Item 7. Management’s Discussion and Analysis
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included
elsewhere in this Annual Report. This discussion and other parts of this Annual Report contain forward-looking statements based upon
current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially
from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “ Risk
Factors ” and elsewhere in this Annual Report.
The
preparation of our consolidated financial statements in conformity with these accounting principles requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the financial statement
date and reported amounts of revenue and expenses during the reporting period. On an on-going basis, we review our estimates and assumptions.
The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual
results are likely to differ from those estimates or other forward-looking statements under different assumptions or conditions, but
we do not believe such differences will materially affect our financial position or results of operations. Our actual results may differ
materially as a result of many factors, including those set forth under the headings entitled “ Special Note Regarding Forward-Looking
Statements ” and “ Risk Factors ”.
48
Overview
BriaCell
is a clinical-stage biotechnology company that is developing novel immunotherapies to transform cancer care. Immunotherapies have come
to the forefront in the fight against cancer as they harness the body’s own immune system to recognize and destroy cancer cells.
The Company is currently advancing its Bria-IMT™ targeted immunotherapy in combination with an immune check point inhibitor (Retifanlimab)
in a pivotal Phase 3 study in metastatic breast cancer. Bria-IMT™ is currently under Fast Track Designation by the U.S. Food and
Drug Administration(the “FDA”) intended to accelerate the review process of novel treatments that address unmet medical needs.
Positive completion of the pivotal study, following review by FDA, could lead to full approval of the Bria-IMT™ immune checkpoint
inhibitor combination in metastatic breast cancer. BriaCell reported benchmark-beating patient survival and clinical benefit in metastatic
breast cancer with median overall survival of 13.4 months in BriaCell’s metastatic breast cancer patients vs. 6.7-9.8 months for
similar patients reported in the literature in its Phase 2 study of Bria-IMT™ combination study with retifanlimab at the 2023 San
Antonio Breast Cancer Symposium. A completed Bria-IMT™ Phase 1 combination study with retifanlimab (an anti-PD1 antibody manufactured
by Incyte) confirmed tolerability and early-stage efficacy. BriaCell is also developing personalized off-the-shelf immunotherapies, Bria-OTS™
and Bria-OTS+™, which provides a platform technology to develop personalized off-the-shelf immunotherapies for numerous types of
cancer, and a soluble CD80 protein therapeutic which acts both as a stimulator of the immune system as well as an immune checkpoint inhibitor.
Critical
Accounting Policies and Estimates
1.
Critical Estimates and Judgements
The
preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses
during the reporting period. Actual outcomes could differ from these estimates. The consolidated financial statements include
estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial
statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in
the period in which the estimate is revised and also in future periods when the revision affects both current and future
periods.
The
critical judgments and significant estimates in applying accounting policies that have the most significant effect on the amounts recognized
in the consolidated financial statements are:
Going
Concern
Preparation
of the consolidated financial statement on a going concern basis, which contemplates that the Company will be able to meet its commitments, continue operations and realize its assets
and discharge its liabilities in the normal course of business for at least twelve months from the date of approval of these Financial
Statements from the Board of Directors. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying
value of its assets, including its intangible assets and to meet its liabilities as they become due.
Warrants
and options
The
Company uses the Black-Scholes option-pricing model to estimate the fair value of options at the grant date, and the warrant liability
at the grant date and each reporting period date. The key assumptions used in the model are the expected future volatility in the price
of the Company’s shares and the expected life of the warrants.
Income
Taxes
The
Company accounts for income taxes in accordance with Accounting Standard Codification 740, Income Taxes (“FASB ASC 740”),
on a tax jurisdictional basis. The Company files income tax returns in the United States.
49
Deferred
tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax bases of
assets and liabilities and the consolidated financial statements reported amounts using enacted tax rates and laws in effect in the year
in which the differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is determined
to be more likely than not that the deferred tax asset will not be realized.
Provision
for Income Taxes. Management accounts for income taxes by estimating future tax effects of temporary differences between the tax and
book basis of assets and liabilities considering the provisions of enacted tax laws. The application of income tax law is inherently
complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, management is required to make many subjective
assumptions and judgments regarding the Corporation’s income tax exposures, including judgments in determining the amount and timing
of recognition of the resulting deferred tax assets and liabilities, including projections of future taxable income. Interpretations
of and guidance surrounding income tax laws and regulations change over time. As such, changes in management’s subjective assumptions
and judgments can materially affect amounts recognized in the Consolidated balance sheet and Consolidated Statements of Operations and
Comprehensive Loss
Intangible
assets
Intangible
assets are tested for impairment annually or more frequently if there is an indication of impairment. The carrying value of intangibles
with definite lives is reviewed each reporting period to determine whether there is any indication of impairment. If there are indications
of impairment, the impairment analysis is completed and if the carrying amount of an asset exceeds its recoverable amount, the asset
is impaired and impairment loss is recognized.
