What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-09-28 compared with 2020-09-18 · 98 added, 82 removed, 124 unchanged (59% of the section changed)

Management’s Discussion and Analysis o f Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

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Actual results may differ materially from any forward-looking statement.

Kintara Therapeutics, Inc.

is the parent company of Del Mar (BC), a British Columbia, Canada corporation, and Adgero Biopharmaceuticals Holdings, Inc., a Delaware corporation (“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 merger described below, the Company is also the parent company of Adgero Biopharmaceuticals, Inc., formerly a wholly-owned subsidiary of Adgero.

References to “we”, “us”, and “our”, refer to Kintara Therapeutics, Inc.

and our wholly-owned subsidiaries, Del Mar (BC), Adgero, Adgero Biopharmaceuticals, Inc., Callco and Exchangeco.

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.

The COVID-19 pandemic did not cause significant disruption to our Phase 2 clinical studies.

Each of our now-completed Phase 2 clinical studies was conducted at respective single sites which reduced the risk of study disruption.

Any disruptions to patient treatments for our Phase 2 studies were within allowances under each study protocol.

Access to the sites by our clinical monitors was limited during the COVID-19 pandemic but the recording of study data in both studies and patient treatments at both study sites was conducted per protocol.

Regarding the VAL-083 study arm of the GCAR registrational Phase 2/3 clinical trial that is currently being conducted at multiple sites in the United States, we have not experienced any significant impacts on patient enrollment or treatment.

With respect to the REM-001 drug supply, we are currently experiencing some delays in contract manufacturing schedules and supplies which we attribute to COVID-19.

The current delays could have an impact on our REM-001 program timeline.

Including net proceeds of approximately $13.6 million received from a registered direct financing completed subsequent to June 30, 2021, we estimate that we have cash available to fund planned operations for less than one year from the date of issuance of our June 30, 2021 consolidated financial statements but cash is expected to fund planned operations through stage 1 of the GBM AGILE study, which could result in graduation to the final confirmatory stage, the potentially NDA enabling portion of the study.

However, 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.

Corporate History

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The Placement 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 the date of the initial closing of the private placement.

The Series C Stock and the shares

of Series C Stock issuable upon exercise of the Placement Agent Warrants will be entitled to receive dividends, payable in shares of our 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 Stock, on the 12 th , 24 th , 36 th and 48 th month anniversary of the initial closing of the private placement, which occurred on August 19, 2020, provided that the holder of such shares has not converted the shares of Series C Stock prior to the applicable dividend rate.

The Series C Stock and the shares of Series C Stock issuable upon exercise of the Placement Agent Warrants will be entitled to receive dividends, payable in shares of our 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 Stock, on the 12 th , 24 th , 36 th and 48 th month anniversary of the initial closing of the private placement, which occurred on August 19, 2020, provided that the holder of such shares has not converted the shares of Series C Stock prior to the applicable dividend rate.

Outstanding Securities

As of September 15, 2020, we had 23,543,892 shares of common stock issued and outstanding, outstanding, warrants to purchase 12,446,779 shares of common stock, warrants to purchase 2,504 Series C Preferred Stock that upon conversion are convertible into 2,152,667 shares of common stock, outstanding stock options to purchase 6,243,872 shares of common stock, 648,613 outstanding shares of Series B Preferred Stock that are convertible into 162,177 shares of common stock, 25,028 outstanding shares of Series C Preferred Stock that are convertible into 21,516,484 shares of common stock.

All warrants and stock options are convertible, or exercisable into, one share of common stock.

Each Series B convertible preferred share is convertible into 0.25 shares of common stock and the Series C convertible Preferred Stock (issued in three series) are convertible into a total of 21,516,484 shares of common stock

On May 8, 2019, we effected a one-for-ten reverse stock split (the “Reverse Stock Split”) of our issued and outstanding and authorized common stock.

All per share amounts and number of shares of common stock in the MD&A and the consolidated financial statements reflect the Reverse Stock Split.

The Reverse Stock Split does not affect the our authorized preferred stock of 5,000,000 shares;

except that, pursuant to the terms of the Certificate of Designations of Series B Convertible Preferred Stock for the issued and outstanding shares of our Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), the conversion price at which shares of Series B Preferred Stock may be converted into shares of common stock will be proportionately adjusted to reflect the Reverse Stock Split.

