Kintara Therapeutics(KTRA) - 2022 Q1 - Quarterly Report

PART I. - FINANCIAL INFORMATION Item 1. Financial Statements. This section presents Kintara Therapeutics, Inc.'s unaudited condensed consolidated interim financial statements for the three months ended September 30, 2021, including balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's operations, significant accounting policies, and specific financial transactions Condensed Consolidated Interim Balance Sheets Condensed Consolidated Interim Balance Sheets (September 30, 2021 vs. June 30, 2021) | Item | September 30, 2021 ($ thousands) | June 30, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------------- | :-------------------------- | :------------------- | :--------- | | Cash and cash equivalents | 19,339 | 10,537 | 8,802 | 83.5% | | Total assets | 22,343 | 13,543 | 8,800 | 65.0% | | Total liabilities | 3,180 | 2,962 | 218 | 7.4% | | Total stockholders' equity | 19,163 | 10,581 | 8,582 | 81.1% | | Accumulated deficit | (119,655) | (111,225) | (8,430) | 7.6% | Condensed Consolidated Interim Statements of Operations Condensed Consolidated Interim Statements of Operations (Three months ended September 30, 2021 vs. 2020) | Item | September 30, 2021 ($ thousands) | September 30, 2020 ($ thousands) | Change ($ thousands) | Change (%) | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Research and development | 3,793 | 1,357 | 2,436 | 179.5% | | General and administrative | 2,178 | 1,534 | 644 | 42.0% | | Merger costs | — | 500 | (500) | -100.0% | | In-process research and development | — | 16,094 | (16,094) | -100.0% | | Net loss for the period | (5,966) | (19,518) | 13,552 | -69.4% | | Net loss attributable to common stockholders | (8,430) | (22,706) | 14,276 | -62.9% | | Basic and fully diluted loss per share | (0.25) | (1.33) | 1.08 | -81.2% | | Basic and fully diluted weighted average shares | 34,281 | 17,106 | 17,175 | 100.4% | Condensed Consolidated Interim Statements of Stockholders' Equity Changes in Stockholders' Equity (Three months ended September 30, 2021) | Item | Amount ($ thousands) | | :---------------------------------------- | :------------------- | | Balance - June 30, 2021 | 10,581 | | Issuance of shares and warrants - net | 13,634 | | Conversion of Series C Preferred stock | — | | Exercise of 2020 Investor Warrants | 69 | | Exercise of pre-funded warrants | 5 | | Warrants issued for services | 31 | | Stock option expense | 811 | | Series A Preferred cash dividend | (2) | | Series C Preferred stock dividend | — | | Loss for the period | (5,966) | | Balance - September 30, 2021 | 19,163 | Changes in Stockholders' Equity (Three months ended September 30, 2020) | Item | Amount ($ thousands) | | :---------------------------------------------- | :------------------- | | Balance - June 30, 2020 | 263 | | Adgero merger | 16,725 | | Issuance of Series C Preferred stock | 25,028 | | Series C placement agent warrants | — | | Series C Preferred stock share issuance costs | (3,386) | | Deemed dividend on beneficial conversion features | — | | Exercise of warrants | 994 | | Warrants issued for services | 45 | | Stock option expense | 405 | | Series A Preferred cash dividend | (2) | | Series B Preferred stock dividend | — | | Loss for the period | (19,518) | | Balance - September 30, 2020 | 20,554 | Condensed Consolidated Interim Statements of Cash Flows Condensed Consolidated Interim Statements of Cash Flows (Three months ended September 30, 2021 vs. 2020) | Cash Flow Activity | September 30, 2021 ($ thousands) | September 30, 2020 ($ thousands) | Change ($ thousands) | Change (%) | | :------------------------ | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Operating activities | (5,073) | (4,110) | (963) | 23.4% | | Investing activities | — | 969 | (969) | -100.0% | | Financing activities | 13,875 | 23,351 | (9,476) | -40.6% | | Increase in cash | 8,802 | 20,210 | (11,408) | -56.4% | | Cash, end of period | 19,339 | 22,602 | (3,263) | -14.4% | Notes to Condensed Consolidated Interim Financial Statements 1. Nature of Operations, Corporate History, and Going Concern and Management Plans - Kintara Therapeutics, Inc. is a clinical-stage drug development company focused on novel cancer therapies, specifically VAL-083 for glioblastoma multiforme (GBM) and REM-001 for cutaneous metastatic breast cancer (CMBC)[22] - The company completed a merger with Adgero Biopharmaceuticals Holdings, Inc. on August 19, 2020, and subsequently changed its name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc., trading under 'KTRA' on Nasdaq[23][24] - The company reported a net loss of $5,966 thousand and negative cash flow from operations of $5,073 thousand for the three months ended September 30, 2021, with an accumulated deficit of $119,655 thousand, raising substantial doubt about its ability to continue as a going concern within one year[29] - Management is pursuing various financing alternatives, including new equity issuance and strategic partnerships, to fund operations, acknowledging the economic uncertainty and volatility caused by the COVID-19 pandemic[30] 2. Significant Accounting Policies - The financial statements are prepared in accordance with U.S. GAAP and presented in United States dollars, consolidating all wholly-owned subsidiaries[32][33] - Unaudited interim financial statements include all necessary normal and recurring adjustments, but do not contain all information required for complete annual financial statements[34] - Loss per share calculations exclude warrants, stock options, and convertible preferred shares as their effect was anti-dilutive for the periods ended September 30, 2021 and 2020[36] - Acquired in-process research and development assets from the Adgero Merger were expensed as they had no current or alternative future use, resulting in a $16,094 thousand expense for the three months ended September 30, 2020[37] 3. Merger - The merger with Adgero on August 19, 2020, was treated as an acquisition of Adgero assets and liabilities, with substantially all fair value concentrated in in-process research and development (IPR&D)[40] - The company issued 11,439 shares of common stock and 2,315 stock purchase warrants to Adgero security holders, with an aggregate fair value of consideration transferred of $16,725 thousand[41] - Merger-related legal, consulting, and professional fees totaled approximately $1,554 thousand, with $500 thousand incurred during the three months ended September 30, 2020[42] - A milestone payment liability of $179 thousand as of September 30, 2021, relates to the acquisition of REM-001, with future contingent payments tied to clinical study completion and regulatory approval[43][45][46] 4. Clinical Trial Deposit - Kintara entered a final agreement with a CRO for its glioblastoma multiforme registration study, recognizing $1,952 thousand in expenses for clinical site initiation and patient enrollment for the three months ended September 30, 2021[47] - A deposit payment of $2,100 thousand has been made to the CRO, anticipated to be applied to future invoices or refunded beyond twelve months from September 30, 2021[48] 5. Property, Equipment, and Intangibles Property, Equipment, and Intangibles (September 30, 2021 vs. June 30, 2021) | Item | September 30, 2021 ($ thousands) | June 30, 2021 ($ thousands) | | :--------------------------------- | :------------------------------- | :-------------------------- | | Property, equipment and intangibles | 150 | 180 | | Less accumulated depreciation | (15) | (30) | | Balance | 135 | 150 | 6. Related Party Transactions - Kintara has a Patent Assignment Agreement with Valent Technologies, LLC, a related party, for VAL-083, entitling Valent to future royalties on revenues[50][51] - The company recorded a $2 thousand dividend payment to Valent for Series A Preferred Stock for both the three months ended September 30, 2021, and 2020[52][53] - Related party payables to officers and directors for fees, expenses, and accrued bonuses decreased from $561 thousand at June 30, 2021, to $491 thousand at September 30, 2021[54] 7. Stockholders' Equity Preferred Stock - The company issued 25,028 shares of Series C Convertible Preferred Stock in August 2020 through a private placement, with conversion prices ranging from $1.15 to $1.214 per share[55] - Series C Preferred Stock holders are entitled to common stock dividends at increasing rates (10%, 15%, 20%, 25%) on the anniversary of the private placement, with a $2,462 thousand dividend paid on August 19, 2021[56] - A non-cash deemed dividend of $3,181 thousand was recognized for the beneficial conversion feature of Series C Preferred Stock issuance for the three months ended September 30, 2020[59] - Series B Preferred Stock was fully converted to common stock by April 29, 2021, and Series A Preferred Stock, held by Valent, is not convertible and has a stated value of $1.00 per share with a 3% annual dividend[61][63] Common Stock - On September 28, 2021, Kintara closed a registered direct offering, selling 7,200 thousand shares of common stock, 4,800 thousand pre-funded warrants (PFW), and 12,000 thousand common warrants (2022 Investor Warrants) for approximately $13,634 thousand in net proceeds[66][67] - All 4,800 thousand PFW were exercised during the three months ended September 30, 2021, generating $4.8 thousand in proceeds[69] Stock Options - The number of common shares available under the 2017 Omnibus Incentive Plan was increased to 13,000 thousand shares as of June 25, 2021[70] Stock Options Outstanding (September 30, 2021) | Item | Number of stock options outstanding (in thousands) | Weighted average exercise price ($) | | :------------------------ | :----------------------------------------------- | :---------------------------------- | | Balance – June 30, 2021 | 6,392 | 2.26 | | Granted | 435 | 1.24 | | Expired | (18) | 13.11 | | Balance – September 30, 2021 | 6,809 | 2.16 | Stock Option Expense (Three months ended September 30, 2021 vs. 2020) | Expense Category | September 30, 2021 ($ thousands) | September 30, 2020 ($ thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | | Research and development | 244 | 91 | | General and administrative | 567 | 314 | | Total Stock Option Expense | 811 | 405 | - As of September 30, 2021, there was $2,597 thousand in unrecognized compensation expense to be recognized over the next 2.58 years[75] Common Stock Warrants Changes in Outstanding Common Stock Warrants (Three months ended September 30, 2021) | Item | Number of Warrants (in thousands) | Weighted average exercise price ($) | | :---------------------------------- | :-------------------------------- | :---------------------------------- | | Balance – June 30, 2021 | 6,974 | 3.34 | | Issuance of 2022 Investor Warrants | 12,000 | 1.25 | | Issuance of PFW | 4,800 | 0.001 | | Issuance of 2022 Agent Warrants | 600 | 1.5625 | | Exercise of PFW | (4,800) | 0.001 | | Exercise of 2020 Investor Warrants | (69) | 1.00 | | Expiry of Adgero replacement warrants | (353) | 3.18 | | Balance – September 30, 2021 | 19,152 | 1.99 | Series C Preferred Stock Warrants - In connection with the Series C Preferred Stock private placement, Kintara issued 2,504 Series C Agent Warrants, exercisable at $1,000 per share with a cashless exercise feature and a four-year term from August 19, 2020[79] - The Series C Agent Warrants were valued at $3,287 thousand using a binomial pricing model[80] 8. Supplementary Statement of Cash Flows Information Non-Cash Investing and Financing Transactions (Three months ended September 30, 2021 vs. 2020) | Non-Cash Transaction | September 30, 2021 ($ thousands) | September 30, 2020 ($ thousands) | | :------------------------------------------------------ | :------------------------------- | :------------------------------- | | Series C Preferred Stock common stock dividend | 2,462 | — | | Series B Preferred Stock common stock dividend | — | 5 | | Deemed dividend on beneficial conversion features | — | 3,181 | | Non-cash issue costs | 333 | 3,287 | | Issue costs in accounts payable and accrued liabilities | 169 | 193 | 9. Financial Instruments - Kintara's financial instruments are measured at fair value using a hierarchy of inputs (Level 1, 2, or 3), with the milestone payment liability classified as Level 3 inputs as of September 30, 2021[84][85] - The carrying values of cash and cash equivalents, other receivables, accounts payable, and related party payables approximate their fair values due to their immediate or short-term maturity[86] 10. Subsequent Events - Subsequent to September 30, 2021, 0.65 shares of Series C-1 Preferred Stock were converted into 560 shares of common stock[87] - On November 8, 2021, the company issued 3,519 stock options to an officer and modified 2,715 previously issued stock options to vest contingently upon strategic partnership initiatives[88] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on Kintara's financial condition and operational results for the three months ended September 30, 2021, compared to the prior year, discussing the impact of COVID-19, recent corporate highlights, clinical milestones, product pipeline, liquidity, and critical accounting policies Impact of Coronavirus ("COVID-19") on our Operations, Financial Condition, Liquidity and Results of Operations - The COVID-19 pandemic did not significantly disrupt Phase 2 clinical studies, but current delays in contract manufacturing schedules and supplies for REM-001 are attributed to COVID-19, potentially impacting its program timeline[94][95] - Despite a recent $13.6 million financing, the company estimates cash to fund operations for less than one year, with the ultimate impact of COVID-19 on its ability to raise additional capital remaining uncertain[96] Background - Kintara Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing novel cancer therapies for patients with unmet medical needs, particularly orphan cancer indications[97][102] - The company's lead candidates are VAL-083 for drug-resistant solid tumors like glioblastoma multiforme (GBM) and REM-001, a photodynamic therapy (PDT) for cutaneous metastatic breast cancer (CMBC)[103] Recent Highlights - Robert E. Hoffman was appointed President and CEO, succeeding Saiid Zarrabian, who will lead strategic partnerships[105] - A registered direct financing on September 28, 2021, raised approximately $15 million in gross proceeds, expected to fund the GBM AGILE study through Stage 1[105] - Positive topline data for the adjuvant arm of the VAL-083 Phase 2 clinical study in newly-diagnosed MGMT-unmethylated GBM patients was reported on September 22, 2021[105] - 26 clinical sites in the United States were activated for the GBM AGILE registrational Phase 2/3 clinical study for GBM by August 17, 2021[105] Targeted Clinical Milestones - Q1 2022: REM-001 Investigational New Drug (IND) application reactivation[106] - Q2 2022: Enroll first patient in REM-001 CMBC fifteen-patient confirmatory study[107] - Q3 2022: VAL-083 GCAR GBM AGILE registration study graduation from Stage 1 to Stage 2[108] Product Pipeline VAL-083 - VAL-083 is a first-in-class, small-molecule, DNA-targeting chemotherapeutic with activity against various tumor types, leveraging over 40 prior NCI Phase 1 and Phase 2 clinical studies[110] - It is currently the only therapeutic agent evaluated in all three GBM patient subtypes (newly-diagnosed methylated MGMT, newly-diagnosed unmethylated MGMT, and recurrent) in the GBM AGILE Study[111] - VAL-083 has received FDA Orphan Drug designation for gliomas (including GBM), medulloblastoma, and ovarian cancer, and Fast Track designation for recurrent GBM[114][136] - Clinical studies show VAL-083's anti-tumor activity is independent of MGMT expression, addressing a significant unmet need in MGMT-unmethylated GBM patients resistant to standard temozolomide (TMZ) treatment[112][141] - Topline data from the Phase 2 study in newly-diagnosed MGMT-unmethylated GBM showed median PFS of 9.3 months and mOS of 19.6 months, comparing favorably to historical TMZ control data[124] - The primary dose-limiting toxicity of VAL-083 is myelosuppression, particularly thrombocytopenia, which is a common chemotherapy side effect and is believed to be manageable[151] REM-001 - REM-001 is a photodynamic therapy (PDT) consisting of a laser light source, light delivery device, and the drug product (SnET2 photosensitizer), developed for rare, unmet medical needs like cutaneous metastatic breast cancer (CMBC)[152][160] - Analysis of prior Phase 2/3 CMBC studies indicates REM-001 Therapy achieved a complete response in approximately 80% of evaluable tumor sites[153][166] - REM-001 has received FDA Orphan Drug designation for the treatment of Basal Cell Carcinoma Nevus Syndrome (BCCNS) and for the prevention of access graft failure in hemodialysis patients[158][159] - The company plans an initial open-label, 15-patient study in CMBC to confirm dose and optimize study design, followed by a Phase 3 clinical study for marketing approval, incorporating FDA feedback[167][168] - REM-001 has been safely administered to over 1,100 patients in prior clinical studies, demonstrating an inherent safety advantage due to its light-activated mechanism[164] Corporate History - Kintara Therapeutics, Inc. was formed on June 24, 2009, as Berry Only Inc., and became the parent company of Del Mar Pharmaceuticals (BC) Ltd. through a reverse acquisition on January 25, 2013[170] - The company acquired Adgero Biopharmaceuticals Holdings Inc. on August 19, 2020, and subsequently changed its name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc[171] Outstanding Securities Outstanding Securities as of November 11, 2021 | Security Type | Number of Shares/Warrants (in thousands) | | :-------------------------------- | :--------------------------------------- | | Common stock | 48,535 | | Common stock warrants | 19,152 | | Series C Preferred Stock warrants | 2,444 (convertible into 2,100 common) | | Stock options | 10,328 | | Series C Preferred Stock | 17,747 (convertible into 15,267 common) | Selected Quarterly Information Selected Balance Sheet Data (September 30, 2021 vs. June 30, 2021) | Item | September 30, 2021 ($ thousands) | June 30, 2021 ($ thousands) | | :------------------------ | :------------------------------- | :-------------------------- | | Cash and cash equivalents | 19,339 | 10,537 | | Working capital | 17,107 | 9,013 | | Total assets | 22,343 | 13,543 | | Total stockholders' equity | 19,163 | 10,581 | Selected Statement of Operations Data (Three months ended September 30, 2021 vs. 2020) | Item | September 30, 2021 ($ thousands) | September 30, 2020 ($ thousands) | | :---------------------------------------------- | :------------------------------- | :------------------------------- | | Research and development | 3,793 | 1,357 | | General and administrative | 2,178 | 1,534 | | Merger costs | — | 500 | | In-process research and development | — | 16,094 | | Net loss for the period | (5,966) | (19,518) | | Net loss attributable to common stockholders | (8,430) | (22,706) | | Basic and fully diluted loss per share | (0.25) | (1.33) | | Basic and fully diluted weighted average shares | 34,281 | 17,106 | Expenses, net of non-cash, share-based compensation expense – non-GAAP Non-GAAP Operational Expenses (Three months ended September 30, 2021 vs. 2020) | Expense Category | September 30, 2021 ($ thousands) | September 30, 2020 ($ thousands) | | :---------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | | Research and development - GAAP | 3,793 | 1,357 | | Less: non-cash, share-based compensation expense | (244) | (91) | | Research and development net of non-cash, share-based, compensation expense – Non-GAAP | 3,549 | 1,266 | | General and administrative - GAAP | 2,178 | 1,534 | | Less: non-cash, share-based compensation expense | (598) | (359) | | General and administrative net of non-cash, share-based, compensation expense – Non-GAAP | 1,580 | 1,175 | Results of Operations Comparison of Expenses (Three months ended September 30, 2021 vs. 2020) | Expense Category | September 30, 2021 ($ thousands) | September 30, 2020 ($ thousands) | Change ($ thousands) | Change (%) | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Research and development | 3,793 | 1,357 | 2,436 | 180% | | General and administrative | 2,178 | 1,534 | 644 | 42% | | Merger costs | — | 500 | (500) | (100%) | | In-process research and development | — | 16,094 | (16,094) | (100%) | | Net loss | (5,966) | (19,518) | 13,552 | | - Research and development expenses increased by $2,436 thousand (180%) due to higher clinical development costs for the GCAR GBM AGILE Study, drug manufacturing for REM-001, and increased non-cash, share-based compensation and personnel costs[179][180][181] - General and administrative expenses increased by $644 thousand (42%) primarily due to higher non-cash, share-based compensation expenses, professional fees (legal and accounting), and personnel costs[182][183] - The company recognized a $2,462 thousand stock dividend on Series C Preferred Stock for the three months ended September 30, 2021, and $2 thousand cash dividend on Series A Preferred Stock for both periods[184][185] Liquidity and Capital Resources Cash Flows (Three months ended September 30, 2021 vs. 2020) | Cash Flow Activity | September 30, 2021 ($ thousands) | September 30, 2020 ($ thousands) | Change ($ thousands) | Change (%) | | :------------------------ | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Operating activities | (5,073) | (4,110) | (963) | 23% | | Investing activities | — | 969 | (969) | (100%) | | Financing activities | 13,875 | 23,351 | (9,476) | (41%) | - Net cash used in operating activities increased by $963 thousand, primarily due to a larger net loss in the prior period offset by a non-cash IPR&D expense of $16,094 thousand in 2020[187] - Financing activities provided $13,875 thousand in 2021, mainly from a registered direct financing, compared to $23,351 thousand in 2020 from a Series C Preferred stock private placement and a loan[189][190] - The company's accumulated deficit of $119,655 thousand and negative cash flow from operations indicate substantial doubt about its ability to continue as a going concern, necessitating additional funding through equity offerings or strategic collaborations[192][195] Critical Accounting Policies - Critical accounting policies include the fair value of financial instruments (stock-based awards, warrants) and accruals for research and development expenses and clinical trials[197][198] - Stock-based awards and warrants are valued using the Black-Scholes model, with variables like expected volatility, exercise behavior, interest rates, and dividend yields requiring management estimates[199][200] - Accruals for R&D and clinical trials are estimated based on discussions with personnel and service providers regarding study progress, with no material adjustments to prior period estimates for the reported periods[201] Off-Balance Sheet Arrangements - The company does not have any off-balance sheet arrangements[202] Item 3. Quantitative and Qualitative Disclosures About Market Risk. This section states that quantitative and qualitative disclosures about market risk are not required for Kintara Therapeutics, Inc. as it is a smaller reporting company - Quantitative and Qualitative Disclosures About Market Risk are not required for Kintara Therapeutics, Inc. as it is a smaller reporting company[203] Item 4. Controls and Procedures. This section details the evaluation of the company's disclosure controls and procedures, confirming their effectiveness as of September 30, 2021, and reporting no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, ensuring timely and accurate reporting of information[204] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control during the quarter ended September 30, 2021[206] PART II - OTHER INFORMATION Item 1. Legal Proceedings. This section states that Kintara Therapeutics, Inc. is not a party to any legal proceedings, nor is any of its property subject to such proceedings - There are no legal proceedings the Company is party to or any of its property is subject to[208] Item 1A. Risk Factors. This section indicates that there are no new risk factors to report for the current period - No new risk factors are reported for the period[209] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[210] Item 3. Defaults Upon Senior Securities. This section confirms that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities are reported[211] Item 4. Mine Safety Disclosures. This section indicates that mine safety disclosures are not applicable to Kintara Therapeutics, Inc - Mine safety disclosures are not applicable[212] Item 5. Other Information. This section states that there is no other information to report for the period - No other information to report[213] Item 6. Exhibits. This section lists the exhibits filed with the Form 10-Q, including certifications from the principal executive and financial officers, and Inline XBRL documents - The report includes certifications from the principal executive officer and principal financial officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[215] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) and the Cover Page Interactive Data File are filed as exhibits[215]