Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
Expressed in Canadian Dollars
Corporate Office- Canada
Suite 300 - Bellevue Centre
235 -15th Street
West Vancouver, BC V7T 2X1
Tel: 604-921-1810
Fax: 604-921-1898
Corporate Office- US
820 Heinz Avenue
Berkeley, CA, 94710
Tel: 1-888-485-6340
Fax: 424-245-3719
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of BriaCell Therapeutics Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of BriaCell Therapeutics Corp. (the Company)
as of July 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, cash flows, and
changes in shareholders’ equity for each of the three years ended July 31, 2020, and the related notes (collectively referred to
as the consolidated financial statements).
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of
the Company as of July 31, 2020 and 2019, and the results of its consolidated operations and its consolidated cash flows for
each of the three years ended July 31, 2020 in conformity with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
Material Uncertainty Related to Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered losses from inception and
negative operating cash flows that raise substantial doubt about its ability to continue as a going concern. Management's plans
with regards 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 consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s consolidated financial statements based on our audits. 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 audit to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Chartered Professional Accountants
Licensed Public Accountants
We have served as the Company’s auditor since 2015.
Mississauga, Canada
November 30, 2020
BriaCell Therapeutics Corp
Consolidated Statements of Financial Position
As at July 31, 2020 and 2019
(Expressed in Canadian Dollars)
ASSETS
Current assets
Cash
Amounts receivable
Prepaid expenses
Total current assets
Investments
Intellectual property (Note 4)
Total Assets
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities (Note 10)
Short term loans (Note 5(a))
Unsecured convertible loan (Note 6)
Total current liabilities
Long term liabilities
Government Grants (Note 5(b))
Total long term liabilities
Shareholders' equity
Share capital (Note 7(b))
Share-based payment reserve (Note 8)
Warrant reserve (Note 7(c))
Accumulated other comprehensive loss
Deficit
Total shareholders' deficit
July 31,
2020
July 31,
2019
$ 26,104
27,660
267,444
321,208
$ 192,916
3,459
10,667
207,042
2
320,474
2
339,215
$ 641,684
$ 546,259
$ 4,562,856
306,878
$ 996,172
-
-
4,869,734
396,224
1,392,396
191,572
191,572
-
1,392,396
15,065,961
739,193
2,271,910
(170,374)
(22,326,312)
(4,419,622)
13,651,217
877,089
2,870,442
(124,295)
(18,120,590)
(846,137)
Total liabilities and shareholders' deficit
$ 641,684
$ 546,259
Nature of Operations and Going Concern (Note 1)
Commitments (Note 15)
Events After the Reporting Period (Note 16)
These consolidated financial statements were approved and authorized for issue on behalf of the Board of Directors
on November 30, 2020 by:
On behalf of the Board:
“Jamieson Bondarenko”
Director
“William Williams”
Director
The accompanying notes are an integral part of these consolidated financial statements.
Page 3
BriaCell Therapeutics Corp
Consolidated Statements of Operations and Comprehensive Loss
For the Years Ended July 31, 2020, 2019 and 2018
(Expressed in Canadian Dollars)
Year ended
July 31,
2019
2020
2018
Expenses:
Research and development costs (Note 13)
General and administration costs (Note 14)
Share-based compensation (Note 8(vi))
Total Expenses
$ 2,980,144
1,857,465
2,071
4,839,680
$ 4,917,287
1,244,471
60,586
6,222,344
$ 3,112,579
1,387,713
476,211
4,976,503
Operating Loss
Interest income
Interest expense (Note 5,6)
Gain from government grant (Note 5)
Change in fair value of convertible debt (Note 6)
Foreign exchange income (loss)
(4,839,680)
(6,222,344)
- 12,004
(31,317)
(4,976,503)
15,991
(20,364)
(36,216)
28,604
(79,119)
(17,810)
(104,541)
-
-
420,585
31,410
432,682
(407,709)
(24,078)
(436,160)
Loss For The Year
(4,944,221)
(5,789,662)
(5,412,663)
Items That Will Subsequently Be
Reclassified To Profit Or Loss
Foreign currency translation adjustment
(46,079)
(46,079)
(18,781)
(18,781)
Comprehensive Loss for the Year
$ (4,990,300)
$ (5,808,443)
(33,340)
(33,340)
-
$ (5,446,003)
-
Basic and Fully Diluted Loss Per Share
$ (6.99)
$ (10.02)
$ (0.04)
Weighted Average Number Of Shares
Outstanding
713,889
579,664
427,815
The accompanying notes are an integral part of these consolidated financial statements.
