 26, 2015, which is a clinical stage company with a focus on the development of photodynamic therapy for the treatment of rare, unmet medical needs, specifically orphan cancer indications;
Adgero Biopharmaceuticals, Inc. a Delaware corporation incorporated on November 16, 2007; and
Callco and Exchangeco which are British Columbia, Canada corporations. Callco and Exchangeco were formed to facilitate the Reverse Acquisition.
Outstanding Securities
As of November 8, 2022, we had 80,807,316 shares of common stock issued and outstanding, outstanding warrants to purchase 35,703,722 shares of common stock, warrants to purchase 2,444 shares of our Series C Preferred Stock that upon exercise are convertible into 2,100,302 shares of common stock, outstanding stock options to purchase 12,023,698 shares of common stock, 16,838 outstanding shares of Series C Preferred Stock that are convertible into 14,496,100 shares of common stock. All common stock warrants and stock options are convertible, or exercisable into, one share of common stock. The Series C Preferred Stock (issued in three series) is convertible into shares of common stock at $1.16 per share (Series C-1), $1.214 per share (Series C-2) or $1.15 per share (Series C-3), respectively. The Series C Preferred stock purchase warrants are convertible into Series C Preferred Stock at $1,000 per share for either Series C-1, Series C-2, or Series C-3 Preferred Stock, as applicable.
Selected Quarterly Information
The financial information reported herein has been prepared in accordance with accounting principles generally accepted in the United States. Our functional currency at September 30, 2022, and June 30, 2022, is the US$. The following tables represent selected financial information for us for the periods presented. All amounts in the remainder of this MD&A are expressed in thousands, except par value and per share amounts, unless otherwise noted.
23
Selected Balance Sheet Data
|
|
September 30, |
|
|
June 30, |
|
||
|
|
(in thousands) |
|
|||||
Cash and cash equivalents |
|
|
7,085 |
|
|
|
11,780 |
|
Working capital |
|
|
4,640 |
|
|
|
9,268 |
|
Total assets |
|
|
13,210 |
|
|
|
15,948 |
|
Total stockholders’ equity |
|
|
9,618 |
|
|
|
11,795 |
|
Selected Statement of Operations Data
For the three months ended
|
|
September 30, |
|
|
September 30, |
|
||
|
|
$ |
|
|
$ |
|
||
|
|
(in thousands, except per share data) |
|
|||||
Expenses |
|
|
|
|
|
|
||
Research and development |
|
|
3,171 |
|
|
|
3,793 |
|
General and administrative |
|
|
1,475 |
|
|
|
2,178 |
|
|
|
|
(4,646 |
) |
|
|
(5,971 |
) |
Other income (loss) |
|
|
|
|
|
|
||
Foreign exchange |
|
|
11 |
|
|
|
4 |
|
Interest, net |
|
|
39 |
|
|
|
1 |
|
|
|
|
50 |
|
|
|
5 |
|
Net loss for the period |
|
|
(4,596 |
) |
|
|
(5,966 |
) |
Series A Preferred cash dividend |
|
|
(2 |
) |
|
|
(2 |
) |
Series C Preferred stock dividend |
|
|
(362 |
) |
|
|
(2,462 |
) |
Net loss for the period attributable to common stockholders |
|
|
(4,960 |
) |
|
|
(8,430 |
) |
Basic and fully diluted weighted average number of shares |
|
|
73,205 |
|
|
|
34,281 |
|
Basic and fully diluted loss per share |
|
|
(0.07 |
) |
|
|
(0.25 |
) |
Expenses, net of non-cash, share-based compensation expense – non-GAAP
The following table discloses research and development, and general and administrative expenses net of non-cash, share-based compensation payment expense. The disclosure has been provided to reconcile the total operational expenses on a GAAP basis and the non-GAAP operational expenses net of non-cash stock-based compensation in order to provide an estimate of cash used in research and development, and general and administrative expense. Management uses the cash basis of expenses for forecasting and budget purposes to determine the allocation of resources and to plan for future financing opportunities.