Prepaid
expenses
The
Company has prepaid certain expenses in respect of its pivotal phase III trial and estimates the period over which such expenses will
be incurred. As of July 31, 2025, the Company revised its estimate of the time to completion in respect of this trial. Amounts estimated
to be expenses in more than 12 months have been classified to long-term prepaid expenses.
The
useful life of property and equipment
Property
and equipment are depreciated over their useful lives. Useful lives are based on management’s estimates of the period that the
assets will be used which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations
in the amounts charged to the consolidated statement of operations and comprehensive loss in specific periods.
Investment
equity method
Investments
in entities over which the Company does not have a controlling financial interest but has significant influence are accounted for
using the equity method, with the Company’s share of losses reported in the loss from equity method investments on the
statements of operation and comprehensive loss. The Company has a 63.1% interest in BC Therapeutics. Management evaluates whether it
has control over the investee in accordance with the guidance of ASC 810, which requires judgment to assess factors such as power
over significant activities of the investee, exposure to variable returns, and the ability to affect those returns. Based on this
evaluation, management concludes significant influence is present for accounting purposes.
2.
New Accounting Policies Adopted
No
new accounting policies were adopted during the year ended July 31, 2025.
50
Results
of Operations
Comparison
of the year ended July 31, 2025, compared to the year ended July 31, 2024
Research
Costs
Research costs are comprised primarily of (i) salaries and wages to Company
employees at our laboratory and in clinical development; and (ii) clinical trials and investigational drug costs, which include the testing
and manufacture of our investigational drugs and costs of our clinical trials.
The following is a breakdown of our research and development costs by nature
of expenses:
Year ended July 31,
2025
2024
Clinical trial sites and investigational drug costs
$
14,765,112
$
20,885,903
Wages and salaries
5,356,806
4,567,307
Laboratory rent
457,320
420,310
Supplies
470,208
496,312
Depreciation
91,356
68,626
Professional Fees
9,826
4,363
Share-based compensation
120,050
734,986
$
21,270,678
$
27,177,807
For the year ended July 31, 2025, total research,
development, and clinical trial costs amounted to $21,270,678 as compared to $27,177,807 for the year ended July 31, 2024. The decrease
was primarily driven by lower clinical trial sites and investigational drug costs, which declined from $20,885,903 in 2024 to $14,765,112
in 2025. The reduction reflects the conclusion of the Bria-IMT™ Phase 1/2a trial and a focus on optimizing expenditures for the
pivotal Phase 3 trial. Wages and salaries increased from $4,567,307 in 2024 to $5,356,806 in 2025, reflecting the hiring of additional
employees to support ongoing research and clinical activities. Laboratory rent rose to $457,320 in 2025, compared to $420,310 in 2024,
due to expanded use of facilities. Supplies decreased, from $496,312 in 2024 to $470,208 in 2025, reflecting reduced consumable needs.
Depreciation expenses increased to $91,356 in 2025, compared to $68,626 in 2024. The increase reflects a full year of depreciation on
equipment purchased in 2024 as no new equipment was purchased in 2025. Professional fees increased from $4,363 in 2024 to $9,826 in 2025.
Share-based compensation expenses decreased significantly from $734,986 in 2024 to $120,050 in 2025, further contributing to the overall
reduction in research, development, and clinical trial expenses.
Clinical trial expenses for the period are as follows:
Year ended July 31,
2025
2024
Bria-IMT™ Pivotal Phase 3 study
$ 13,511,235
$ 11,594,463
Bria-IMT™ Phase 1/2a
1,013,828
4,239,415
Bria-OTS™ Phase 1/2a
428,233
-
$ 14,953,296
$ 15,833,879
Clinical
trial expenses for the year ended July 31, 2025, were $14,953,296, compared to $15,833,879 during the year ended July 31, 2024. The decrease
is primarily attributable to the conclusion of the Bria-IMT™ Phase 1/2a clinical trial in fiscal 2024, resulting in significantly
lower associated costs in 2025. As expenses for the Bria-IMT™ Phase 1/2a trial declined, resources were increasingly directed toward
the pivotal Phase 3 study, which remains our primary focus. In addition, we began incurring costs related to the Bria-OTS™ Phase
1/2a trial, which commenced in August 2024.
For
the year ended July 31, 2025, Bria-IMT™ Pivotal Phase 3 Study costs totaled $13,511,235, compared to $11,594,463 in 2024. The increase
reflects the progression of the pivotal study, with higher expenditures on patient recruitment, treatment, and data-management activities
as the trial advanced through key operational milestones.