Page 4
BriaCell Therapeutics Corp
Consolidated Statements of Cash Flows
For the Years Ended July 31, 2020, 2019 and 2018
(Expressed in Canadian Dollars)
Cash flow from operating activities
Net loss for the year
Items not affecting cash:
Depreciation and amortization
Share-based compensation
Accrued interest expense
Foreign exchange
Gain from government grant
Change in fair value of convertible loan
Changes in non
Amounts receivable
Prepaid expenses
Security deposits
Accounts payable and accrued liabilities
cash working capital:
‐
Cash flow from investing activities
Change in short-term investments
Cash flow from financing activities
Proceeds for private placements
Short-term loan
Repayment of unsecured convertible loan
Proceeds from exercise of warrants
Year ended
July 31,
2019
2018
2020
(4,944,221)
$ (5,789,662)
$ (5,412,663)
18,741
2,071
36,216
-
18,743
60,586
-
16,894
476,211
20,364
(28,604)
79,119
-
(420,585)
-
407,709
(24,201)
(256,777)
-
3,562,494
(1,555,162)
15,516
137,067
172,980
710,460
(5,094,895)
(11,994)
(117,051)
(151,413)
(186,650)
(4,958,593)
-
-
1,341,043
1,341,043
(591,043)
(591,043)
1,414,744
505,159
(477,559)
-
1,442,344
2,973,324
(117,540)
-
140,000
2,995,784
4,332,232
(465,849)
1,138,919
286,020
5,291,322
Increase (Decrease) in cash and cash equivalents (112,818)
Effect of changes in foreign exchange rates
(53,994)
192,916
Cash and cash equivalents, beginning of year
(758,068)
12,536
938,448
(258,314)
(67,667)
1,264,429
Cash and cash equivalents, end of year
26,104
$ 192,916
$ 938,448
The accompanying notes are an integral part of these consolidated financial statements.
Page 5
BriaCell Therapeutics Corp
Consolidated Statements of Changes in Shareholders’ Equity
For the Years Ended July 31, 2020, 2019 and 2018
(Expressed in Canadian Dollars)
Balance, July 31, 2017
Private Placement (Note 7(b)(i))
Acquisition of Sapientia (Note 7(b)(ii))
Exercise of warrants (Note 7(b)(iii))
Private Placement (Note 7(b)(iv))
Share issuance costs
Issuance of shares and warrants on conversion of Convertible
Notes (Note 7(b)(v))
Issuance of warrants on conversion of Convertible Notes
Expiration of warrants and compensation warrants (Note 7(c)(i),
7(d)(i))
Share-based compensation (Note 8(i))
Expiration of options (Note 8(ii))
Foreign exchange translation
Loss for the year
Balance, July 31, 2018
Issuance of shares and warrants on conversion of Convertible
Notes (Note 7(b)(vi))
Exercise of warrants (Note 7(b)(vii))
Private Placement (Note 7(b)(viii))
Expiration of warrants (Note 7(c)(ii))
Expiration of options (Note 8(iii))
Share-based compensation (Note 8)
Foreign exchange translation
Loss for the year
Balance, July 31, 2019
Private Placement (Note 7(b)(ix))
Private Placement (Note 7(b)(x))
Expiration of warrants (Note 7(c)(iii),(Note 7(d)(ii))
Expiration of options (Note 8(v))
Share-based compensation (Note 8(vi))
Foreign exchange translation
Loss for the year
SHARE CAPITAL
SHARES
AMOUNT
SHARE-
BASED
PAYMENT
RESERVE
WARRANT
RESERVE
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
ACCUMULATED
DEFICIT
TOTAL
SHAREHOLDERS'
EQUITY (DEFICIT)
353,015 $ 6,609,615 $ 884,763 $ 1,841,448 $ (72,174) $ (8,328,600) $ 935,052
631,785 -
- - - 631,785
13,528
375,000 -
- - - 375,000
8,333
351,557 -
- - 286,020
6,810
(65,537)
1,687,573
144,408
- - 4,332,232
2,644,659 -
- - - (465,850)
- (465,850) -
3,561
66,408
- 40,435
- - 106,843
-
- - 97,875
- - 97,875
-
- - (694,457)
- 694,457
-
-
-
-
-
529,655 10,213,174 905,257 2,907,337 (105,514) (12,688,964)
- 378,336
- (357,842)
- -
- (33,340)
- - - - (5,412,663) (5,412,663)
1,231,290
- - - 378,336
- - 357,842
- (33,340)
-
22,488
408,119
- 266,526
- - 674,645
(34,140)
174,140 -
2,855,784
- - 140,000
- - - - 2,855,784
- (269,282)
3,333
99,117
- 269,282
-
- - 88,754
- (88,754)
-
- - - 60,586
- 60,586
-
- - - (18,781)
- (18,781)
-
-
- - - - (5,789,662) (5,789,662)
654,593 13,651,217 877,089 2,870,442 (124,295) (18,120,590) (846,137)
- - - - 846,300
40,300 846,300
27,069 568,444
- - - - 568,444
- 598,532
- - - (598,532)
- - 139,967
- - (139,967)
- - - 2,071
- - 2,071
- - - - (46,079)
- (46,079)
- - - - - (4,944,221) (4,944,221)
-
-
-
-
Balance, July 31, 2020
The accompanying notes are an integral part of these consolidated financial statements.