For the three months ended
|
|
September 30, |
|
|
September 30, |
|
||
|
|
(in thousands) |
|
|||||
Research and development - GAAP |
|
|
3,171 |
|
|
|
3,793 |
|
Less: non-cash, share-based compensation expense |
|
|
(140 |
) |
|
|
(244 |
) |
Research and development net of non-cash, share-based, compensation expense – Non-GAAP |
|
|
3,031 |
|
|
|
3,549 |
|
General and administrative - GAAP |
|
|
1,475 |
|
|
|
2,178 |
|
Less: non-cash, share-based compensation expense |
|
|
(378 |
) |
|
|
(598 |
) |
General and administrative net of non-cash, share-based, compensation expense – Non-GAAP |
|
|
1,097 |
|
|
|
1,580 |
|
24
Results of Operations
Comparison of the three months ended September 30, 2022, and September 30, 2021
|
|
Three months ended |
|
|
|
|
|
|
|
|||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change $ |
|
|
Change % |
|
||||
|
|
(in thousands) |
|
|
|
|
||||||||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
3,171 |
|
|
|
3,793 |
|
|
|
(622 |
) |
|
|
(16 |
) |
General and administrative |
|
|
1,475 |
|
|
|
2,178 |
|
|
|
(703 |
) |
|
|
(32 |
) |
|
|
|
(4,646 |
) |
|
|
(5,971 |
) |
|
|
1,325 |
|
|
|
|
|
Other income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange |
|
|
11 |
|
|
|
4 |
|
|
|
7 |
|
|
|
175 |
|
Interest, net |
|
|
39 |
|
|
|
1 |
|
|
|
38 |
|
|
|
3,800 |
|
|
|
|
50 |
|
|
|
5 |
|
|
|
45 |
|
|
|
|
|
Net loss |
|
|
(4,596 |
) |
|
|
(5,966 |
) |
|
|
1,370 |
|
|
|
|
|
Research and Development
Research and development expenses decreased to $3,171 for the three months ended September 30, 2022, from $3,793 for the three months ended September 30, 2021. The decrease was largely attributable to lower clinical development costs, non-cash, share-based compensation expenses, and personnel costs incurred during the three months ended September 30, 2022, compared to the three months ended September 30, 2021.
Clinical development costs have decreased in the current quarter compared to the same quarter in the prior fiscal year largely due to costs incurred during the three months ended September 30, 2021 related to study preparation and manufacturing expenses for the Company's REM-001, 15-patient clinical study. Costs for the REM-001 study were lower during the three months ended September 30, 2022 than the three months ended September 30, 2021. Subsequent to September 30, 2022, we made the decision to pause REM-001 in order to preserve cash for the development of its VAL-083 program. Costs for the GCAR GBM AGILE international registrational study commenced in January 2021 and ongoing study costs, including clinical site activation and patient enrollment, were largely similar for the three months ended September 30, 2022, and 2021.
Non-cash, share-based compensation expense decreased for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, due to the higher compensation expense recognized during the three months ended September 30, 2021 for stock options granted in September 2021. Personnel costs have decreased in the current quarter compared to the same quarter in the prior fiscal year largely due to a reduction in staff.
General and Administrative
General and administrative expenses were $1,475 for the three months ended September 30, 2022, compared to $2,178 for the three months ended September 30, 2021. A significant portion of the decrease was a result of lower professional fees, non-cash, share-based compensation expenses, and personnel in the current three months compared to the same period in the prior fiscal year. Professional fees were lower during the three months ended September 30, 2022 compared to the three months ended September 30, 2021 due to reduced investor relations and business development activities.
Non-cash, share-based compensation expense decreased for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, due to the recognition of higher compensation expense recognized during the three months ended September 30, 2021 for stock options granted in September 2021. Personnel costs have decreased in the current quarter compared to the same quarter in the prior fiscal year largely due to a reduction in staff.
Preferred Share Dividends
During the three months ended September 30, 2022, we issued 2,174 (2021 – 1,698) shares of common stock as a stock dividend on the Series C Preferred stock and recognized $362 (2021 - $2,462) as a direct increase in accumulated deficit.
For each of the three months ended September 30, 2022, and 2021, we recorded $2 related to the cash dividend payable to Valent on the Series A preferred stock. The dividend has been recorded as a direct increase in accumulated deficit for both periods.