As of September 28, 2021, we had 43,174,989 shares of common stock issued and outstanding, outstanding warrants to purchase 23,951,752 shares of common stock, warrants to purchase 2,443 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 6,809,125 shares of common stock, 18,382 outstanding shares of Series C Preferred Stock that are convertible into 15,827,521 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.

On June 25, 2021, we amended our articles of incorporation, as amended, to increase the number of authorized shares of common stock from 95,000,000 to 175,000,000 shares.

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The following tables represent selected financial information for us for the periods presented.

Selected Balance Sheet data

Selected Balance Sheet data (in thousands)

Cash and cash equivalents

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Total stockholders’ equity

Selected Statement of Operations data

Selected Statement of Operations data (in thousands, except per share data)

For the years ended

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General and administrative

In-process research and development

Other income (loss)

Change in fair value of derivative liabilities

Derivative liability issue costs

Foreign exchange loss

Interest income

Foreign exchange

Amortization of deferred loan costs

Interest - net

Net loss for the year

Deemed dividend recognized on beneficial conversion

features of Series C Preferred stock issuance

Series A Preferred cash dividend

Series B Preferred stock dividend

Net loss for the year attributable to common

Basic and fully diluted number of shares

Basic and fully diluted weighted average number of shares

Basic and fully diluted loss per share

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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 years ended

For the years ended (in thousands)

Research and development - GAAP

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Comparison of the years ended June 30, 2021 and June 30, 2020

(in thousands)

Research and development

General and administrative

In-process research and development

Other income (loss)

Change in fair value of derivative liabilities

Derivative liability issue costs

Foreign exchange loss

Interest income

Foreign exchange

Amortization of deferred loan costs

Interest - net

Research and Development

Research and development expenses decreased slightly to $3,630,024 for the year ended June 30, 2020 from $3,662,056 for the year ended June 30, 2019.

The decrease was largely attributable to lower preclinical research, personnel, and intellectual property expenses partially offset by higher clinical development costs in the current year compared to the prior year.

Preclinical research costs decreased during the year ended June 30, 2020 compared to the year ended June 30, 2019 due to the completion, or deferral, of studies that were ongoing in the prior year as well as us focusing our resources on our clinical studies in the current year.

Personnel costs have decreased in the year ended June 30, 2020 compared to the year ended June 30, 2019 due a reduction in full-time employee head count in the current year compared to the prior year.

Intellectual property costs decreased in the year ended June 30, 2020 compared to the year ended June 30, 2019 as we have refined our patent portfolio by focusing on our most important patent claims in the most strategic jurisdictions.

Patent costs can vary considerably depending on the filing of new patents, conversion of the provisional applications to PCT applications, foreign office actions, and actual filing costs.

Clinical development costs increased in the year ended June 30, 2020 largely due to the initial costs we have incurred related to the GCAR GBM AGILE study.

In June 2020 we announced our acceptance of an invitation from GCAR to include VAL-083 in GCAR's GBM AGILE study, an adaptive clinical study platform in GBM.

Upon acceptance, we incurred certain costs to initiate the preliminary agreement.

We expect our research and development costs to increase in fiscal 2021 as our GCAR GBM AGILE study commences.

In addition, our planned clinical study for REM-001 is expected to commence in the coming year.

Research and development expenses increased to $11,815 for the year ended June 30, 2021 from $3,630 for the year ended June 30, 2020.

The increase was largely attributable to higher clinical development, non-cash, share-based compensation expenses, and personnel costs incurred during the year ended June 30, 2021 compared to the year ended June 30, 2020.

Clinical development costs increased in the current year compared to the prior year largely due to start-up and patient enrollment costs related to the GCAR GBM AGILE Study.

Patient recruitment commenced in January 2021 and there were costs incurred in order to prepare the study for commencement as well as patient recruitment and enrollment.

In addition, with the acquisition of the REM-001 technology as part of the acquisition of Adgero, costs relating to clinical development and drug manufacturing activity have been incurred during the year ended June 30, 2021 that were not incurred during the year ended June 30, 2020.

We expect our research and development costs to be higher in fiscal year 2022 than fiscal year 2021 as our GCAR GBM AGILE Study continues and we incur costs related to the development of REM-001.

Personnel costs also increased in the current year compared to the prior year due to the addition of staff as a result of the acquisition of Adgero.

General and Administrative

General and administrative expenses were $9,757 for the year ended June 30, 2021 compared to $4,514 for the year ended June 30, 2020.

A significant portion of the decrease was due to lower professional fees and non-cash, share-based compensation expense partially offset by higher office and sundry expenses in the current year compared to the prior year.