721,962 $ 15,065,961 $ 739,193 2,271,910 $ (170,374) $ (22,326,312) $ (4,419,622)
Page 6
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
1. Nature of Operations and Going Concern
BriaCell Therapeutics Corp. (“BriaCell” or the “Company”) was incorporated under the Business
Corporations Act (British Columbia) on July 26, 2006 and is listed on the TSX Venture Exchange (“TSX
Venture”). The Company trades on the TSX Venture under the symbol “BCT.V”.
The Company’s head office is located at Suite 300 – 235 West 15th Street, West Vancouver, British
Columbia, V7T 2X1.
BriaCell is an immuno-oncology biotechnology company. BriaCell owns the US patent to Bria-IMT™, a
whole-cell cancer vaccine (US Patent No.7674456) (the “Patent”). The Company is currently advancing
its immunotherapy program, Bria-IMT™, to complete a 24-subject Phase I/IIa clinical trial and by research
activities in the context of BriaDx™, a companion diagnostic test to identify patients likely benefitting from
Bria-IMT™.
The accompanying consolidated financial statements have been prepared on the basis of a going
concern which contemplates the realization of assets and liquidation of liabilities in the normal course of
business for the foreseeable future. The Company has incurred losses from inception of $22,326,312
(July 31, 2019 - $18,120,590), and negative cash flows from operations of $1,555,162 (2019- $5,094,895,
2018- $4,958,593) is currently in the development stage and has not commenced commercial operations.
The Company’s ability to continue as a going concern is dependent upon its ability to attain future
profitable operations and to obtain the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come due. As at July 31, 2020, the Company had
not yet completed the clinical development of or achieved regulatory approval to market Bria-IMT™, its
lead product candidate and expects to incur further losses; the nature of a development stage immune-
oncology company requires the raising of financial capital to support its clinical development programs
and administrative costs. The uncertainty of the Company’s ability to raise such financial capital casts
significant doubt on the Company’s ability to continue as a going concern. These consolidated financial
statements do not include any adjustments to the amounts and classification of assets and liabilities that
might be necessary should the Company not be able to continue as a going concern.
These consolidated financial statements were authorized for issue by the Board of Directors on
November 30, 2020.
Page 7
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
2. Basis of Presentation
Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the international Accounting Standards Board (“IASB”) as
and interpretations of the IFRS Interpretations Committee (“IFRIC”).
The policies applied in these consolidated financial statements are based on IFRS effective as of July
31, 2020.
Basis of Presentation
The consolidated financial statements are prepared on a going concern basis and have been presented
in Canadian dollars which is the Company’s reporting currency. A summary of the significant accounting
policies is provided in Note 3. Standards and guidelines not effective for the current accounting period
are described in Note 4.
Basis of Measurement
These consolidated financial statements have been prepared on a going concern basis, under the
historical cost basis, except for financial instruments which have been measured at fair value.
Basis of Consolidation
These consolidated financial statements include the accounts of BriaCell and its wholly-owned US
subsidiary BriaCell Therapeutics Corp. (“BTC”) and BTC’s wholly owned subsidiary – Sapientia
Pharmaceuticals, Inc. (“Sapientia”). The financial statements of the subsidiaries are included in the
consolidated financial statements from the date that control commenced until the date control ceases.