Liquidity and Capital Resources
Three months ended September 30, 2022, compared to the three months ended September 30, 2021
25
|
|
September 30, |
|
|
September 30, |
|
|
Change |
|
|
Change |
|
||||
|
|
(in thousands) |
|
|
|
|
||||||||||
Cash flows from operating activities |
|
|
(6,369 |
) |
|
|
(5,073 |
) |
|
|
(1,296 |
) |
|
|
26 |
|
Cash flows from investing activities |
|
|
(232 |
) |
|
|
— |
|
|
|
(232 |
) |
|
|
— |
|
Cash flows from financing activities |
|
|
1,906 |
|
|
|
13,875 |
|
|
|
(11,969 |
) |
|
|
(86 |
) |
Operating Activities
Net cash used in operating activities increased to $6,369 for the three months ended September 30, 2022, from $5,073 for the three months ended September 30, 2021. During the three months ended September 30, 2022, and 2021, we reported net losses of $4,596 and $5,966, respectively. Changes in adjustments to reconcile net loss to net cash used in operating activities for the three months ended September 30, 2022, included stock option expense of $518 being recognized during the current period compared to $811 in the same period in the prior fiscal year. The most significant changes in working capital for the three months ended September 30, 2022, were related to an increase in clinical trial deposits of $1,700 and a decrease in accounts payable and accrued liabilities of $332. The most significant change in working capital for the three months ended September 30, 2021, was cash from an increase in accounts and accrued liabilities of $122.
Investing Activities
Net cash used in investing activities was $232 for the three months ended September 30, 2022, for the purchase of equipment, compared to $nil for the three months ended September 30, 2021.
Financing Activities
During the three months ended September 30, 2022, we received $1,908 in net proceeds from the sale of shares under the Purchase Agreement with Lincoln Park.
During the three months ended September 30, 2021, we received $13,803 in net proceeds from the completion of a registered direct financing that closed on September 28, 2021, and $74 from the cash exercise of stock purchase warrants.
Going Concern and Capital Expenditure Requirements
Going Concern and Management Plans
(See note 1 to the condensed consolidated interim financial statements)
The condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that we will continue our operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.
For the three months ended September 30, 2022, we reported a loss of $4,596 and a negative cash flow from operations of $6,369. We had an accumulated deficit of $141,316 and had cash and cash equivalents of $7,085 as of September 30, 2022. We are in the clinical stage and have not generated any revenues to date. We do not have the prospect of achieving revenues until such time that our product candidates are commercialized, or partnered, which may not ever occur. On August 2, 2022, we entered into a stock purchase agreement under which we received approximately $1,908 in net proceeds as of September 30, 2022 which is the current maximum amount available under the stock purchase agreement due to ownership limitations under Nasdaq rules. Even with the proceeds from this financing, we will require additional funding to maintain our clinical trials, research and development projects, and for general operations. These circumstances indicate substantial doubt exists about our ability to continue as a going concern within one year from the date of filing of these condensed consolidated interim financial statements.
Consequently, management is pursuing various financing alternatives to fund our operations so we can continue as a going concern. However, the COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets. Management plans to continue to pursue opportunities to secure the necessary financing through the issue of new equity, debt, and/or the entering into of strategic partnership arrangements but the ultimate impact of the COVID-19 pandemic on our ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and any new information which may emerge concerning the severity of the COVID-19 pandemic. We may not be able to raise sufficient additional capital and may tailor our drug candidate development program based on the amount of funding we are able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.
26
The condensed consolidated interim financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Such adjustments could be material.
Our future funding requirements will depend on many factors, including but not limited to:
the rate of progress and cost of our clinical studies, preclinical studies and other discovery and research and development activities;
the costs associated with establishing manufacturing and commercialization capabilities;
the costs of acquiring or investing in businesses, product candidates and technologies;
the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
the costs and timing of seeking and obtaining FDA and other regulatory approvals;
the effect of competing technological and market developments;
the economic and other terms and timing of any collaboration, licensing or other arrangements into which we may enter; and
the impact of us being a public entity.
Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs primarily through public or private equity and debt offerings, and/or strategic collaborations. The sale of equity and convertible debt securities may result in dilution to our stockholders and certain of those securities may have rights senior to those of our shares of capital stock. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights. Economic conditions may affect the availability of funds and activity in equity markets. We do not know whether additional funding will be available on acceptable terms, or at all. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more of our clinical trials or research and development programs or make changes to our operating plan. In addition, we may have to seek a partner for one or more of our product candidates at an earlier stage of development, which would lower the economic value of those programs to us.
Critical Accounting Policies and Estimates
The preparation of financial statements, in conformity with generally accepted accounting principles in the United States, requires companies to establish accounting policies and to make estimates that affect both the amount and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain and therefore actual results may differ from those estimates.
A detailed presentation of all of our significant accounting policies and the estimates derived therefrom is included in Note 2 to our consolidated financial statements for the year ended June 30, 2022, contained in our Form 10-K filed with the SEC on September 27, 2022. While all of the significant accounting policies are important to our consolidated financial statements, the following accounting policies and the estimates derived therefrom are critical:
Fair value of financial instruments
Accruals for research and development expenses and clinical trials
27
Fair value of financial instruments
We recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the statement of operations over the service period based on a measurement of fair value for each stock-based award. Prior to our adoption of ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), stock options granted to non-employee consultants were revalued at the end of each reporting period until vested using the Black-Scholes option-pricing model and the changes in their fair value were recorded as adjustments to expense over the related vesting period. For the three months ended September 30, 2022, and 2021, the determination of grant-date fair value for stock option awards was estimated using the Black-Scholes model which includes variables such as the expected volatility of our share price, the anticipated exercise behavior of its grantee, interest rates, and dividend yields. For the three months ended September 30, 2022, and 2021, we utilized the plain vanilla method to determine the expected life of stock options. These variables are projected based on our historical data, experience, and other factors. Changes in any of these variables could result in material adjustments to the expense recognized for share-based payments. Such value is recognized as expense over the requisite service period, net of actual forfeitures, using the accelerated attribution method. We recognize forfeitures as they occur. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results, or updated estimates, differ from current estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.
We have issued warrants for services provided by non-employees. The warrants issued for services have been valued at the fair value of the warrants issued. For the three months ended September 30, 2022, and 2021, the determination of grant-date fair value for warrants issued for services was estimated using the Black-Scholes model which includes variables such as the expected volatility of our share price, interest rates, dividend yields, and the term of the warrant. We have also issued shares for services to non-employees which have been valued using the share price of our common stock.
Accruals for research and development expenses and clinical trials
As part of the process of preparing our financial statements, we are required to estimate our expenses resulting from our obligations under contracts with vendors, clinical research organizations and consultants, and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment terms that do not match the periods over which materials or services are provided under such contracts. Our objective is to reflect the appropriate expenses in our financial statements by matching those expenses with the period in which services are performed and efforts are expended. We account for these expenses according to the timing of various aspects of the expenses. We determine accrual estimates by taking into account discussion with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed. During the course of a clinical trial, we adjust our clinical expense recognition if actual results differ from our estimates. We make estimates of our accrued expenses as of each balance sheet date based on the facts and circumstances known to us at that time. Our clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low for any particular period. For three months ended September 30, 2022, and 2021, there were no material adjustments to our prior period estimates of accrued expenses for clinical trials.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
28
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for a smaller reporting company.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
(b) Changes in Internal Controls. There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
29
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no legal proceedings the Company is party to or any of its property is subject to.
Item 1A. Risk Factors.
There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 27, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On November 9, 2022, the Board of Directors of the Company (the “Board”) approved the adoption of our Amended and Restated Bylaws (the “Amended Bylaws”), effective immediately. The Amended Bylaws amended and restated in their entirety our bylaws, as amended, to, among other things: (i) provide that a stockholder, or a group of stockholders, owning at least 20% of our outstanding common stock may call a special meeting of stockholders; (ii) eliminate the ability of stockholders to take action by written consent; (iii) establish procedures for the advance notice of stockholder proposed business and director nominations at a stockholder meeting; (iv) provide that chairperson of the Board, the Board, the President, or the chairperson of the stockholder meeting may adjourn a stockholder meeting whether or not a quorum is present; (v) provide that the size of the Board consist of two or more members; (vi) provide that the forum for the resolution of internal corporate claims will be the courts in the State of Nevada; and (vii) make other technical and modernizing amendments.
The foregoing description is qualified in its entirety by reference to the Amended Bylaws, a copy of which is filed herewith as Exhibit 3.1.
30
Item 6. Exhibits.
* Filed herewith
** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
Kintara Therapeutics, Inc. |
|
|
|
|
Date: November 9, 2022 |
By: |
/s/ Robert E. Hoffman |
|
|
Robert E. Hoffman |
|
|
Chief Executive Officer (Principal Executive Officer) |
Date: November 9, 2022 |
By: |
/s/ Scott Praill |
|
|
Scott Praill |
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
32