Professional fees decreased during the year ended June 30, 2020 compared to the year ended June 30, 2019 primarily due to our proposed rights offering in the prior year which was terminated in June 2019.

As a result, the professional fees related to the Rights Offering of $555,664 were expensed in the quarter ended June 30, 2019.

Office and sundry has increased in the year ended June 30, 2020 compared to the year ended June 30, 2019 due primarily to costs of higher directors’ and officers’ liability insurance.

In relation to general and administrative expenses during the year ended June 30, 2020, we incurred non-cash, share-based compensation expense relating to warrants issued for services and stock option expense while during the year ended June 30, 2019, we incurred non-cash, share-based compensation expense relating to performance share units, warrants issued for services, and stock option expense.

All performance share units were canceled on April 30, 2019 so there was no related expense incurred during the year ended June 30, 2020.

Merger costs of $1,053,697 (2019 - $Nil) relate to expenditures incurred prior to June 30, 2020 with respect to the Adgero Merger and have been expensed.

Preferred Share Dividends

A significant portion of the increase was due to higher non-cash, share-based compensation expense, professional fees, office and sundry expenses and personnel incurred in the current year compared to the prior year.

Non-cash, share-based compensation expense increased for the year ended June 30, 2021 compared to the year ended June 30, 2020, due to the recognition of compensation expense for stock options granted in September 2020 as well as due to the acceleration of vesting of certain stock options granted in a prior period.

In addition, non-cash, share-based compensation expense increased due to the issuance of warrants for professional services.

Professional fees increased during the year ended June 30, 2021 compared to the year ended June 30, 2020 primarily due to higher legal and accounting fees in the current year while office and sundry increased due primarily to costs of higher directors’ and officers’ liability insurance.

Personnel costs also increased in the current year compared to the prior year due to the addition of staff from the Adgero acquisition.

M erger Costs

We incurred costs related to the acquisition of Adgero of $500 and $1,054 respectively, for the years ended June 30, 2021 and 2020.

All of these costs have been expensed.

Acquired In-Process Research and Development Expense

We acquired in-process research and development assets in connection with our merger with Adgero.

As the acquired in-process research and development assets were deemed to have no current or alternative future use, an expense of $16,094 was recognized in the consolidated statements of operations for the year ended June 30, 2021.

Preferred Stock Dividends

For each of the years ended June 30, 2021 and 2020, we recorded $8 related to the dividend payable to Valent on the Series A Preferred Stock.

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Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

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Net cash used in operating activities increased to $18,860 for the year ended June 30, 2021 from $7,928 for the year ended June 30, 2020.

During the year ended June 30, 2020 and 2019 we reported net losses of $9,125,916 and $8,048,221, respectively.

Changes in adjustments to reconcile net loss to net cash used in operating activities for the year ended June 30, 2020 compared to June 30, 2019 included higher warrants issued for services in the current year due to more warrants being issued in the current year compared to the prior year.

Items incurred during the year ended June 30, 2019 but not in the year ended June 30, 2020 include a change in the fair value of derivative liabilities of $433,503 and performance stock unit expense of $526,141.

The most significant changes in working capital for the year ended June 30, 2020 were from uses of cash due to an increase in non-financing related accounts payable and accrued liabilities of $206,597, an increase in related party payables of $338,657, and an increase in prepaid expenses of $75,332.

The most significant change in working capital for the year ended June 30, 2019 was cash from a reduction in prepaid expenses and deposits of $754,682 largely due to a partial refund of a clinical study deposit, and cash from an increase in accounts payable and accrued liabilities of $202,000.

During the years ended June 30, 2021 and 2020, we reported net losses of $38,298 and $9,126, respectively.

Partially offsetting the higher loss in the current year compared to the prior year was the recognition of $16,094 of acquired in-process research and development expense related to the acquisition of Adgero.

Additional changes in adjustments to reconcile net loss to net cash used in operating activities for the year ended June 30, 2021 included stock option expense of $5,276 being recognized during the current year compared to $495 in the prior year.

The most significant change in working capital for the year ended June 30, 2021 was from a use of cash due to an increase in prepaid expenses and deposits related primarily to the remaining balance of $2,100 of the payment to GCAR for study initiation and patient recruitment.

The most significant change in working capital for the year ended June 30, 2020 was cash from an increase in related party payables and accrued liabilities of $339.