Control exists when the Company has the power directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. The Company applies the
acquisition method to account for business combinations in accordance with IFRS 3.
All inter–company balances, and transactions, have been eliminated upon consolidation.
3. Significant Accounting Policies
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held with banks and other short-term highly
liquid investments with original maturities of three months or less. As at July 31, 2020 and 2019, the
Company had no cash equivalents.
Page 8
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
3. Significant Accounting Policies (continued)
Translation of Foreign Currencies
These consolidated financial statements are presented in Canadian dollars. The functional currency of
BriaCell is the Canadian dollar. The functional currency of BTC and Sapientia is the United States dollar.
Translation gains or losses resulting from the translation of the financial statements of BTC and Sapientia
into Canadian dollars for presentation purposes are recorded in other comprehensive loss.
Within each entity, transactions in currencies other than the functional currency (“foreign currencies”) are
translated to the functional currency at the rate of exchange prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional
currency at the end of each reporting period at the period-end exchange rate. Exchange gains and losses
on the settlement of transactions and the translation of monetary assets and liabilities to the functional
currency are recorded in profit or loss.
Intangible assets
Separately acquired intangible assets are measured on initial recognition at cost including directly
attributable costs. Intangible assets acquired in a business combination are measured at fair value at the
acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized
development costs, are recognized in profit or loss when incurred.
Intangible assets with finite useful lives are amortized over their useful lives and reviewed for impairment
whenever there is an indication that the asset may be impaired. The amortization period and the
amortization method for an intangible asset are reviewed at least at each year end.
Intangible assets with indefinite useful lives are not systematically amortized and are tested for
impairment annually, or whenever there is an indication that the intangible asset may be impaired. The
useful life of these assets is reviewed annually to determine whether their indefinite life assessment
continues to be supportable. If the events and circumstances do not continue to support the assessment,
the change in the useful life assessment from indefinite to finite life is accounted for prospectively as a
change in accounting estimate and on that date the asset is tested for impairment. Commencing from
that date, the asset is amortized systematically over its useful life.
The useful lives of intangible assets are as follows:
Useful life
Amortization method
In-house development or purchase
Patents
20 years
Straight-line
Purchase
Page 9
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
3. Significant Accounting Policies (continued)
Impairment of non-financial assets
The Company evaluates the need to record an impairment of non-financial assets whenever events or
changes in circumstances indicate that the carrying amount is not recoverable.
If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced
to their recoverable amount. The recoverable amount is the higher of fair value less costs of sale and
value in use. In measuring value in use, the expected future cash flows are discounted using a pre-tax
discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does
not generate independent cash flows is determined for the cash generating unit (“CGU”) to which the
asset belongs. Impairment losses are recognized in profit or loss.
An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the
estimates used to determine the asset's recoverable amount since the last impairment loss was
recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the
carrying amount that would have been determined (net of depreciation or amortization) had no
impairment loss been recognized for the asset in prior years and its recoverable amount. The reversal of
impairment loss of an asset presented at cost is recognized in profit or loss.
Research and Development
The Company expenses amounts paid for intellectual property, development and production
expenditures as they are incurred. However, such costs are deferred and recorded in intangible assets
when they meet generally accepted criteria, to the extent that their recovery can reasonably be regarded
as assured.
The costs must meet the following criteria to be deferred: the technical feasibility of completing the
intangible asset so that it will be available for use or sale; the intention to complete the intangible asset
and use or sell it; the ability to use or sell the intangible asset; the probability of future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to
use or sell the intangible asset; and the ability to reliably measure the expenditure attributable to the
intangible asset during its development.
Once those criteria are met, the future costs, such as costs to obtain patent or trademark protection over
the developed technologies, will be capitalized. These costs are then amortized over their expected
useful lives. To date it has not been demonstrated that these expenditures will generate or be able to be
used to generate probable future economic benefits.
Page 10
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
3. Significant Accounting Policies (continued)
Financial Instruments
In July 2014, the IASB published IFRS 9 which replaces IAS 39, "Financial Instruments: Recognition and
Measurement". IFRS 9 introduces improvements which include a logical model for classification and
measurement of financial instruments, a single, forward-looking "expected credit loss" impairment model
and a substantially reformed approach to hedge accounting. IFRS 9 was effective for annual reporting
periods beginning on or after January 1, 2018.
