UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended April 30, 2023

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

For the transition period from to

Commission File No. 001-40101

BRIACELL THERAPEUTICS CORP.

(Exact name of registrant as specified in its charter)

British Columbia, Canada

47-1099599

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

235 15^th Street, Suite 300, West Vancouver, BC, V7T 2X1

(Address of Principal Executive Offices, including zip code)

604-921-1810

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common shares, no par value	BCTX	The Nasdaq Stock Market LLC

Warrants to purchase common shares, no par value	BCTXW	The Nasdaq Stock Market LLC

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 ☐

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

BRIACELL THERAPEUTICS CORP.

Form 10-Q

Table of Contents

		Page
Part I. Financial Information		3

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of April 30, 2023 (unaudited) and July 31, 2022 (unaudited)	3
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended April 30, 2023	4
	Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months ended April 30, 2023	5
	Unaudited Condensed Consolidated Statement of Cash Flows for the Nine Months ended April 30, 2023	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures Regarding Market Risk	25
Item 4.	Controls and Procedures	26

Part II. Other Information		27

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27

Signatures		28

PART I-FINANCIAL

INFORMATION

Item 1. Financial Statements

BRIACELL THERAPEUTICS CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	April 30, 2023			July 31, 2022

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	28,170,099		$	41,041,652
Amounts receivable		14,896			24,103
Prepaid expenses		1,317,985			1,280,945
Total current assets		29,502,980			42,346,700

NON-CURRENT ASSETS:
Investments		2			2
Intangible assets, net		218,886			230,339
Total non-current assets		218,888			230,341

Total assets	$	29,721,868		$	42,577,041

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Trade payables	$	995,252		$	463,280
Accrued expenses and other payables (Note 7)		387,842			477,807
Total current liabilities		1,383,094			941,087

NON-CURRENT LIABILITIES:
Warrant liability		34,231,116			31,307,022
Total non-current liabilities		34,231,116			31,307,022

SHAREHOLDERS’ EQUITY:
Share Capital of no par value - Authorized: unlimited at April 30, 2023 and July 31, 2022 ; Issued and outstanding: 15,518,318 and 15,269,853 shares April 30, 2023 and July 31, 2022, respectively		65,591,784			65,589,293
Additional paid in capital		6,888,134			5,228,160
Accumulated other comprehensive loss		(138,684	)		(138,684	)
Accumulated deficit		(78,233,576	)		(60,349,837	)
Total shareholders’ equity (deficit)		(5,892,342	)		10,328,932

Total liabilities and shareholders’ equity (deficit)	$	29,721,868		$	42,577,041

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

BriaCell Therapeutics Corp.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

	2023			2022			2023			2022
	Three months ended April 30,						Nine months ended April 30,
	2023			2022			2023			2022
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Operating Expenses:
Research and development expenses	$	3,860,568		$	2,268,805		$	10,169,140			4,852,620
General and administrative expenses (Note 7)		1,816,461			1,854,455			5,397,363			5,202,258
Total operating expenses		5,677,029			4,123,260			15,566,503			10,054,878

Operating loss		(5,677,029	)		(4,123,260	)		(15,566,503	)		(10,054,878	)
Financial income (expenses), net		781,593			(5,892,313	)		(2,317,236	)		(16,333,673	)
Net loss for the period		(4,895,436	)		(10,015,573	)		(17,883,739	)		(26,388,551	)
Comprehensive loss for the period	$	(4,895,436	)	$	(10,015,573	)	$	(17,883,739	)		(26,388,551	)
Loss per share – basic and diluted	$	(0.32	)	$	(0.65	)	$	(1.15	)	$	(1.70	)
Weighted average number of shares used in computing net basic earnings per share of common stock		15,518,072			15,358,947			15,518,036			15,486,028
Weighted average number of shares used in computing net diluted earnings per share of common stock		15,518,072			15,358,947			15,518,036			15,486,028

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

BRIACELL THERAPEUTICS CORP.

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity

	Number		Amount		capital		loss			deficit			Equity
	Share capital				Additional paid in		Accumulated other comprehensive			Accumulated			Total shareholders’
	Number		Amount		capital		loss			deficit			Equity
Balance, January 31, 2023		15,518,018	$	65,589,293	$	6,606,945	$	(138,684	)	$	(73,338,140	)	$	(1,280,586	)
Exercise of public offering warrants		300		2,491		-		-			-			2,491
Issuance of options		-		-		281,189		-			-			281,189
Net loss for the period		-		-		-		-			(4,895,436	)		(4,895,436	)
Balance, April 30, 2023		15,518,318	$	65,591,784	$	6,888,134	$	(138,684	)	$	(78,233,576	)	$	(5,892,342	)

	Share capital				Additional paid in		Accumulated other comprehensive			Accumulated			Total shareholders’ equity
	Number		Amount		capital		loss			deficit			(deficit)
Balance, July 31, 2022		15,518,018	$	65,589,293	$	5,228,160	$	(138,684	)	$	(60,349,837	)	$	10,328,932
Exercise of public offering warrants		300		2,491		-		-			-			2,491
Issuance of options		-		-		1,659,974		-			-			1,659,974
Net loss for the period		-		-							(17,883,739	)		(17,883,739	)
Balance, April 30, 2023		15,518,318	$	65,591,784	$	6,888,134	$	(138,684	)	$	(78,233,576	)	$	(5,892,342	)

	Share capital					Additional paid in			Accumulated other comprehensive			Accumulated			Total shareholders’
	Number			Amount		capital			loss			deficit			equity
Balance, January 31, 2022		15,946,642		$	62,961,708	$	3,511,140		$	(138,684	)	$	(49,908,466	)	$	16,425,698
Exercise of representation warrants		11,153			125,713		-			-			-			125,713
Exercise of private placement warrants		197,200			2,251,913		-			-			-			2,251,913
Exercise of public offering warrants		30,389			307,075		-			-			-			307,075
Issuance of options		-			-		863,626			-			-			863,626
Shares cancelled		(667,366	)		-		-			-			-			-
Expiration of options		-			-		(24,554	)		-			24,554			-
Net loss for the period		-			-		-			-			(10,015,573	)		(10,015,573	)
Balance, April 30, 2022		15,518,018		$	65,646,409	$	4,350,212		$	(138,684	)	$	(59,899,485	)	$	9,958,452

	Share capital						Additional paid in			Accumulated other comprehensive			Accumulated			Total shareholders’ equity
	Number			Amount			capital			loss			deficit			(deficit)
Balance, July 31, 2021		15,269,583		$	54,774,172		$	2,178,130		$	(138,684	)	$	(29,141,897	)	$	27,671,721
Beginning balance		15,269,583		$	54,774,172		$	2,178,130		$	(138,684	)	$	(29,141,897	)	$	27,671,721
Exercise of representation warrants		219,453			1,429,953			-			-			-			1,429,953
Exercise of private placement warrants		997,200			12,162,001			-			-			-			12,162,001
Exercise of public offering warrants		63,454			1,984,706			-			-			-			1,984,706
Issuance of options		-			-			2,196,636			-			-			2,196,636
Shares repurchased and canceled		(1,031,672	)		(4,704,423	)		-			-			(4,393,591	)		(9,098,014	)
Expiration of options		-			-			(24,554	)		-			24,554			-
Net loss for the period		-			-									(26,388,551	)		(26,388,551	)
Balance, April 30, 2022		15,518,018		$	65,646,409		$	4,350,212		$	(138,684	)	$	(59,899,485	)	$	9,958,452
Ending balance		15,518,018		$	65,646,409		$	4,350,212		$	(138,684	)	$	(59,899,485	)	$	9,958,452

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

BriaCell Therapeutics Corp.

Unaudited Condensed Consolidated Statement of Cash Flows

	2023			2022
	Nine months ended April 30,
	2023			2022
	(Unaudited)			(Unaudited)
Cash flow from operating activities
Net loss	$	(17,883,739	)	$	(26,388,551	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		11,453			11,453
Share-based compensation		1,659,974			2,196,637
Interest expense		-			979
Gain from government grant		-			(3,388	)
Change in fair value of warrants		2,972,285			16,384,676
Changes in assets and liabilities:
Decrease in amounts receivable		9,207			(1,958	)
Increase in prepaid expenses		(37,040	)		(1,167,991	)
Increase in accounts payable		531,972			6,945
Decrease in accrued expenses and other payables		(89,965	)		(197,449	)
Total cash flow from operating activities		(12,825,853	)		(9,158,647	)

Cash flows from financing activities
Proceeds from exercise of warrants		1,594			6,509,768
Share and warrant buyback program		(47,294	)		(10,069,065	)
Repayment government grant		-			(23,577	)
Total cash flow from financing activities		(45,700	)		(3,582,874	)

Decrease in cash and cash equivalents		(12,871,553	)		(12,741,521	)
Cash and cash equivalents at beginning of the period		41,041,652			57,268,685
Cash and cash equivalents at end of the period	$	28,170,099		$	44,527,164

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

NOTE 1: GENERAL

	a.	BriaCell Therapeutics Corp. (“BriaCell” or the “Company”) was incorporated under the Business Corporations Act (British Columbia) on July 26, 2006 and is listed on the Toronto Stock Exchange (“TSX”). under the symbol “BCT” and on the Nasdaq Capital Market (“NASDAQ”) under the symbols “BCTX” and “BCTXW”.

	b.	BriaCell owns the U.S. and Japanese patents to SV-BR-1-GM (“Bria-IMT™”), a whole-cell targeted immunotherapy for cancer (U.S. Patent No. 7,674,456, U.S. Patent No. 11,559,574 B2, Japanese Patent No. 6901505), as well as patents related to PKCδ inhibitors (U.S. Patent Nos. 9,364,460 and 9,572,793). The Company is currently advancing its targeted immunotherapy program by prioritizing a Phase II clinical trial with Bria-IMT™ in combination with an immune checkpoint inhibitor.

	c.	Basis of presentation of the financial statements:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the U.S Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments consisting of a normal recurring nature which are necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report for the year ended July 31, 2022, filed with the SEC on October 28, 2022. The interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.

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

The Company continues to devote substantially all of its efforts toward research and development activities. In the course of such activities, the Company has sustained operating losses and expects such losses to continue in the foreseeable future. The Company’s accumulated deficit as of April 30, 2023, was $78,233,576 and negative cash flows from operating activities during the nine-month period ended April 30, 2023, was $12,825,853. The Company is planning to finance its operations with its existing and future working capital resources and to continue to evaluate additional sources of capital and financing. The Company believes that its existing capital resources will be adequate to satisfy its expected liquidity requirements for at least twelve months from the issuance of the condensed consolidated financial statements.

The Company has a wholly-owned U.S. subsidiary, BriaCell Therapeutics Corp. (“BTC”), which was incorporated in April 3, 2014, under the laws of the state of Delaware. BTC has a wholly-owned subsidiary, Sapientia Pharmaceuticals, Inc. (“Sapientia” and, together with BTC, the “Subsidiaries”), which was incorporated in September 20, 2012, under the laws of the state of Delaware. The Company has one operating segment and reporting unit. Subsequent to the reporting period, on May 24, 2023, the Company entered into an Arrangement Agreement to spin out certain pre-clinical pipeline assets to a newly incorporated entity, BriaPro Therapeutics Corp. (“SpinCo”), with the Company initially retaining a 66.67% ownership interest in SpinCo, subject to shareholder, TSX, NASDAQ, and court approvals, with the anticipated completion of the Arrangement by August 2023.

The Company may face difficulties recruiting or retaining patients in our ongoing and planned clinical trials if patients are affected by COVID-19 or are fearful of visiting or traveling to our clinical trial sites because of a new outbreak of COVID-19, or of a new variant thereof, or of another pandemic. In the event that clinical trial sites are slowed down or closed to enrolment in our trials, this could have a material adverse impact on our clinical trial plans and timelines. The Company currently believes that the execution of our clinical trials and research programs were delayed by at least one quarter due to COVID-19. Although future delays appear unlikely, they cannot be ruled out.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

a. Use of estimates:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company’s management believes that the estimates, judgments, and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities at the dates of the consolidated financial statements and the reported amount of expenses during the reporting periods. Actual results could differ from those estimates.

b. Recently issued and adopted accounting standards:

The Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company as an “emerging growth company” to delay the adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.

In June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The guidance will be effective for the Company for fiscal years beginning after December 15, 2022. Early adoption is permitted. Effective August 1, 2021, the Company early adopted ASU 2016-13. Adoption of the new standard did not have a material impact on the financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The final guidance issued by the FASB for convertible instruments eliminates two of the three models in ASC 470-20 that require separate accounting for embedded conversion features. Separate accounting is still required in certain cases. Additionally, among other changes, the guidance eliminates some of the conditions for equity classification in ASC 815-40-25 for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. ASU 2020-06 is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020. Effective August 1, 2021, the Company early adopted ASU 2020-06. Adoption of the new standard did not have a material impact on the financial statements.

In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance (ASU 2021-10), which improves the transparency of government assistance received by most business entities by requiring disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. Early adoption is permitted. Adoption of the new standard did not have a material impact on the financial statements.

NOTE 3: CONTINGENT LIABILITIES AND COMMITMENTS

Legal proceedings:

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

Lease

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

NOTE 4: FAIR VALUE MEASUREMENTS

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

	Fair Value Measurements at
	April 30, 2023						July 31, 2022
	Level 1		Level 2		Total		Level 1		Level 2		Total
Financial Assets:
Cash and cash equivalents		28,170,099		-		28,170,999		41,041,652		-		41,041,652

Total assets measured at fair value	$	28,170,099	$	-	$	28,170,999	$	41,041,652	$	-	$	41,041,652

Financial liabilities:
Warrants liability		11,748,879		22,482,237		34,231,116		11,151,608		20,155,414		31,307,022

Total liabilities measured at fair value	$	11,748,879	$	22,482,237	$	34,231,116	$	11,151,608	$	20,155,414	$	31,307,022

We classify our cash and cash equivalents and the liability in respect of publicly traded warrants within Level 1 because we use quoted market prices in active markets.

The fair value of the warrant liability for non-public warrants is measured using inputs other than quoted prices included in Level 1 that are observable for the liability either directly or indirectly, and thus are classified as Level 2 financial instruments.

NOTE 5: SHAREHOLDERS’ EQUITY (DEFICIT)

a.	Authorized share capital

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

b.	Issued share capital

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

c. Share buyback program

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

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

d. Share Purchase Warrants

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

SUMMARY OF CHANGES IN WARRANTS

Number of warrants outstanding

Weighted

average exercise price

(Unaudited)

Balance, July 31, 2022

SEC Form 10-Q filed by BriaCell Therapeutics Corp.