For
the year ended July 31, 2025, Bria-IMT™ Phase 1/2a costs were $1,013,828, down from $4,239,415 in 2024, reflecting the conclusion
of the study. The remaining expenses primarily relate to final data analysis and study close-out activities.
For
the year ended July 31, 2025, Bria-OTS™ Phase 1/2a costs totaled $428,233, compared to $nil in 2024, due to the initiation of the
Bria-OTS™ Phase 1/2a trial in August 2024.
51
General
and Administrative Expenses
For the year ended July 31, 2025, general and administrative expenses were $5,934,125, compared to $6,152,269 for
the year ended July 31, 2024. Expenses remained relatively consistent year over year, with lower consulting, professional fees, and share-based
compensation largely offset by higher wages and salaries, travel, and other administrative costs.
Financial
income, net
For
the year ended July 31, 2025, finance income, net, was $114,511, compared to $262,566 for the year ended July 31, 2024. The decrease
was primarily due to lower interest income, which declined to $176,431 in 2025 from $288,018 in 2024, reflecting reduced average cash
balances available for investment. The decrease was further impacted by the recognition of $36,979 in interest expense in 2025 compared
to nil in the prior year. Foreign exchange losses were relatively consistent year over year, amounting to $24,941 in 2025 versus $25,452
in 2024.
Loss
for the period
The
Company reported a net loss of $26,311,867 for the year ended July 31, 2025, compared to $4,791,466 in 2024. The increase in net loss
was primarily due to a significantly smaller gain on the fair value of the warrant liability, which was $758,364 in 2025 compared to
$28,242,472 in 2024. This variance outweighed the reduction in research, development, and clinical trial expenses, which decreased from
$27,177,807 in 2024 to $21,270,678 in 2025, mainly reflecting lower clinical-trial and investigational-drug costs following the completion
of the Bria-IMT™ Phase 1/2a trial.
Liquidity
and Capital Resources
As
of July 31, 2025, the Company has a positive working capital of $15,948,588 (July 31, 2024 – negative $3,807,303) and an
accumulated deficit of $111,755,564 (July 31, 2024 - $85,443,697).
As
of July 31, 2025, the Company’s capital resources consist primarily of cash and cash equivalents, comprised mostly of cash on deposit
with banks, investments in money market funds, investments in U.S. government securities, U.S. government agency securities, and investment
grade corporate debt securities. Our investment policy and strategy are focused on preservation of capital and supporting our liquidity
requirements.
52
Historically,
the Company has financed its operation through private and public placement of equity securities, as well as debt financing. The Company’s
ability to fund its longer-term cash requirements is subject to multiple risks, many of which are beyond its control. The Company intends
to raise additional capital, either through debt or equity financings in order to achieve its business plan objectives. Management believes
that it can be successful in obtaining additional capital; however, there can be no assurance that the Company will be able to do so.
There is no assurance that any funds raised will be sufficient to enable the Company to attain profitable operations or continue as a
going concern. To the extent that the Company is unsuccessful, the Company may need to curtail or cease its operations and implement
a plan to extend payables or reduce overhead until sufficient additional capital is raised to support further operations. There can be
no assurance that such a plan will be successful. To this end, for several months during calendar year 2025, certain directors and officers
agreed to defer payment of their directors’ fees/compensation until we completed a financing, after which, these fees were paid
in full. Further, certain officers have indicated their willingness to receive a portion of their compensation in shares of the Company,
subject to applicable Nasdaq rules. In addition, we continue to reduce expenditure on certain non-core activities whilst maintaining
our focus on our Phase 3 Bria-IMT™ pivotal study in advanced metastatic breast cancer.
During
the year ended July 31, 2025, the Company’s overall position of cash and cash equivalents increased by $10,493,808 from the year
ended July 31, 2024 (including effects of foreign exchange). This increase in cash can be attributed to the following:
The
Company’s net cash used in operating activities during the year ended July 31, 2025, was $28,170,520 as compared to $24,126,128
for the year ended July 31, 2024.
Cash
used in investing activities for the year ended July 31, 2025, was $7,646,000, as compared to $681,801 for the year ended July 31, 2024.
The amount in 2025 relates primarily to the purchase of short-term investments ($7,316,000) and an equity investment in BC Therapeutics
($330,000), and in the prior year, to the purchase of property, plant and equipment ($456,801) and an equity investment in BC Therapeutics
($225,000).
Cash
generated from financing activities for the year ended July 31, 2025, was $45,448,239, as compared to $4,418,926 for the year ended July
31, 2024. In both periods, this relates to proceeds for the issuance of shares.
Off-balance
Sheet Arrangements
None.
Tabular
Disclosure of Contractual Obligations
None.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to
provide the information required under this Item 7A.