The Company adopted IFRS 9 on August 1, 2018 and has elected not to restate the comparative
information for prior periods with respect to classification and measurement (including impairment)
requirements. Therefore, comparative periods have not been restated. There were no differences in the
carrying amounts of financial assets and financial liabilities from adoption of IFRS 9. Accordingly, the
information presented for July 31, 2018 does not generally reflect the requirements of IFRS 9 but rather
those of IAS 39. The adoption of IFRS 9 resulted in changes in classification which are described below.
a) Classification
In implementing IFRS 9, the Company updated the financial instruments classification within its
accounting policy. The following table shows the original classification under IAS 39 and the new
classification under IFRS 9:
Financial asset/liability
Classification under
Classification under
IAS 39
IFRS 9
Cash and cash equivalents
Loans and receivables
Amortized cost
Amounts receivable
Loans and receivables
Amortized cost
Accounts payable
Other financial liabilities
Amortized cost
Short term loans
Other financial liabilities
Amortized cost
Convertible debt
Other financial liabilities
FVTPL
The Company determines the classification of financial instruments at initial recognition. The
classification of its instruments is driven by the Company’s business model for managing the financial
assets and their contractual cash flow characteristics. Equity instruments that are held for trading
(including all equity derivative instruments) are classified as fair value through profit and loss (“FVTPL”).
For other equity instruments, on the day of acquisition, the Company can make an irrevocable election
(on an instrument-by-instrument basis) to designate them at fair value through other comprehensive
income (“FVTOCI”). Financial liabilities are measured at amortized cost, unless they are required to be
measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to
measure them at FVTPL.
Page 11
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
3. Significant Accounting Policies (continued)
Financial Instruments (continued)
b) Measurement
Financial assets and liabilities:
Financial instruments carried at FVTPL are initially recorded at fair value and transaction costs are
expensed in the consolidated statements of operations and comprehensive loss. Realized and unrealized
gains and losses arising from changes in the fair value of the financial assets held at FVTPL are included
in the statements of operations and comprehensive loss in the period in which they arise. Where the
Company has opted to recognize a financial liability at FVTPL, any changes associated with the
Company’s own credit risk will be recognized in other comprehensive income (loss).
Financial instruments carried at FVTOCI for other equity instruments, on the day of acquisition the
Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them at
fair value through other comprehensive income.
After initial recognition, other financial liabilities are subsequently measured at amortized costs using the
effective interest rate method (“EIR”). Gains and losses are recognized in the consolidated statements of
operations and comprehensive loss when the liabilities are derecognized, as well as through the EIR
amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or
costs that are an integral part of EIR. The EIR amortization is included as an interest expense in the
consolidated statement of operations and comprehensive loss.
c) Impairment of financial assets at amortized cost
The Company recognizes a loss allowance for expected credit losses on financial assets that are
measured at amortized cost. At each reporting date, the Company measures the loss allowance for the
financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial
asset has increased significantly since initial recognition. If at the reporting date, the financial asset has
not increased significantly since initial recognition, the Company measures the loss allowance for the
financial asset at an amount equal to twelve month expected credit losses. The Company recognizes an
impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the
loss allowance at the reporting date to the amount that is required to be recognized.
Page 12
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
3. Significant Accounting Policies (continued)
Share-based Payments
Equity-settled share-based payments for directors, officers and employees are measured at fair value at
the date of grant and recorded as compensation expense over the vesting period with a corresponding
increase to share-based payment reserve in the consolidated financial statements.
The fair value determined at the grant date of equity-settled share-based payments is expensed using
the graded vesting method over the vesting period based on the Company’s estimate of payments that
will eventually vest. Upon exercise of the stock options, consideration paid by the option holder together
with the amount previously recognized in share-based payment reserve is recorded as an increase to
share capital. Upon expiry, the amounts recorded for share-based compensation are transferred to the
deficit from the share-based payment reserve. Shares are issued from treasury upon the exercise of
equity-settled share-based instruments.
Compensation expense on stock options granted to non-employees is measured at the earlier of the
completion of performance and the date the options are vested using the fair value method and is
recorded as an expense in the same period as if the Company had paid cash for the goods or services
received.