Investing Activities

As part of the acquisition of Adgero that closed on August 19, 2020, we acquired $969 in cash.

There were no investing activities during the year ended June 30, 2020.

Financing Activities

During the year ended June 30, 2021, we received $21,598 in net proceeds from the completion of a private placement of Series C Preferred stock and $4,404 from the cash exercise of stock purchase warrants.

Also, during the year ended June 30, 2021, we received proceeds from the NBTS Loan of $500.

The NBTS Loan was repaid in June 2021.

During the year ended June 30, 2020, we received $6,583 in net proceeds from the completion of an underwritten public offering by us of common stock, pre-funded warrants, and common stock purchase warrants.

Additionally, we received $51,550 pursuant to the exercise of warrants in the current year.

At June 30, 2020, we have incurred $25,000 in deferred financing costs, net of deferred financing costs included in accounts payable, related to the private placement completed in August 2020.

During the year ended June 30, 2019, we received $3,362,379 in net proceeds from the completion of a registered direct offering by us of common stock and common stock purchase warrants.

We also received $720,165 in net proceeds from the exercise and exchange of warrants.

Liquidity Risk and Capital Expenditure Requirements

Liquidity Risk

Additionally, we received $51 pursuant to the exercise of warrants.

Going Concern and Capital Expenditure Requirements

Going Concern and Management Plans

(See note 1 to the consolidated financial statements)

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For the year ended June 30, 2021, we reported a loss of $39,298 and a negative cash flow from operations of $18,860.

We had an accumulated deficit of $69,721,233 as of June 30, 2020.

As of June 30, 2 020, we had cash and cash equivalents on hand of $2,392,402.

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 part nered, which may not ever occur.

In the future, we will require additional funding to maintain our clinical studies, research and development projects, and for general operations.

We may tailor the development programs of our drug candidates based on the a mount of funding we are able to raise in the future.

These circumstances had indicated substantial doubt existed about our ability to continue as a going concern.

Subsequent to June 30, 2020, we completed a private placement in three closings for gross proceeds of approximately $25 million, or net proceeds of approximately $21.7 million.

We believe that based on our current estimates, cash on hand at June 30, 2020 and the proceeds from the private placement, will be sufficient to fund our planned operations beyond the next year from the date the consolidated financial statements are issued.

As a result, substantial doubt about our ability to continue as a going concern has been alleviated.

We had an accumulated deficit of $111,225 and had cash and cash equivalents of $10,537 as of June 30, 2021.

We are in the clinical development 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.

In the near future, 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 the consolidated financial statements.

On September 23, 2021, we entered into securities purchase agreements with certain institutional investors pursuant to which, on September 28, 2021, we issued an aggregate of 7,200,000 shares of common stock, pre-funded warrants to purchase 4,800,000 shares of common stock with an exercise price of $0.001 per share and warrants to purchase 12,000,000 shares of common stock with an exercise price of $1.25 per share for approximately $15 million in gross proceeds, before placement agent fees and other offering expenses payable by us.

Our existing cash and cash equivalents as of June 30, 2021, as well as the net proceeds of approximately $13.6 million we received from the registered direct financing subsequent to June 30, 2021, are estimated to fund planned operations for less than one year from the date of issuance of our June 30, 2021 consolidated 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.

The ultimate impact of the COVID-19 pandemic on our ability to raise additional capital in the future 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 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.

Management plans to secure the necessary financing through the issue of new equity 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.

The consolidated 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.

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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 sig nificant accounting policies and the estimates derived therefrom is included in Note 2 to our consolidated financial statements for the year ended June 30, 2020 contained elsewhere in this report on Form 10-K.

While all of the significant accounting polici es are important to our consolidated financial statements, the following accounting policies and the estimates derived therefrom are critical:

Warrants and shares issued for services

Stock options

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, 2021 contained elsewhere in this Form 10-K.

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

Warrants and shares issued for services

We have issued equity instruments for services provided by employees and nonemployees.

The equity instruments are valued at the fair value of the instrument granted.

Stock options

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 year ended June 30, 2019, 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 year ended June 30, 2020, we utilized the plain vanilla method to determine the expected life of stock options.

For the years ended June 30, 2021 and 2020, 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 years ended June 30, 2021 and 2020, 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.

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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 years ended June 30, 2021 and 2020, 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.

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.

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We do not have any off-balance sheet arrangements.

Quantitative and Qualitative Disclosures About Market Risk.

Not required for a smaller reporting company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis