Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis (“MD&A”) contains “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995, which represent our projections, estimates, expectations, or beliefs concerning, among other things, financial items that relate to management’s future plans or objectives or to our future economic and financial performance. In some cases, you can identify these statements by terminology such as “may”, “should”, “plans”, “believe”, “will”, “anticipate”, “estimate”, “expect” “project”, or “intend”, including their opposites or similar phrases or expressions. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation by us or any other person that our events or plans will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this report. Except as may be required under applicable securities laws, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this report or to reflect the occurrence of unanticipated events.

You should review the factors and risks we describe under “Risk Factors” in this report on Form 10-K for the year ended June 30, 2022 and in our other filings with the Securities and Exchange Commission, available at www.sec.gov. Actual results may differ materially from any forward-looking statement.

Impact of Coronavirus (“COVID-19”) on our Operations, Financial Condition, Liquidity and Results of Operations

In December 2019 a novel strain of coronavirus, COVID-19 was reported to have surfaced in Wuhan, China and on March 11, 2020, it was declared a pandemic by the World Health Organization. The ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the duration and severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or us, may determine are needed.

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 GBM AGILE Study that is currently being conducted at multiple sites in the United States, Canada and Europe, 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 aggregate net proceeds of approximately $21.6 million received from two registered direct financings that closed on September 28, 2021 and April 14, 2022, respectively, as well as the potential proceeds available under our Purchase Agreement with Lincoln Park, we estimate that we have cash available to fund planned operations for less than one year from the date of issuance of our June 30, 2022 consolidated financial statements. The COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets. The ultimate impact of the COVID-19 pandemic on our ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and new information which may emerge concerning the severity of the COVID-19 pandemic. We may not be able to raise sufficient additional capital and may tailor our drug candidate development programs based on the amount of funding we are able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.

Corporate History

We are a Nevada corporation formed on June 24, 2009, under the name Berry Only, Inc. On January 25, 2013, we entered into and closed the Exchange Agreement with Del Mar (BC), Callco, Exchangeco and the security holders of Del Mar (BC). Upon completion of the Exchange Agreement, Del Mar (BC) became our wholly-owned subsidiary which we refer to as the Reverse Acquisition.

On June 10, 2020, we entered into the Merger Agreement by and among Merger Sub and Adgero. On August 19, 2020, upon the terms, and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into Adgero, the separate corporate existence of Merger Sub ceased, and Adgero continued its existence under Delaware law as the surviving corporation in the

Merger and became our direct, wholly-owned subsidiary. As a result of the Merger, each issued and outstanding share of Adgero common stock (other than treasury shares held by Adgero), was converted automatically into the right to receive 1.5740 shares, or the Exchange Ratio, of our common stock, and cash in lieu of any fractional shares. Also, each outstanding warrant to purchase Adgero Common Stock was converted into a warrant exercisable for that number of shares of our common stock equal to the product of (x) the aggregate number of shares of Adgero Common Stock for which such warrant was exercisable and (y) the Exchange Ratio.

Following the completion of the Merger, we changed our name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc. In conjunction with the closing of the Merger, and through a series of three private placement closings, we issued a total of 25,028 shares of Series C Preferred Stock at a purchase price of $1,000 per share for total aggregate gross proceeds of $25 million, or net proceeds of approximately $21.6 million.

The Series C Stock was issued in three series at conversion prices equal to $1.16, $1.214 and $1.15, respectively. As a result, we issued a total of 25,028 shares of Series C Stock, which are convertible into an aggregate 21,516,484 shares of common stock. As part of the private placement, we issued Placement Agent Warrants to purchase 2,504 shares of Series C Stock to the placement agent. 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 12th, 24th, 36th and 48th 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 26, 2022, we had 80,807 shares of common stock issued and outstanding, outstanding warrants to purchase 35,704 shares of common stock, warrants to purchase 2.4 shares of our Series C Preferred Stock that upon exercise are convertible into 2,100 shares of common stock, outstanding stock options to purchase 12,291 shares of common stock, 17 outstanding shares of Series C Preferred Stock that are convertible into 14,497 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 21, 2022, we amended our articles of incorporation, as amended, to increase the number of authorized shares of common stock from 175,000,000 to 275,000,000 shares.

Related Parties

We acquired our initial patents and technology rights from Valent, an entity owned by Dr. Dennis Brown, our Chief Scientific Officer. As a result, Valent is a related party.

Selected Annual Information

The financial information reported herein has been prepared in accordance with accounting principles generally accepted in the United States. Our functional currency at June 30, 2022 and June 30, 2021 is the US$ and our financial data is expressed in thousands, except par value and per share amounts unless otherwise noted. The following tables represent selected financial information for us for the periods presented.

Selected Balance Sheet data (in thousands)

$ $

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

For the years ended

Expenses

Merger costs — 500

In-process research and development — 16,094

Other income (loss)

Foreign exchange 7 (12 )

Amortization of deferred loan costs — (94 )

Interest - net 14 (26 )

Series A Preferred cash dividend (8 ) (8 )

Series B Preferred stock dividend — (17 )

Series C Preferred stock dividend (2,462 ) —

Basic and fully diluted weighted average number of shares 48,702 25,886

Basic and fully diluted loss per share $ (0.52 ) $ (1.60 )

Expenses net of non-cash, share-based compensation expense - non-GAAP

The following table discloses research and development, and general and administrative expenses net of non-cash, share-based compensation payment expense. The disclosure has been provided to reconcile the total operational expenses on a U.S. GAAP basis and the non-GAAP operational expenses net of non-cash, share-based compensation in order to provide an estimate of cash used in research and development, and general and administrative expense. Management uses this estimate of expenses net of non-cash, share-based compensation for forecasting and budget purposes to determine the allocation of resources and to plan for future financing opportunities.

For the years ended (in thousands)

Less: non-cash share-based compensation expense (601 ) (1,478 )

General and administrative - GAAP 7,509 9,757

Less: non-cash share-based compensation expense (1,682 ) (4,367 )

Comparison of the years ended June 30, 2022 and June 30, 2021

Years ended

(in thousands)

Expenses

Other income (loss)

Amortization of deferred loan costs — (94 ) 94 (100 )

Research and Development

Research and development expenses increased to $15,173 for the year ended June 30, 2022, from $11,815 for the year ended June 30, 2021. The increase was largely attributable to higher clinical development costs partially offset by lower non-cash, share-based compensation incurred during the year ended June 30, 2022, compared to the year ended June 30, 2021, due primarily to the recognition of compensation expense for stock options granted in September 2020.

Clinical development costs have increased in the current year compared to the prior year largely due to expenses related to the GCAR GBM AGILE Study. Patient recruitment for this study commenced in January 2021 and ongoing study costs, including clinical site activation and patient enrollment, were incurred during the full year ended June 30, 2022 but were incurred for only a portion of the year ended June 30, 2021. In addition, during the current year we incurred compound manufacturing costs and initial study preparation costs relating to our REM-001, 15-patient clinical study which is planned to commence patient enrollment around the end of the third quarter of calendar 2022.

General and Administrative

General and administrative expenses were $7,509 for the year ended June 30, 2022, compared to $9,757 for the year ended June 30, 2021. We incurred lower non-cash, share-based compensation expenses in the current year compared to the prior year due to the recognition of compensation expense in the year ended June 30, 2021, for stock options granted in September 2020. In addition, professional fees were lower in the year ended June 30, 2022, compared to the year ended June 30, 2021.

Partially offsetting the lower non-cash, share-based compensation expenses and professional fees for the year ended June 30, 2022, were higher personnel, and office and sundry costs. Personnel costs increased due to the recognition of employee severance costs during the current year while office and sundry has increased due to higher insurance costs.

Merger Costs

We incurred costs related to the Adgero Merger of $500 for the year ended June 30, 2021, and none in the year ended June 30, 2022. 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 the Adgero Merger. 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

During the year ended June 30, 2022, we issued 1,698 (2021 – nil) shares of common stock as a stock dividend on the Series C Preferred stock and recognized $2,462 (2021 - nil) as a direct increase in accumulated deficit.

For each of the years ended June 30, 2022, and 2021, we recorded $8 related to the dividend payable to Valent on the Series A Preferred Stock. The dividend has been recorded as a direct increase in accumulated deficit for both years.

During the year ended June 30, 2022, we issued nil (2021 – 11) shares of common stock as a dividend on the Series B Preferred stock and recognized nil (2021 - $17) as a direct increase in accumulated deficit.

Liquidity and Capital Resources

Comparison of the years ended June 30, 2022 and June 30, 2021

Cash flows from investing activities — 964 (964 ) (100 )

Operating Activities

Net cash used in operating activities increased to $20,392 for the year ended June 30, 2022, from $18,860 for the year ended June 30, 2021. During the year ended June 30, 2022, and 2021, we reported net losses of $22,661 and $38,298, respectively. While the loss in the prior year was larger than the current year, the prior year included a non-cash amount of $16,094 relating to the recognition of acquired in-process research and development expense related to the Adgero Merger. Additional changes in adjustments to reconcile net loss to net cash used in operating activities for the year ended June 30, 2022, included stock option expense of $2,248 being recognized during the current year compared to $5,276 in the prior year. The most significant changes in working capital for the year ended June 30, 2022, were related to an increase in accounts payable and accrued liabilities of $1,007 and from an increase in prepaid expenses, deposits and other of $722. 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 a $2,600 payment to GCAR for study initiation and patient recruitment.

Investing Activities

There were no investing activities during the year ended June 30, 2022. During the year ended June 30, 2021, we acquired $969 in cash as part of the Adgero Merger that closed on August 19, 2020.

Financing Activities

During the year ended June 30, 2022, we received $21,569 in aggregate net proceeds from the completion of two registered direct financings that closed on September 28, 2021, and April 14, 2022, respectively. We also received $74 from the cash exercise of stock purchase warrants.

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. We also received $4,404 and $77 from the respective cash exercise of common stock purchase warrants and stock options. In addition, during the year ended June 30, 2021, we received proceeds from the NBTS Loan of $500 which we repaid during the prior year.

Going Concern and Capital Expenditure Requirements

Going Concern and Management Plans

(See note 1 to the consolidated financial statements)

The consolidated financial statements have been prepared on a going concern basis, which assumes that we will continue our operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.

For the year ended June 30, 2022, we reported a loss of $22,661 and a negative cash flow from operations of $20,392. We had an accumulated deficit of $136,356 and had cash and cash equivalents of $11,780 as of June 30, 2022. We are in the clinical stage and have not generated any revenues to-date. We do not have the prospect of achieving revenues until such time that our product candidates are commercialized, or partnered, which may not ever occur. On September 28, 2021, and April 14, 2022, respectively, we completed registered direct financings for aggregate net proceeds of approximately $21.6 million and on August 2, 2022, we entered into the Purchase Agreement with Lincoln Park, which subject to certain limitations, may allow us to sell shares our common stock for a total of up to $20 million in gross proceeds. Subsequent to June 30, 2022, we have sold 11,470 shares of common stock for total gross proceeds of approximately $1,976 under this facility. However, potential proceeds under the Purchase Agreement are uncertain as to timing and amount. Even with the proceeds from the two registered direct financings and the existence of the Purchase

Agreement, 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 our 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. Management plans to secure the necessary financing through potential proceeds from our Purchase Agreement with Lincoln Park and the issue of new equity and/or the entering into of strategic partnership arrangements. However, 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.

Our future funding requirements will depend on many factors, including but not limited to:

•

the rate of progress and cost of our clinical studies, preclinical studies and other discovery and research and development activities;

•

the costs associated with establishing manufacturing and commercialization capabilities;

•

the costs of acquiring or investing in businesses, product candidates and technologies;

•

the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

•

the costs and timing of seeking and obtaining FDA and other regulatory approvals;

•

the effect of competing technological and market developments;

•

the economic and other terms and timing of any collaboration, licensing or other arrangements into which we may enter; and

•

the impact of us being a public entity.

Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs primarily through public or private equity offerings, or strategic collaborations. The sale of equity and convertible debt securities may result in dilution to our stockholders and certain of those securities may have rights senior to those of our shares of capital stock. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights. Economic conditions may affect the availability of funds and activity in equity markets. We do not know whether additional funding will be available on acceptable terms, or at all. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more of our clinical trials or research and development programs or make changes to our operating plan. In addition, we may have to seek a partner for one or more of our product candidates at an earlier stage of development, which would lower the economic value of those programs to us.

Critical Accounting Policies and Estimates

The preparation of financial statements, in conformity with generally accepted accounting principles in the United States, requires companies to establish accounting policies and to make estimates that affect both the amount and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain and therefore actual results may differ from those estimates.

A detailed presentation of all of our significant accounting policies and the estimates derived therefrom is included in Note 2 to our consolidated financial statements for the year ended June 30, 2022, contained 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

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 Accounting Standards Update 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 years ended June 30, 2022, and 2021, the determination of grant-date fair value for stock option awards was estimated using the Black-Scholes model which includes variables such as the expected volatility of our share price, the anticipated exercise behavior of its grantee, interest rates, and dividend yields. For the years ended June 30, 2022, and 2021, we utilized the plain vanilla method to determine the expected life of stock options. These variables are projected based on our historical data, experience, and other factors. Changes in any of these variables could result in material adjustments to the expense recognized for share-based payments. Such value is recognized as expense over the requisite service period, net of actual forfeitures, using the accelerated attribution method. We recognize forfeitures as they occur. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results, or updated estimates, differ from current estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

We have issued warrants for services provided by non-employees. The warrants issued for services have been valued at the fair value of the warrants issued. For the years ended June 30, 2022, and 2021, the determination of grant-date fair value for warrants issued for services was estimated using the Black-Scholes model which includes variables such as the expected volatility of our share price, interest rates, dividend yields, and the term of the warrant. We have also issued shares for services to non-employees which have been valued using the share price of our common stock.

Accruals for research and development expenses and clinical trials

As part of the process of preparing our financial statements, we are required to estimate our expenses resulting from our obligations under contracts with vendors, clinical research organizations and consultants, and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment terms that do not match the periods over which materials or services are provided under such contracts. Our objective is to reflect the appropriate expenses in our financial statements by matching those expenses with the period in which services are performed and efforts are expended. We account for these expenses according to the timing of various aspects of the expenses. We determine accrual estimates by taking into account discussion with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed. During the course of a clinical trial, we adjust our clinical expense recognition if actual results differ from our estimates. We make estimates of our accrued expenses as of each balance sheet date based on the facts and circumstances known to us at that time. Our clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low for any particular period. For years ended June 30, 2022, and 2021, there were no material adjustments to our prior period estimates of accrued expenses for clinical trials.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not required for a smaller reporting company.

Item 8. Financial Statements and Supplementary Data

Kintara Therapeutics, Inc.

Consolidated Financial Statements

For the years ended June 30, 2022 and 2021

(expressed in US dollars unless otherwise noted)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Kintara Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Kintara Therapeutics, Inc. (the “Company”) as of June 30, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended June 30, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accruals for Research and Development Expenses and Clinical Trials

Description of the Matter

As discussed in note 2 to the consolidated financial statements, the Company records accruals for research and development expenses and clinical trials based upon estimates of costs incurred through the balance sheet date that have yet to be invoiced by the contract research organizations (“CRO”) and other third-party vendors.

The Company accounts for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. Estimated accruals are determined based on reviewing contractual terms and through communications with internal clinical personnel and external service providers including CRO’s as to the progress or state of its trials. The principal consideration for our determination that performing procedures related to the clinical trial expenses, specifically related to the year-end accrual for clinical trial costs, is a critical audit matter is that there was judgment by management in determining the progress of the activities included in the individual clinical trial agreements based on internal and external information.

How We Addressed the Matter in Our Audit

To evaluate the accruals for research and development expenses and clinical trials, our audit procedures included, among others, testing the completeness and accuracy of the underlying data used in the estimates and evaluating the significant assumptions including, but not limited, by obtaining an understanding of the Company’s estimation process, corroborating the progress of clinical trials with the Company’s clinical team, and obtaining confirmations directly from third parties.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2019.

San Francisco, CA

September 27, 2022

Kintara Therapeutics, Inc.

Consolidated Balance Sheets

(In thousands, except par value amounts)

Note $ $

Assets

Current assets

Prepaid expenses, deposits and other 1,478 756

Clinical trial deposit 4 — 500

Property, equipment and intangibles, net 5 90 150

Liabilities

Current liabilities

Accounts payable and accrued liabilities 3,269 2,219

Milestone payment liability 3 163 182

Stockholders' equity

Preferred stock

Authorized

Issued and outstanding

Common stock

Authorized

Issued and outstanding

Accumulated other comprehensive income 21 21

Total liabilities and stockholders’ equity 15,948 13,543

Commitments and contingencies (note 10)

Subsequent events (note 13)

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

Kintara Therapeutics, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

For the years ended June 30,

Expenses

In-process research and development 3 — 16,094

Other income (loss)

Foreign exchange 7 (12 )

Amortization of deferred loan costs 7 — (94 )

Computation of basic loss per share

Series A Preferred cash dividend 8 (8 ) (8 )

Series B Preferred stock dividend 8 — (17 )

Series C Preferred stock dividend 8 (2,462 ) —

Basic and fully diluted loss per share (0.52 ) (1.60 )

Basic and fully diluted weighted average number of shares $ 48,702 $ 25,886

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

Kintara Therapeutics, Inc.

Consolidated Statements of Stockholders’ Equity

For the years ended June 30, 2022 and 2021

(In thousands)

Issuance of Series C Preferred stock — — — — 25,028 — 25,028

Series C placement agent warrants — — 3,287 — (3,287 ) — —

Series C Preferred stock share issuance costs — — — — (3,455 ) — (3,455 )

Series C Agent Warrants exercised — — (79 ) — 79 — —

Warrants issued for services — — 569 — — — 569

Stock options exercised 170 1 76 — — — 77

Stock option expense — — 5,276 — — — 5,276

Series A Preferred cash dividend — — — — — (8 ) (8 )

Series B Preferred stock dividend 11 — 17 — — (17 ) —

Net loss for the year — — — — — (38,298 ) (38,298 )

Warrants issued for services — — 35 — — — 35

Exercise of 2020 Investor Warrants for cash 69 — 69 — — — 69

Exercise of pre-funded warrants for cash 4,800 5 — — — — 5

Stock option expense — — 2,248 — — — 2,248

Series A Preferred cash dividend — — — — — (8 ) (8 )

Net loss for the year — — — — — (22,661 ) (22,661 )

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

Kintara Therapeutics, Inc.

Consolidated Statements of Cash Flows

June 30, 2022

(In thousands)

For the years ended June 30,

Note $ $

Cash flows from operating activities

Adjustments to reconcile net loss to net cash used in operating activities

Amortization of intangible assets — 2

Depreciation of property and equipment 5 60 30

Impairment of in-process research and development 3 — 16,094

Change in fair value of milestone liability 3 (19 ) (6 )

Interest expense 7 — 30

Amortization of deferred loan costs 7 — 94

Warrants issued for services 8 35 569

Changes in operating assets and liabilities

Prepaid expenses, deposits and other (722 ) (381 )

Clinical trial deposits 4 (500 ) (2,100 )

Accounts payable and accrued liabilities 1,007 (67 )

Related party payables 160 (103 )

Net cash used in operating activities (20,392 ) (18,860 )

Cash flows from investing activities

Cash acquired on merger with Adgero 3 — 969

Purchase of equipment — (8 )

Proceeds on sale of equipment — 3

Net cash provided by investing activities — 964

Cash flows from financing activities

Net proceeds from the issuance of shares and warrants 8 21,569 21,598

Warrants exercised for cash 8 74 4,404

Stock options exercised for cash — 77

Proceeds from loan 7 — 500

Repayment of loan 7 — (500 )

Interest paid 7 — (30 )

Series A preferred cash dividend 8 (8 ) (8 )

Net cash provided by financing activities 21,635 26,041

Increase in cash and cash equivalents 1,243 8,145

Cash and cash equivalents – beginning of year 10,537 2,392

Cash and cash equivalents – end of year 11,780 10,537

Supplementary information (note 11)

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

Kintara Therapeutics, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(In thousands)

Nature of operations, corporate history, and going concern and management plans

Nature of operations

Kintara Therapeutics, Inc. (the “Company”) is a clinical-stage drug development company with a focus on the development of novel cancer therapies for patients with unmet medical needs. The Company is developing two late-stage, Phase 3-ready therapeutics – VAL-083 for glioblastoma multiforme and REM-001 for cutaneous metastatic breast cancer. In order to accelerate the Company’s development timelines, it leverages existing preclinical and clinical data from a wide range of sources. The Company may seek marketing partnerships in order to potentially offset clinical costs and to generate future royalty revenue from approved indications of its product candidates.

Corporate history

The Company is a Nevada corporation formed on June 24, 2009, under the name Berry Only, Inc. On January 25, 2013, the Company entered into and closed an exchange agreement (the “Exchange Agreement”), with Del Mar Pharmaceuticals (BC) Ltd. (“Del Mar (BC)”), 0959454 B.C. Ltd. (“Callco”), and 0959456 B.C. Ltd. (“Exchangeco”) and the security holders of Del Mar (BC). Upon completion of the Exchange Agreement, Del Mar (BC) became a wholly-owned subsidiary of the Company (the “Reverse Acquisition”).

On June 9, 2020, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), by and among Adgero Acquisition Corp., the Company’s wholly-owned subsidiary incorporated in the State of Delaware (“Merger Sub”), and Adgero Biopharmaceuticals Holdings, Inc., a Delaware corporation (“Adgero”). On August 19, 2020, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into Adgero (the “Merger”), the separate corporate existence of Merger Sub ceased and Adgero continued its existence under Delaware law as the surviving corporation in the Merger and became a direct, wholly-owned subsidiary of the Company. As a result of the Merger, each issued and outstanding share of Adgero common stock, par value $0.0001 per share (the “Adgero Common Stock”) (other than treasury shares held by Adgero), was converted automatically into 1.5740 shares (the “Exchange Ratio”) of the Company’s common stock per share of Adgero Common Stock, and cash in lieu of any fractional shares. Also, each outstanding warrant to purchase Adgero Common Stock was converted into a warrant exercisable for that number of shares of the Company’s common stock equal to the product of (x) the aggregate number of shares of Adgero Common Stock for which such warrant was exercisable and (y) the Exchange Ratio.

Following the completion of the Merger, the Company changed its name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc. and began trading on The Nasdaq Capital Market LLC under the symbol “KTRA”.

Kintara Therapeutics, Inc. is the parent company of Del Mar (BC), a British Columbia, Canada corporation and Adgero, a Delaware corporation, which are clinical stage companies with a focus on the development of drugs for the treatment of cancer. The Company is also the parent company to Callco and Exchangeco which are British Columbia, Canada corporations. Callco and Exchangeco were formed to facilitate the Reverse Acquisition. In connection with the Adgero merger, the Company also became the parent company of Adgero Biopharmaceuticals, Inc. (“Adgero Bio”), formerly a wholly-owned subsidiary of Adgero.

References to the Company refer to the Company and its wholly-owned subsidiaries.

Going concern and management plans

These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue its operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.

For the year ended June 30, 2022, the Company reported a loss of $22,661 and a negative cash flow from operations of $20,392. The Company had an accumulated deficit of $136,356 and had cash and cash equivalents of $11,780 as of June 30, 2022. The Company is in the clinical stage and has not generated any revenues to-date. The Company does not have the prospect of achieving revenues until such time that its product candidates are commercialized or partnered, which may not ever occur. During the year ended June 30, 2022, the Company completed two registered direct financings for aggregate net proceeds of approximately $21.6 million and on August 2, 2022, the Company entered into a stock purchase agreement which subject to certain limitations, may allow the Company to sell shares of its common stock for a total of up to $20 million in gross proceeds. However, potential proceeds under the stock purchase agreement are uncertain as to timing and amount. Even with the proceeds from the two registered direct financings and the existence of the stock purchase agreement, the Company will require additional funding to maintain its clinical trials, research and development projects, and for general operations. These circumstances indicate substantial doubt exists about the Company’s ability to continue as a going concern within one year from the date of filing of these consolidated financial statements.

Consequently, management is pursuing various financing alternatives to fund the Company’s operations so it can continue as a going concern. However, the coronavirus (“COVID-19”) pandemic has created significant economic uncertainty and volatility in the credit and capital markets. Management plans to continue to pursue opportunities to secure the necessary financing through the issue of new equity, debt, and/or the entering into of strategic partnership arrangements but the ultimate impact of the COVID-19 pandemic on the Company’s ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and any new information which may emerge concerning the severity of the COVID-19 pandemic. The Company may not be able to raise sufficient additional capital and may tailor its drug candidate development programs based on the amount of funding the Company is able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.

These consolidated financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.

Significant accounting policies

Basis of presentation

The consolidated financial statements of the Company have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) and are presented in United States dollars. The functional currency of the Company and each of its subsidiaries is the United States dollar.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below and have been consistently applied to all years presented.

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Adgero, Adgero Bio, Del Mar BC, Callco, and Exchangeco as of, and for the years ended June 30, 2022, and 2021. All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, expenses, contingent assets, and contingent liabilities as at the end of, or during, the reporting period. Actual results could significantly differ from those estimates. Significant areas requiring management to make estimates include the fair value of the milestone payment liability, the valuation of equity instruments issued for services, clinical trial accruals, deferred tax valuation allowance and assessment of going concern. Further details of the nature of these assumptions and conditions may be found in the relevant notes to these consolidated financial statements.

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid investments with original maturities from the purchase date of three months or less that can be readily convertible into known amounts of cash. Cash and cash equivalents are held at recognized Canadian and United States financial institutions. Interest earned is recognized in the consolidated statement of operations.

Foreign currency translation

The functional currency of the Company at June 30, 2022, is the United States dollar. Transactions that are denominated in a foreign currency are remeasured into the functional currency at the current exchange rate on the date of the transaction. Any foreign-currency denominated monetary assets and liabilities are subsequently remeasured at current exchange rates, with gains or losses recognized as foreign exchange losses or gains in the consolidated statement of operations. Non-monetary assets and liabilities are translated at historical exchange rates. Expenses are translated at average exchange rates during the period. Exchange gains and losses are included in consolidated statement of operations for the period.

Acquired in-process research and development expense

The Company acquired in-process research and development assets in connection with its Merger with Adgero (note 3). 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.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over its estimated useful life of three years. Depreciation expense is recognized from the date the equipment is put into use.

Income taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. To the extent that deferred tax assets cannot be recognized under the preceding criteria, the Company establishes valuation allowances, as necessary, to reduce deferred tax assets to the amounts expected to be realized.

As of June 30, 2022, and 2021, all deferred tax assets were fully offset by a valuation allowance. The realization of deferred tax assets is dependent upon future federal, state and foreign taxable income. The Company’s judgments regarding deferred tax assets may change due to future market conditions, as the Company expands into international jurisdictions, due to changes in U.S. or international tax laws and other factors.

These changes, if any, may require material adjustments to the Company’s deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period in which such determinations are made. The Company recognizes the impact of uncertain tax positions based upon a two-step process. To the extent that a tax position does not meet a more-likely-than-not level of certainty, no impact is recognized in the consolidated financial statements. If a tax position meets the more-likely-than-not level of certainty, it is recognized in the consolidated financial statements at the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company’s policy is to analyze the Company’s tax positions taken with respect to all applicable income tax issues for all open tax years in each respective jurisdiction. Interest and penalties with respect to uncertain tax positions would be included in income tax expense. As of June 30, 2022, the Company concluded that there were no uncertain tax provisions required to be recognized in its consolidated financial statements.

The Company does not record U.S. income taxes on the undistributed earnings of its foreign subsidiaries based upon the Company’s intention to permanently reinvest undistributed earnings to ensure sufficient working capital and further expansion of existing operations outside the United States. As June 30, 2022, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S. earnings and profit purposes. In the event the Company is required to repatriate funds from outside of the United States, such repatriation would be subject to local laws, customs, and tax consequences. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

Financial instruments

The Company has financial instruments that are measured at fair value. To determine the fair value, the Company uses the fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market participants would use to value an asset or liability. The three levels of inputs that may be used to measure fair value are as follows:

•

Level one - inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities;

•

Level two - inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals; and

•

Level three - unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. As of June 30, 2022, the Company’s milestone payment liability was measured using level 3 inputs (note 3).

The Company’s financial instruments consist of cash and cash equivalents, other receivables, accounts payable, and related party payables. The carrying values of cash and cash equivalents, other receivables, accounts payable and related party payables approximate their fair values due to the immediate or short-term maturity of these financial instruments.

Intangible assets

Patents

Expenditures associated with the filing, or maintenance of patents, licensing or technology agreements are expensed as incurred. Costs previously recognized as an expense are not recognized as an asset in subsequent periods. If the Company achieves regulatory approval, patent costs will be deferred and amortized over the remaining life of the related patent.

Accruals for research and development expenses and clinical trials

As part of the process of preparing its financial statements, the Company is required to estimate its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants, and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment terms that do not match the periods over which materials or services are provided under such contracts. The Company’s objective is to reflect the appropriate expenses in its financial statements by matching those expenses with the period in which services are performed and efforts are expended. The Company accounts for these expenses according to the timing of various aspects of the expenses. The Company determines accrual estimates by taking into account discussion with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed. During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in it reporting amounts that are too high or too low for any particular period. For the years ended June 30, 2022, and 2021, there were no material adjustments to the Company’s prior period estimates of accrued expenses for clinical trials.

Warrants and shares issued for services

The Company has issued equity instruments for services provided by employees and non-employees. The equity instruments are valued at the fair value of the instrument issued.

Stock options

The Company recognizes 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 Accounting Standards Update ("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 years ended June 30, 2022, and 2021, the determination of grant-date fair value for stock option awards was estimated using the Black-Scholes model, which includes variables such as the expected volatility of our share price, the anticipated exercise behavior of its grantee, interest rates, and dividend yields. For years ended June 30, 2022, and 2021, the Company utilized the plain vanilla method to determine the expected life of stock options. These variables are projected based on our historical data, experience, and other factors. Changes in any of these variables could result in material adjustments to the expense recognized for share-based payments. Such value is recognized as expense over the requisite service period, net of actual forfeitures, using the accelerated attribution method. The Company recognizes forfeitures as they occur. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results, or updated estimates, differ from current estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

Loss per share

Income or loss per share is calculated based on the weighted average number of common shares outstanding. For the years ended June 30, 2022, and 2021 diluted loss per share does not differ from basic loss per share since the effect of the Company’s warrants, stock options, performance stock units, and convertible preferred shares is anti-dilutive. As of June 30, 2022, potential common shares of 36,024 (2021 – 6,974) related to outstanding common stock warrants, 2,100 (2021 – 2,100) related to outstanding Series C preferred stock warrants, 8,810 (2021 – 6,392) related to stock options, and 14,497 (2021 – 17,295) relating to outstanding Series C convertible preferred shares were excluded from the calculation of net loss per common share.

Segment information

The Company identifies its operating segments based on business activities, management responsibility and geographical location. The Company operates within a single operating segment being the research and development of cancer indications, and operates primarily in one geographic area, being North America. The Company previously conducted one clinical trial in China but the expenses incurred over the course of the study were not significant. All of the Company’s assets are located in either Canada or the United States.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date.

Recently adopted

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

The amendments in this update are intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. For public business entities that are not smaller reporting companies, the ASU’s amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, the effective date is for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The guidance may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted ASU 2020-06 effective July 1, 2021. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements.

During the year ended June 30, 2022, there have been no new, or existing, recently issued accounting pronouncements that are of significance, or potential significance, that impact the Company’s consolidated financial statements.

Merger

On June 9, 2020, the Company, Adgero Acquisition Corp., a wholly-owned subsidiary of the Company (“Merger Sub”), and Adgero, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) pursuant to which upon closing the Merger Sub will merge with and into Adgero, with Adgero surviving the merger and becoming a direct, wholly-owned subsidiary of the Company (the “Merger”).

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (i) each outstanding share of Adgero common stock (the “Adgero Common Stock”) was converted into shares of Company common stock (the “Kintara Common Stock”) based on the exchange ratio, (ii) each outstanding warrant to purchase Adgero Common Stock was converted into a warrant exercisable for that number of shares of Kintara Common Stock equal to the product of (x) the aggregate number of shares of Adgero Common Stock for which such warrant was exercisable and (y) the Exchange Ratio (as defined in the Merger Agreement); and (iii) each outstanding Adgero stock option, whether vested or unvested, that had not been exercised was cancelled for no consideration. On August 19, 2020, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into Adgero, the separate corporate existence of Merger Sub ceased and Adgero continued its existence under Delaware law as the surviving corporation and a direct, wholly-owned subsidiary of the Company.

The Exchange Ratio in the Merger Agreement was negotiated so that the existing stockholders of Adgero would own 49.5% of the total voting shares outstanding of the Company and the existing stockholders of the Company would own 50.5% of the total voting shares outstanding of the Company immediately after the merger (less the effect of the payment of cash in lieu of any fractional shares of Kintara Common Stock). The final Exchange Ratio determined immediately prior to the Effective Time to reflect the Company’s and Adgero’s capitalization as of immediately prior to such time was 1.574.

Under the terms of the Merger Agreement, upon closing of the Merger, the Company issued 11,439 shares of Company common stock and 2,314 stock purchase warrants to the security holders of Adgero (“Adgero Warrants”). The Adgero Warrants were exercisable at $3.18 per share but have all expired as of June 30, 2022 (note 8). The Adgero Warrants were valued using a Black-Scholes valuation with a weighted-average risk-free interest rate of 0.21%, a term of one year, a volatility of 115.96%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock at the date of measurement is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the instrument at the valuation date. The expected term has been estimated using the remaining life of the warrant. Also, in conjunction with the Merger, the Company issued 572 shares of common stock to the placement agent as a success fee. The shares of common stock issued to the former Adgero stockholders as well as the success fee shares, have been valued at $1.34 per share which was the closing price of the Company’s common stock on August 19, 2020, the date the Merger closed.

In connection with the Merger, the Company completed a private placement of Series C Convertible Preferred Stock in three separate closings (note 8).

To determine the accounting for this transaction under ASU 2017-01, an assessment was made as to whether an integrated set of assets and activities should be accounted for as an acquisition of a business or an asset acquisition. The guidance requires an initial screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If that screen is met, the set is not a business. In connection with the Merger, substantially all of the fair value was concentrated in in-process research and development (“IPR&D”). As such, the Merger has been treated as an acquisition of Adgero assets and an assumption of Adgero liabilities.

The Company incurred approximately $1,554 of legal, consulting and other professional fees related to the Merger, of which approximately $500 was incurred in the year ended June 30, 2021. The transaction costs incurred during the year ended June 30, 2021, applicable to the Merger have been classified as merger expenses in the consolidated statement of operations for the year ended June 30, 2021.

The following summarizes total consideration transferred to the Adgero stockholders under the Merger as well as the assets acquired and liabilities assumed under the Merger:

$(in thousands)

Consideration:

Success fee shares 766

Net assets acquired:

Other current assets (11 )

Property and equipment (note 5) (175 )

Accounts payable and accrued liabilities 337

Milestone payment liability 188

In-process research and development 16,094

The fair value of the IPR&D assets has been expensed as a charge in the consolidated statements of operations for the year ended June 30, 2021, as there is no alternative use for these assets. Property and equipment includes office furniture that was subsequently sold and laboratory equipment that was put into use during the third quarter of the year ended June 30, 2021.

The milestone payment liability relates to an asset purchase agreement with St. Cloud Investments, LLC (“St. Cloud”) that Adgero has regarding the acquisition of REM-001. The Agreement, as amended, is dated November 26, 2012 (the “St. Cloud Agreement”). Pursuant to the terms of the St. Cloud Agreement, the Company is obligated to make certain payments under the agreement. The future contingent amounts payable under that agreement are as follows:

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Upon the earlier of (i) a subsequent equity financing to take place after the Company conducts a Phase 2B clinical study in which fifty patients complete the study and their clinical data can be evaluated or (ii) the commencement of a clinical study intended to be used as a definitive study for market approval in any country, the Company is obligated to pay an aggregate amount of $300 in cash or an equivalent amount of common stock, with $240 to St. Cloud and $60 to an employee of the Company; and

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Upon receipt of regulatory approval of REM-001 Therapy, the Company is obligated to pay an aggregate amount of $700 in cash or an equivalent amount of common stock, with $560 to St. Cloud and $140 to an employee of the Company.

With respect to the $300 and $700 potential milestone payments referenced above (each a “Milestone Payment”), if either such Milestone Payment becomes payable, and in the event the Company elects to pay either such Milestone Payment in shares of its common stock, the value of the common stock will equal the average of the closing price per share of the Company’s common stock over the twenty (20) trading days following the first public announcement of the applicable event described above.

The milestone payment liability has been estimated using a scenario-based method (or “SBM”). An SBM is an income-based approach under which possible outcomes are identified, the contingent consideration payoff of each outcome is probability weighted, and then a suitable discount rate is used to arrive at the expected present value of the contingent consideration at the valuation date. The probability used in the valuation was based on published research for the probability of success of oncology companies at a similar stage of development as the Company. The discount rate was based on published rates for corporate bonds and the term was

based on an estimate of the planned timing of completion of the respective development achievement that would result in payment of the respective milestones.

$(in thousands)

Change in fair value estimate (6 )

Change in fair value estimate (19 )

Clinical trial deposit

The Company has entered into an agreement with a contract research organization (“CRO”) for the management of the Company’s registration study for glioblastoma multiforme. Under the agreement, the Company will supply the drug for the study and the CRO will manage all operational aspects of the study including site activation and patient enrollment. The Company is required to make certain payments under the agreement related to patient enrollment milestones. For the year ended June 30, 2022, the Company has recognized $8,163 (2021 – $5,430) of expenses for this study.

In relation to this study, the Company has made a deposit payment of $2,600 to the CRO. It is anticipated that the deposit will be applied to future invoices, or refunded to the Company, beyond twelve months from June 30, 2022. The Company can terminate the study at any time. Upon termination, the Company will be liable for any payments due to the effective date of the termination as well as any non-refundable costs incurred by the CRO prior to the date of termination.

Property, equipment and intangibles, net

$(thousands)

Acquired in Adgero merger (note 3) 175

Laboratory equipment purchased 8

Disposal of furniture (3 )

Less depreciation and amortization (32 )

Less depreciation (60 )

At June 30, 2022, the total capitalized cost of intangibles was $80 (2021 - $80) and the Company has recognized nil and $2, respectively, in amortization expense during the years ended June 30, 2022 and 2021. The intangible assets were fully amortized at June 30, 2021.

Related party transactions

Valent Technologies, LLC Agreements

One of the Company’s officers is a principal of Valent Technologies, LLC (“Valent”) and as result Valent is a related party to the Company.

On September 12, 2010, the Company entered into a Patent Assignment Agreement (the “Valent Assignment Agreement”) with Valent pursuant to which Valent transferred to the Company all its right, title and interest in and to the patents for VAL-083 owned by Valent. The Company now owns all rights and title to VAL-083 and is responsible for the drug’s further development and commercialization. In accordance with the terms of the Valent Assignment Agreement, Valent is entitled to receive a future royalty on all revenues derived from the development and commercialization of VAL-083. In the event that the Company terminates the agreement, the Company may be entitled to receive royalties from Valent’s subsequent development of VAL-083 depending on the development milestones the Company has achieved prior to the termination of the Valent Assignment Agreement.

On September 30, 2014, the Company entered into an exchange agreement (the “Valent Exchange Agreement”) with Valent and Del Mar (BC). Pursuant to the Valent Exchange Agreement, Valent exchanged its loan payable in the outstanding amount of $279 (including aggregate accrued interest to September 30, 2014, of $29), issued to Valent by Del Mar (BC), for 279 shares of the

Company’s Series A Preferred Stock. The Series A Preferred Stock has a stated value of $1.00 per share (the “Series A Stated Value”) and is not convertible into common stock. The holder of the Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in arrears. For the years ended June 30, 2022, and 2021, respectively, the Company recorded $8 related to the dividend paid to Valent. The dividends have been recorded as a direct increase in accumulated deficit.

Related party payables

At June 30, 2022 there is an aggregate amount of $721 (2021 - $561) payable to the Company’s officers and directors for fees, expenses, and accrued bonuses and other liabilities.

Loan from National Brain Tumor Society and National Foundation for Cancer Research

$(in thousands)

Financing costs (94 )

Interest expense 30

Amortization of deferred financing costs 94

Payment of principal and interest (530 )

During the year ended June 30, 2021, the Company received a loan of $500 from National Brain Tumor Society (“NBTS”) and the National Foundation for Cancer Research (the “NBTS Loan”) to support VAL-083's preparation for participation in the Global Coalition for Adaptive Research's sponsored trial, Adaptive Global Innovative Learning Environment study. In relation to the NBTS Loan, the Company issued 125 share purchase warrants which are exercisable at a price of $1.09 per common share until June 19, 2025 and were included in deferred financing costs as of June 30, 2020 (“NBTS Warrants”). The NBTS Loan is secured by a promissory note, accrues interest at a rate of 6% per annum and matures on June 19, 2021. On June 19, 2021, the Company repaid the NBTS Loan principal of $500 and loan interest of $30.

The NBTS Warrants were valued at $94 using a Black-Scholes valuation with a risk-free interest rate of 0.37%, a term of 5 years, a volatility of 89.82%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock at the date of measurement is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the instrument at the valuation date. The expected term has been estimated using the remaining life of the NBTS Warrants.

Stockholders’ equity

Preferred stock

Series C Preferred Stock

Numberof shares $(in thousands)

Issued on exercise of Series C Agent Warrants 33 79

Conversion of Series C Preferred stock to common stock (4,969 ) (3,713 )

Conversion of Series C Preferred stock to common stock (3,254 ) (2,377 )

In connection with the Merger (note 3), in August 2020, the Company issued 25,028 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) in three separate closings of a private placement (Series C-1, C-2, and C-3). Each share of Series C Preferred Stock was issued at a purchase price of $1,000 per share and is convertible into shares of common stock based on the respective conversion prices which were determined at the closing of each round of the private placement. The conversion prices for the Series C-1 Preferred Stock, Series C-2 Preferred Stock, and the Series C-3 Preferred Stock are $1.16, $1.214, and $1.15, respectively. Subject to ownership limitations, the owners of the Series C Preferred Stock are entitled to receive dividends, payable in shares of common stock at a rate of 10%, 15%, 20% and 25% of the number of shares of common stock issuable upon conversion of

the Series C Preferred Stock, on the 12th, 24th, 36th and 48th month, anniversary of the initial closing of the private placement which occurred on August 19, 2020.

The Series C Preferred Stock dividends do not require declaration by the board of directors and are accrued annually as of the date the dividend is earned in an amount equal to the fair value of the Company’s common stock on the dates the respective dividends are paid. The fair value of the Series C Preferred Stock dividend paid on August 19, 2021, was determined by multiplying the dividends paid of 1,698 by the Company’s closing share price on August 19, 2021, of $1.45 per share for a total fair value of $2,462. Any outstanding shares of Series C Preferred Stock will automatically convert to shares of common stock on August 19, 2024.

Total gross proceeds from the private placement were $25,028, or approximately $21,598 in net proceeds after deducting financing costs of $3,455 with respect to agent commissions and expenses, as well as legal and accounting fees. In addition, the Company issued 2,504 Series C Preferred Stock purchase warrants with a fair value of $3,287 to the placement agent (“Series C Agent Warrants”).

The Company’s Series C Preferred Stock outstanding, conversion shares, and future dividends as of June 30, 2022, are as follows:

Series C Dividends Dividend Shares(in thousands)

The conversion feature of the Series C Convertible Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series C Convertible Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from inception, the Company immediately recorded a non-cash deemed dividend of $3,181 related to the beneficial conversion feature arising from the issuance of Series C Convertible Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders and net loss per share for the nine months ended March 31, 2021.

The Series C Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock and (ii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series C Preferred Stock. The Series C Preferred Stock shall be pari passu in liquidation to the Company’s Series A Preferred Stock. The liquidation value of the Series C Preferred Stock at June 30, 2022, is the stated value of $16,838.

Series B Preferred Stock

Series B Preferred Stock(in thousands)

Numberof shares $

Conversion of Series B Preferred stock to common stock (649 ) (4,525 )

During the year ended June 30, 2016, the Company issued 902 shares of Series B Preferred Stock. During the year ended June 30, 2021, the remaining 649 shares of Series B Preferred Stock were fully converted to 162 shares of common stock. The holders of

the Series B Preferred Stock were entitled to an annual cumulative, in arrears, dividend at the rate of 9% payable quarterly. The 9% dividend accrued quarterly commencing on the date of issue and was payable quarterly on September 30, December 31, March 31, and June 30 of each year commencing on June 30, 2016. Dividends were payable solely by delivery of shares of common stock, in an amount for each holder equal to the aggregate dividend payable to such holder with respect to the shares of Series B Preferred Stock held by such holder divided by the conversion price. Pursuant to the Series B Preferred Stock dividend, during the year ended June 30, 2022, the Company issued nil (2021 – 11) shares of common stock and recognized nil (2021 - $17). These dividends have been recognized as an increase in accumulated deficit.

In addition, the Company and the Series B Preferred Stockholders entered into a royalty agreement, pursuant to which the Company will pay the holders of the Series B Preferred Stock, in aggregate, a single-digit royalty based on their pro rata ownership of the Series B Preferred Stock on products sold directly by the Company or sold pursuant to a licensing or partnering arrangement.

Series A Preferred Stock

Effective September 30, 2014, the Company filed a Certificate of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of Nevada. Pursuant to the Series A Certificate of Designation, the Company designated 279 shares of preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have a stated value of $1.00 per share (the “Series A Stated Value”) and are not convertible into common stock. The holder of the Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in arrears. Upon any liquidation of the Company, the holder of the Series A Preferred Stock will be entitled to be paid, out of any assets of the Company available for distribution to stockholders, the Series A Stated Value of the shares of Series A Preferred Stock held by such holder, plus any accrued but unpaid dividends thereon, prior to any payments being made with respect to the common stock. The Series A Preferred Stock is held by Valent (note 6).

The Series A Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock, and (ii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series A Preferred Stock. The Series A Preferred Stock shall be pari passu in liquidation to the Company’s Series C Preferred Stock. The liquidation value of the Series A Preferred stock at June 30, 2022, of $279.

There was no change to the Series A Preferred stock for the years ended June 30, 2022, or 2021.

Common stock

Amended articles of incorporation

On June 25, 2021, the Company amended its articles of incorporation to increase the number of authorized shares of common stock from 95,000 to 175,000 and on June 21, 2022, the Company amended its articles of incorporation to increase the number of authorized shares of common stock from 175,000 to 275,000.

Stock issuances

Year ended June 30, 2022

Registered direct financing - September 28, 2021

On September 28, 2021, the Company closed on the sale of (i) 7,200 shares of its common stock, par value $0.001 per share, (ii) pre-funded warrants (“PFW”) to purchase an aggregate of 4,800 shares of common stock and (iii) common warrants to purchase an aggregate of 12,000 shares of common stock (“2022 Investor Warrants”) in the Company’s registered direct offering (the “September Offering”). Each share of common stock, or PFW as applicable, was sold together with a 2022 Investor Warrant to purchase one share of common stock at a combined effective price of $1.25 per share of common stock and accompanying 2022 Investor Warrant. The 2022 Investor Warrants have been valued at $7,023 and have been treated as equity. They have been valued using a Black-Scholes valuation with a risk-free rate of 0.55%, a contractual term of 3.5 years, a volatility of 116.7%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant.

The net proceeds from the September Offering were $13,634 after deducting commissions and other offering expenses.

The 2022 Investor Warrants are exercisable at $1.25 per share until their expiry on March 28, 2025, and the PFW are exercisable at $0.001 per share at any time after September 28, 2021. The Company also issued 600 agent warrants that are exercisable at $1.5265 per share commencing September 28, 2021, until their expiry on March 28, 2025 (the “2022 Agent Warrants”). The 2022 Agent Warrants have been valued at $333 and have been treated as non-cash issue costs of the common stock, 2022 Investor Warrants, and PFW. The 2022 Agent Warrants have been valued using a Black-Scholes valuation with a risk-free rate of 0.55%, a contractual term of 3.5 years, a volatility of 116.7%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant.

As of June 30, 2022, all of the 4,800 PFW have been exercised at $0.001 per PFW for proceeds of $4.8.

Registered direct financing - April 14, 2022

On April 14, 2022, the Company closed on the sale of 16,266 shares of its common stock, par value $0.001 per share, and common warrants to purchase an aggregate of 16,266 shares of common stock (“2022 April Investor Warrants”) in the Company’s registered direct offering (the “April Offering”). Each share of common stock was sold together with a 2022 April Investor Warrant to purchase one share of common stock at a combined effective price of $0.53 per share of common stock and accompanying 2022 April Investor Warrant. The 2022 April Investor Warrants have been valued at $3,898 and have been treated as equity. They have been valued using a Black-Scholes valuation with a risk-free rate of 0.54%, a contractual term of 5 years, a volatility of 109.4%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant.

The net proceeds from the April Offering were approximately $7,900 after deducting commissions and other offering expenses.

The 2022 April Investor Warrants are exercisable at $0.41 per share until their expiry on April 14, 2027. The Company also issued 1,623 agent warrants that are exercisable at $0.6625 per share commencing October 14, 2022, until their expiry on October 14, 2026 (the "2022 April Agent Warrants"). The 2022 April Agent Warrants have been valued at $350 and have been treated as non-cash issue costs of the common stock and the 2022 April Investor Warrants. The 2022 April Agent Warrants have been valued using a Black-Scholes valuation with a risk-free rate of 0.54%, a contractual term of 4.5 years, a volatility of 112.3%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant.

Stock options

2017 Omnibus Incentive Plan

As subsequently approved by the Company’s stockholders at an annual meeting of stockholders, on April 11, 2018, the Company’s board of directors approved the adoption of the Company’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”), as amended. The board of directors also approved a form of Performance Stock Unit Award Agreement to be used in connection with grants of performance stock units (“PSUs”) under the 2017 Plan. As approved by the Company’s stockholders on June 21, 2022, the number of common shares available under the 2017 Plan is 22,000 shares. Under the 2017 Plan, 22,000 shares of Company common stock are currently reserved for issuance, less the number of shares of common stock issued under the Del Mar (BC) 2013 Amended and Restated Stock Option Plan (the “Legacy Plan”), or that are subject to grants of stock options made, or that may be made, under the Legacy Plan, or that have been previously exercised. A total of 117 shares of common stock have been issued under the Legacy Plan and/or are subject to outstanding stock options granted under the Legacy Plan, and a total of 8,693 shares of common stock have been issued under the 2017 Plan and/or are subject to outstanding stock options granted under the 2017 Plan leaving 12,996 shares of common stock available at June 30, 2022 for issuance under the 2017 Plan if all such options under the Legacy Plan were exercised, net of stock options previously exercised.

The maximum number of shares of Company common stock with respect to which any one participant may be granted awards during any calendar year is 8% of the Company’s fully diluted shares of common stock on the date of grant (excluding the number of shares of common stock issued under the 2017 Plan and/or the Legacy Plan or subject to outstanding awards granted under the 2017 Plan and/or the Legacy Plan). No award will be granted under the 2017 Plan on, or after, July 7, 2027.

During the year ended June 30, 2022, a total of 3,954 stock options to purchase shares of common stock were granted to directors and an officer of the Company. Of the total stock options granted, 435 have an exercise price of $1.24 per share and vest in 12 equal monthly installments beginning on October 22, 2021. The remaining 3,519 stock options granted have an exercise price of $0.96 per share and vest as to 25% on November 8, 2022, with the remaining portion vesting in equal monthly installments over a period of 36 months commencing on December 8, 2022. All of the options to purchase shares of common stock granted have a 10-year term and are subject to cancellation upon the grantees’ termination of service for the Company, with certain exceptions.

In addition, 2,715 stock options previously issued to an officer of the Company were modified such that 754 stock options that were to vest over the period December 15, 2022, to September 15, 2023, were changed to vest on a contingent basis dependent on the achievement of certain strategic partnership initiatives. As the conditions to meet the contingent vesting were unlikely to be met, the compensation expense for these stock options was recognized over the pre-amendment basis. The contingent vesting stock options were subsequently forfeited upon the termination of that officer. In relation to the termination of two officers of the Company, the Company has recognized $120 in stock option expense due to the acceleration of vesting of certain stock options granted to those officers.

The following table sets forth changes in stock options outstanding under all plans:

The following table summarizes stock options outstanding and exercisable under all plans at June 30, 2022:

Stock options issued during the years ended June 30, 2022, and 2021, have been valued using a Black-Scholes pricing model with the following assumptions:

Dividend rate — % — %

The estimated volatility of the Company’s common stock at the date of issuance of the stock options is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the stock options at the valuation date. The expected life of the stock options has been estimated using the plain vanilla method.

The Company has recognized the following amounts as stock option expense for the periods noted:

Years ended June 30,

All of the stock option expense for the periods ended June 30, 2022, and 2021, has been recognized as additional paid in capital. The aggregate intrinsic value of stock options outstanding at June 30, 2022, was nil (2021 - $4,759) and the aggregate intrinsic value of stock options exercisable at June 30, 2022, was nil (2021 - $2,181). As of June 30, 2022, there was $1,792 in unrecognized compensation expense that will be recognized over the next 2.25 years.

The following table sets forth changes in unvested stock options under all plans:

Number of options(in thousands) Weighted average exercise price $

The aggregate intrinsic value of unvested stock options at June 30, 2022 was nil (2021 - $2,577). The unvested stock options have a remaining weighted average contractual term of 9.19 (2021 – 9.16) years.

Common stock warrants

The following table sets forth changes in outstanding warrants:

Number of warrants(in thousands) Weighted average exercise price $

Issuance of Adgero Warrants 2,314 3.18

Exercise of warrants (ii) (4,907 ) 1.00

Warrants issued for services (i) 600 1.74

Expiry of warrants (iii) (1,330 ) 8.55

Warrants issued for services are exercisable at various prices and expire at the various dates noted in the table below.

ii)

A total of 4,404 2020 Investor Warrants were exercised at $1.00 per share and 503 warrants issued as either agent warrants or issued for services were exercised on a cashless basis for which 273 common shares were issued.

iii)

Expired warrants include: 1,108 Adgero replacement warrants with an exercise price of $3.18, 208 2017 Investor Warrants with an exercise price of $35.00, and 14 2017 Agent Warrants with an exercise price of $40.60.

The following table summarizes the Company’s outstanding warrants as of June 30, 2022:

Description of warrants Number(in thousands) Exerciseprice $ Expiry date

(i)

NBTS Warrants were issued with respect to loan proceeds received during the year ended June 30, 2021 (note 7).

Series C preferred stock warrants

In connection with the Series C Preferred Stock private placement, the Company initially issued 2,504 Series C Agent Warrants. The Series C Agent Warrants have an exercise price of $1,000 per share, provide for a cashless exercise feature, and are exercisable for a period of four years from August 19, 2020. The Series C Preferred Stock issuable upon exercise of the Series C Agent Warrants is convertible into shares of common stock in the same manner as each respective underlying series of outstanding Series C Preferred Stock and will be entitled to the same dividend rights as each respective series.

The Series C Agent Warrants were valued at a total of $3,287 using a binomial pricing model with a risk-free interest rate of 0.27%, a term of 4.0 years, and a volatility of 95.2% to 95.8%. The estimated volatility of the Company’s common stock at the date of measurement is based on the historical volatility of the Company’s common stock. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the instrument at the valuation date. The expected term has been estimated using the contractual term of the warrant.

The following table sets forth changes in outstanding Series C Agent Warrants:

Issuance of Preferred Series C-1 Agent Warrants 1,929 — — 1,929 1.16

Issuance of Preferred Series C-2 Agent Warrants 219 — — 219 1.21

Issuance of Preferred Series C-3 Agent Warrants 296 — — 296 1.15

The following table summarizes the Company’s outstanding Series C Agent Warrants as of June 30, 2022:

Income taxes

For the years ended June 30, 2022, and 2021, the Company did not record a provision for income taxes due to a full valuation allowance against the deferred tax assets.

Significant components of the Company’s deferred tax assets and deferred tax liabilities are shown below:

Deferred tax assets:

Stock-based compensation 635 155

Capital losses carried forward 18 18

Bonus - compensation 85 —

Scientific research and development 803 761

Scientific research and development – Investment Tax Credits (“ITC”) 690 665

Deferred tax liabilities:

Scientific research and development – ITC (114 ) (110 )

Net future tax assets — —

The income tax benefit of these tax attributes has not been recorded in these consolidated financial statements because of the uncertainty of their recovery. The Company’s effective income tax rate differs from the statutory income tax rate of 21% (2021 – 21%).

The differences arise from the following items:

Tax recovery at statutory income tax rates (4,743 ) (8,015 )

Effect of rate differentials between jurisdictions (345 ) (551 )

Effect of foreign exchange rates 445 (954 )

Non-capital losses acquired with Adgero — (4,114 )

Scientific research and development – ITC (44 ) 97

Adjustment to prior year's provision versus statutory tax returns (2,332 ) 228

Change in valuation allowance 6,021 8,803

— —

The Company has no current income tax expense for the year ended June 30, 2022, as there was a taxable loss for this period. The components of the Company’s loss before income taxes for the year ended June 30, 2022, were allocated as to $8.5 million in the U.S. and $4.3 million in Canada. As of June 30, 2022, the Company had combined U.S. and Canadian net operating loss (“NOL”) carry forwards of $96.4 million (2021 – $77.7 million). The U.S. federal NOL carryforwards consist of $15.8 million generated before July 1, 2018, which begin expiring in 2026, and $29.7 million that can be carried forward indefinitely, but are subject to the 80% taxable income limitation. The Canadian NOL carryforwards of $50.8 million begin expiring in 2030. In addition, the Company has non-refundable Canadian federal investment tax credits of $422 (2021 - $407) that expire between 2031 and 2041 and non-refundable British Columbia investment tax credits of $248 (2021 – $258) that expire between 2022 and 2031. The Company also has Canadian scientific research and development tax incentives of $3.0 million (2021 – $2.8 million) that do not expire.

The Company files U.S. federal, U.S. state, and Canadian income tax returns with varying statues of limitations. The tax years from 2007 to 2021 remain open to examination due to the carryover of unused NOL carryforwards and tax credits. The Company currently is not under examination by any tax authority.

Internal Revenue Code (“IRC”) Section 382 and 383 places a limitation on the amount of taxable income that can be offset by NOL and credit carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct NOL and credit carryforwards in excess of the IRC Section 382 and 383 limitations. The limitation in the federal and state NOL and research and development credit carryforwards reduce the deferred tax assets, which are further offset by a full valuation allowance. The limitation can result in the expiration of the NOLs and research and development credit carryforwards available. The Company has performed an IRC Section 382 and 383 analysis and determined there was an ownership change in 2013. The Company has not performed any section 382 and 383 analyses since 2013. An assessed change in ownership subsequent to 2013 could limit future use of NOL and research and development credit carryforwards. The acquisition of Adgero Biopharmaceuticals Holdings, Inc. also triggers IRC Section 382 on the pre-acquisition NOLs. An analysis for IRC Section 382 has not been performed at this time on the pre-acquisition NOLs.

The CARES Act, was enacted March 27, 2020. Among the business provision, the CARES Act provided for various payroll tax incentives, changes to net operating loss carryback and carryforward rules, business interest expense limitation increases, and bonus depreciation on qualified improvement property. Additionally, the Consolidated Appropriations Act of 2021 was signed on December 27, 2020, which provided additional COVID-19 relief provisions for businesses. The Company has evaluated the impact of both the Acts and has determined that any impact is not material to its financial statements.

10.

Commitments and contingencies

The Company has the following obligations over the next five fiscal years ending June 30, 2027:

Clinical development

The Company has entered into contracts for drug manufacturing, clinical study management and safety related to its clinical trials for a total of $14,880. Pursuant to the commitments for clinical trials, the Company has paid a total of $3,269 in deposits related to study initiation and certain study costs. These deposits are available to be applied against invoices received from the contract research organization but have not been netted against the Company’s commitments for the fiscal year ended June 30, 2022.

Office lease

The Company currently rents its shared head office on a one-year renewable lease at $2.4 per year and rents its administrative offices on a month-to-month basis at a total rate of $3.4 (CA $4.4 per month) per month. During the year ended June 30, 2022, the Company recorded a total of $41.4 as rent expense (2021 - $40).

11.

Supplementary statement of cash flows information

Series B Preferred Stock common stock dividend (note 8) — 17

Series C Preferred Stock common stock dividend (note 8) 2,462 —

Issue costs in accounts payable 43 —

Cashless exercise of Series C warrants (note 8) — 79

Conversion of Series B Preferred Stock to common stock (note 8) — 4,525

Conversion of Series C Preferred Stock to common stock (note 8) 2,377 3,713

Income taxes paid — —

Interest paid — —

12.

Financial risk management

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or valuation of its financial instruments.

The Company is exposed to financial risk related to fluctuation of foreign exchange rates. Foreign currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the United Sates dollar, primarily general and administrative expenses incurred in Canadian dollars. The Company believes that the results of operations, financial position and cash flows would be affected by a sudden change in foreign exchange rates but would not impair or enhance its ability to pay its Canadian dollar accounts payable. The Company manages foreign exchange risk by converting its US$ to CA$ as needed. The Company maintains the majority of its cash in US$. As of June 30, 2022, Canadian dollar denominated accounts payable and accrued liabilities exposure in US$ totaled $57.

a) Foreign exchange risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. If foreign exchange rates were to fluctuate within +/-10% of the closing rate at year-end, the maximum exposure is $14.

Balances in foreign currencies at June 30, 2022 and 2021 were as follows:

Interest, taxes, and other receivables 11 11

b) Interest rate risk

The Company is subject to interest rate risk on its cash and cash equivalents and believes that the results of operations, financial position and cash flows would not be significantly affected by a sudden change in market interest rates relative to the investment interest rates due to the short-term nature of the investments. As of June 30, 2022, cash and cash equivalents held by the Company were $11,780. The Company’s cash balance currently earns interest at standard bank rates. If interest rates were to fluctuate within +/-10% of the closing rate at year end the impact of the Company’s interest-bearing accounts will not be significant due to the current low market interest rates.

The only financial instruments that expose the Company to interest rate risk are its cash and cash equivalents.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial instruments. The Company continues to manage its liquidity risk based on the outflows experienced for the period ended June 30, 2022, and is undertaking efforts to conserve cash resources wherever possible. The maximum exposure of the Company’s liquidity risk is $4,282 as of June 30, 2022.

Credit risk

Credit risk arises from cash and cash equivalents, deposits with banks, financial institutions, and contractors as well as outstanding receivables. The Company limits its exposure to credit risk, with respect to cash and cash equivalents, by placing them with high quality credit financial institutions. The Company’s cash equivalents consist primarily of operating funds with commercial banks. Of the amounts on deposit with financial institutions, the following table summarizes the amounts at risk should the financial institutions with which the deposits are held cease trading:

The maximum exposure of the Company’s credit risk is $19 at June 30, 2022 relating to interest, taxes, and other receivables. The credit risk related to uninsured cash and cash equivalents balances is $11,185 at June 30, 2022.

Cash and cash equivalents $ Insured amount $ Non-insured amount $

Concentration of credit risk

Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents.

The Company places its cash and cash equivalents in accredited financial institutions and therefore the Company’s management believes these funds are subject to minimal credit risk. The Company has no significant off-balance sheet concentrations of credit risk such as foreign currency exchange contracts, option contracts or other hedging arrangements.

13.

Subsequent events

The Company has evaluated its subsequent events from June 30, 2022, through the date these consolidated financial statements were issued and has determined that there are no subsequent events requiring disclosure in these consolidated financial statements other than the items noted below.

Equity Purchase Agreement

On August 2, 2022, the Company entered into a purchase agreement, dated as of August 2, 2022 (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed to purchase up to $20,000 of shares (the “Purchase Shares”) of the Company’s common stock. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to take certain actions relating to the registration of the offer and sale of the shares of common stock available for issuance under the Purchase Agreement.

The Company issued 1,630 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the Purchase Agreement.

Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to present Lincoln Park with a purchase notice directing Lincoln Park to purchase up to 500 Purchase Shares provided that the closing sale price of the common stock on the purchase date is not below a threshold price set forth in the Purchase Agreement (a “Regular Purchase”). The Company and Lincoln Park may mutually agree to increase the Regular Purchase amount with respect to any Regular Purchase under the Purchase Agreement, provided that Lincoln Park’s maximum committed purchase obligation under any single Regular Purchase shall not exceed $2,000. The purchase price per share for each Regular Purchase will be based on prevailing market prices of the common stock immediately preceding the time of sale as computed in accordance with the terms set forth in the Purchase Agreement. There are no upper limits on the price per share that Lincoln Park must pay for shares of common stock under the Purchase Agreement.

If the Company directs Lincoln Park to purchase the maximum number of shares of common stock that the Company may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park to purchase additional shares of common stock in an “accelerated purchase” (each, an “Accelerated Purchase”) and an “additional accelerated purchase” (each, an “Additional Accelerated Purchase”) (including multiple Additional Accelerated Purchases on the same trading day) as provided in the Purchase Agreement. The purchase price per share for each Accelerated Purchase and Additional Accelerated Purchase will be based on market prices of the common stock on the applicable purchase date for such Accelerated Purchases and such Additional Accelerated Purchases.

The aggregate number of shares that the Company can sell to Lincoln Park under the Purchase Agreement may in no case exceed 13,100 shares of the common stock (which is equal to approximately 19.99% of the shares of the common stock outstanding immediately prior to the execution of the Purchase Agreement) (the “Exchange Cap”), unless (i) stockholder approval is obtained to issue Purchase Shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of our common stock to Lincoln Park under the Purchase Agreement equals or exceeds $0.2024 per share (which represents the lower of (A) the official closing price of the Company's common stock on Nasdaq on the trading day immediately preceding the date of the Purchase Agreement and (B) the average official closing price of our common stock on Nasdaq for the five consecutive trading days ending on the trading day on the date of the Purchase Agreement, adjusted such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules).

The Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the Purchase Agreement.

Subsequent to June 30, 2022, the Company sold 11,470 shares of common stock for total gross proceeds of approximately $1,976 under this facility.

Series C Preferred Stock

On August 19, 2022, the Company paid the common stock dividend on its Series C Preferred Stock as well as the Series C Agent Warrants. The common stock dividend corresponds to the 15% dividend payable on the second anniversary of the initial closing of the Series C Preferred Stock which occurred on August 19, 2020. The 15% stock dividend was payable on August 19, 2022, to the holders of the Series C Preferred Stock and the Series C Agent Warrants on that date. The 15% dividend is not payable on Series C Preferred Stock or Series C Agent Warrants that were converted, or exercised, prior to August 19, 2022. The dividend resulted in 2,174 shares of common stock being issued to the Series C Preferred Stock holders and 315 shares of common stock being accrued to the Series C Agent Warrants holders. The common stock accrued to the Series C Agent Warrants holders will be released to the Series C Agent Warrant holders upon the exercise of the respective Series C Agent Warrant.

Stock Options

Subsequent to June 30, 2022, 3,181 stock options were granted at $0.1757 per share and are exercisable until August 1, 2032. The options vest as to 25% on the first anniversary of grant with the remaining portion vesting pro rata monthly thereafter over 36 months. In addition, 300 stock options were granted at $0.255 per share and are exercisable until July 1, 2032. These options vest in 12 equal monthly installments commencing August 1, 2022.

Restricted Stock Units

Subsequent to June 30, 2022, 880 restricted stock units were issued to the Company's management. The restricted stock units vest in four equal amounts commencing August 1, 2023.

Clinical Trials Deposit

Subsequent to June 30, 2022, the Company paid an additional $1,700 in relation to its clinical trial deposit.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures in ensuring that material information required to be disclosed in our reports filed or submitted under the Exchange Act, has been made or known to them in a timely fashion. Based on this evaluation, our CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2022.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management assessed, with the oversight of the board of directors, the effectiveness of our internal control over financial reporting as of June 30, 2022. In making this assessment, management used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the evaluation, our management concluded that our internal control over financial reporting was effective as of June 30, 2022.

Changes in Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended June 30, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Because of the inherent limitations in internal control over financial reporting, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in a cost-effective controlled system, misstatements due to error or fraud may occur and not be detected.

Item 9B. Other Information.

On July 1, 2022, a total of 300,000 stock options were issued to the Company’s three independent directors. The stock options are exercisable at $0.255 per share and vest in 12 equal monthly installments beginning on August 1, 2022. All of the stock options have a 10-year term and are subject to cancellation upon the grantees’ termination of service for the Company, with certain exceptions.

On August 1, 2022, a total of 2,641,154 stock options were issued to officers of the Company. The stock options are exercisable at $0.1757 per share and vest as to 25% on August 1, 2023, with the remainder in 36 equal monthly installments beginning on September 1, 2023. All of the stock options have a 10-year term and are subject to cancellation upon the grantees’ termination of service for the Company, with certain exceptions. In addition, on August 1, 2022, a total of 880,319 restricted stock units ("RSU") were issued to officers of the Company. The RSU vest in four equal annual installments beginning on August 1, 2023.

Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.

Not applicable.

PART III

HURA US Equity

HURA · 10-K · period ended 2022-06-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

HURA US Equity☆

HURA · 10-K · period ended 2022-06-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

HURA US Equity