When the value of goods or services received in exchange for the share-based payment cannot be
reliably estimated, the fair value is measured by use of a Black-Scholes valuation model. The expected
life used in the model is adjusted, based on management’s best estimate, for the effects of non-
transferability, exercise restrictions, and behavioral considerations.
Share Capital
Common shares are classified as equity. Proceeds from unit placements are allocated between shares
and warrants issued using the relative fair value method. Costs directly identifiable with share capital
financing are charged against share capital. Share issuance costs incurred in advance of share
subscriptions are recorded as prepaid assets. Share issuance costs related to uncompleted share
subscriptions are charged to operations in the period they are incurred.
Warrant Reserve
The fair value of warrants is determined upon their issuance either as part of unit private placements or
in settlement of share issuance costs and finders’ fees, using the Black-Scholes model. All such warrants
are classified in a warrant reserve within equity. If the warrants are converted, the value attributable to
the warrants is transferred to common share capital. Upon expiry, the amounts recorded for expired
warrants is transferred to the deficit from the warrant reserve. Shares are issued from treasury upon the
exercise of share purchase warrants.
Page 13
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
3. Significant Accounting Policies (continued)
Income Taxes
Income tax expense consists of current and deferred tax expense. Current and deferred taxes are
recognized in profit or loss except to the extent they relate to items recognized directly in equity or other
comprehensive income.
Current tax is recognized and measured at the amount expected to be recovered from or payable to the
taxation authorities based on the income tax rates enacted or substantively enacted at the end of the
reporting period and includes any adjustment to taxes payable in respect of previous years.
Deferred tax is recognized on any temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable earnings. Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the period when the asset is realized and the liability is settled. The effect of a change
in the enacted or substantively enacted tax rates is recognized in loss and comprehensive loss or equity
depending on the item to which the adjustment relates.
Deferred tax assets are recognized to the extent future recovery is probable. At the end of each reporting
period, deferred tax assets are reduced to the extent that it is no longer probable that sufficient taxable
earnings will be available to allow all of part of the asset to be recovered.
Basic and Diluted Loss per Share
Basic loss per share is computed by dividing the loss for the year by the weighted average number of
common shares outstanding during the year. Diluted earnings per share reflect the potential dilution that
could occur if potentially dilutive securities were exercised or converted to common stock.
The dilutive effect of options and warrants and their equivalent is computed by application of the treasury
stock method. Diluted amounts are not presented when the effect of the computations is anti-dilutive.
Accordingly, at present, there is no difference in the amounts presented for basic and diluted loss per
share.
Government Grants
Government grants are recognized when there is reasonable assurance that the grant will be received,
and all conditions associated with the grant are met. Grants related to assets are recorded as a reduction
to the asset’s carrying value and are depreciated over the useful like of the asset. Claim under the
government grant related to income are recorded as other income in the period in which eligible expenses
are incurred or when the services have been performed.
Page 14
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
3. Significant Accounting Policies (continued)
Accounting Standards Implemented as at August 1, 2019
IFRS 16 - Leases (“IFRS 16”)
IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease,
SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving
the Legal Form of a Lease. It eliminates the distinction between operating and finance leases from the
perspective of the lessee. All contracts that meet the definition of a lease will be recorded in the
consolidated statements of financial position with a “right of use” asset and a corresponding liability. The
asset is subsequently accounted for as property, plant and equipment or investment property and the
liability is unwound using the interest rate inherent in the lease. The Company has adopted IFRS 16 as
of August 1, 2019, and has assessed no changes to the opening consolidated statements of financial
position as a result of the adoption of this new standard.
On transition to IFRS 16, the Company has elected to apply the practical expedient to grandfather the
assessment of which transactions are leases and apply IFRS 16 only to contracts that were previously
identified as leases. Contracts that were not identified as leases under IAS 17 Leases have not been
reassessed for whether a lease exists. The Company has elected to not recognize right-of-use assets
and lease liabilities for leases that have a lease term of 12 months or less and for leases of low-value
assets.
IFRIC 23 - Uncertainty over Income Tax Treatments (“IFRIC 23”)
The Company adopted IFRIC 23 on July 1, 2019 on a modified retrospective basis without restatement
of comparative information. The interpretation requires an entity to assess whether it is probable that a
tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income
tax filings and to exercise judgment in determining whether each tax treatment should be considered
independently or whether some tax treatments should be considered together. The decision should be
based on which approach provides better predictions of the resolution of the uncertainty. An entity also
has to consider whether it is probable that the relevant authority will accept each tax treatment, or group
of tax treatments, assuming that the taxation authority with the right to examine any amounts reported to
it will examine those amounts and will have full knowledge of all relevant information when doing so. The
adoption of the new standard had no impact on the consolidated financial statements as at July 31, 2020.
Page 15
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
3. Significant Accounting Policies (continued)
Accounting Standards Implemented as at August 1, 2019 (continued)
IFRS 3 - Business Combinations (“IFRS 3”)
In October 2018, the IASB issued an amendment to IFRS 3, effective for annual periods beginning on or
after January 1, 2020 with early adoption permitted. The amendment clarifies that a business must
include, at minimum, an input and a substantive process that together contribute to the ability to create
outputs, and assists companies in determining whether an acquisition is a business combination or an
acquisition of a group of assets by providing supplemental guidance for assessing whether an acquired
process is substantive. The Company has decided to early adopt the amendments to IFRS 3 effective
August 1, 2019 and shall apply the amended standard in assessing business combinations on a
prospective basis. For acquisitions that are determined to be acquisitions of assets as opposed to
business combinations, the Company allocates the transaction price to the individual identifiable assets
acquired and liabilities assumed on the basis of their relative fair values, and no goodwill is recognized.
Acquisitions that continue to meet the definition of a business combination are accounted for under the
acquisition method, without any changes to the Company’s accounting policy. There was no impact on
the Company’s consolidated financial statements as at July 31, 2020.
Significant Accounting Judgments and Estimates
The preparation of these consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated
financial statements and reported amounts of expenses during the reporting period. Actual outcomes
could differ from these estimates. The consolidated financial statements include estimates which, by
their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated
financial statements, and may require accounting adjustments based on future occurrences. Revisions
to accounting estimates are recognized in the period in which the estimate is revised and also in future
periods when the revision affects both current and future periods.
Page 16
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
3. Significant Accounting Policies (continued)
Significant Accounting Judgments and Estimates (continued)
The critical judgments and significant estimates in applying accounting policies that have the most
significant effect on the amounts recognized in the consolidated financial statements are:
The series of loans made to the subsidiary company are considered part of the parent company’s
net investment in a foreign operation as the Company does not plan to settle these balances in the
foreseeable future. As a result of this assessment, the unrealized foreign exchange gains and losses
on the intercompany loans are recorded through compressive loss. If the Company determined that
settlement of these amounts was planned or likely in the foreseeable future, the resultant foreign
exchange gains and losses would be recorded through profit or loss.
The change in the fair value of the unsecured convertible loan is based on an estimate determined
by the Black-Scholes Model.
Preparation of the consolidated financial statement on a going concern basis, which contemplates
the realization of assets and payments of liabilities in the ordinary course of business. Should the
Company be unable to continue as a going concern, it may be unable to realize the carrying value
of its assets, including its intangible assets and to meet its liabilities as they become due.
Intangible assets are tested for impairment annually or more frequently if three is an indication of
impairment. The carrying value of intangibles with definite lives is reviewed each reporting period to
determine whether there is any indication of impairment. If there are indications of impairment the
impairment analysis is completed and if the carrying amount of an asset exceeds its recoverable
amount, the asset is impaired and impairment loss is recognized.
4. Intellectual Property
The attributable intellectual property relates to Sapientia’s various patents, which the Company is
amortizing over 20 years, consistent with its accounting policy. During the year ended July 31, 2020, the
Company recorded $18,741 in amortization on intellectual property (2019 - $18,743).
Costs
Accumulated Amortization
Net Book
Value
July 31, 2019:
July 31, 2018 Additions July 31, 2019
July 31, 2018
Amotization
during the
year
July 31, 2019
July 31, 2019
$
374,852
-
374,852
$
16,894
18,743
35,637
339,215
July 31, 2020:
July 31, 2019 Additions July 31, 2020
July 31, 2019
Amotization
during the
year
July 31, 2020
July 31, 2020
$
374,852
-
374,852
$
35,637
18,741
54,378
320,474
Page 17
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
5. Loans
(a)
Short-terms loans
On December 3, 2019, January 27, 2020 and February 20, 2020 and the Company received three
unsecured loan from a third party in the amounts of US$100,000, US$50,000 and US$50,000,
respectively “Short Term Loans”). The Short Term Loans all bear interest at 2.5% annually and were all
repayable on or before March 26, 2020, after which the interest rate increased to 15% annually, however,
the loan holder has deferred the increased interest to November 20, 2020. The Short Term Loans remain
outstanding as of the date of this report.
On April 30, 2020 and May 20, 2020, the Company received two loans from other third parties in the total
amount of US$20,000. These loans all bear interest at 10% annually are repayable on or before
December 31, 2020.
Total interest expense in respect to the short-term loans was $33,939 for the year ended July 31, 2020
($nil for the year ended July 31, 2019).
(b)
Government grants
On April 24, 2020, the Company received a $40,000 loan from the Canada Emergency Business Account
(“CEBA Loan”). The CEBA Loan bears 0% interest until December 31, 2022. If the balance is not paid
by December 31, 2022, the remaining balance will be converted to a 3-year term loan at 5% annual
interest, paid monthly, effective January 1, 2023. The full balance must be repaid by no later than
December 31, 2025. No principal payments required until December 31, 2022. Principal repayments can
be voluntarily made at any time without fees or penalties. $10,000 loan forgiveness is available, provided
the outstanding balance is $40,000 at December 31, 2020, and $30,000 is paid back between January 1,
2021 and December 31, 2022. The loan was recognized at the fair value based on an estimated market
interest rate of 15%. The Company made no interest payments during the year ended July 31, 2020 and
recorded a gain from the government grant in the amounts of $13,121 (2019 – nil, 2018 – nil) which
represents the benefit of receiving an interest free grant.
On May 1, 2020 the Company received US$127,030 as a loan from the Paycheck Protection Program in
the United States (the “Program”) The terms of the Program provide that a portion of the loan may be
forgiven, to the extent that the amounts spent during the eight week period following the first disbursement
of the loan are incurred as follows: (i) payroll costs, (ii) interest payments on mortgages incurred before
February 15, 2020, (iii) rent payments on leases in effect before February 15, 2020, and (iv) utility
payments for which service began before February 15, 2020 (“Program Expenses”). The unforgiven part
of the loan must be repaid within two years and bears interest at 1% per annum. The Company used the
entire proceeds to pay Program expenses and is currently in the process of applying to have this loan
forgiven. The loan was recognized at the fair value based on an estimated market interest rate of 15%.
The Company made no interest payments during the year ended July 31, 2020 and recorded a gain from
the government grant in the amount of $15,483 (2019 – nil, 2018 – nil) which represents the benefit of
receiving a loan with 1% interest.
Page 18
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
6. Unsecured convertible loan
On March 16, 2018, concurrent with the non-brokered unit offering (Note 7(b)(iv)), the Company
completed a non-brokered private placement for the purchase of 5.0% unsecured convertible notes
(each, a "Convertible Note") in the principal amount of US$885,000. Under the terms of securities
purchase agreements between the Company and the purchasers of Convertible Notes (the
“Noteholders”), each Convertible Note is convertible, at the option of the holder, into (i) common shares
of BriaCell for so long as the Convertible Note is outstanding, at a fixed conversion price of $30.00 per
common share, for a period of nine months from the date of issuance, which may be extended by the
applicable holder and (ii) for each common share issued as a result of conversion, one warrant. The
warrants are valid for 36 months from their issuance date and each warrant is exercisable for one
common share at an exercise price of $42.00. On April 23, 2019, the Company revised the exercise price
of these warrants from $42.00 to $36.00.
The original repayment date of the Convertible Notes was September 16, 2018. On September 17, 2018,
the Company and the Noteholders agreed to extend the repayment date of the Convertible Notes to
March 20, 2019 and on March 8, 2019, the Company and the Noteholders agreed to extend the
repayment date of the Convertible Notes, to September 7, 2019.
During the year ended July 31, 2018, the Noteholders converted $106,843 of Convertible Notes into
3,561 shares and 3,561 warrants.
During the year ended July 31, 2019, $674,645 of Convertible Notes were converted and as such, the
Company issued 22,488 shares and 22,488 warrants on conversion.
On September 10, 2019, the Company repaid the balance of the Convertible Notes in the total amount
of $477,599 (US$ 362,819).
The Convertible Notes are denominated in US dollars and convertible into common shares and warrants
based on the principal and interest balance translated to Canadian dollars. Management determined that
the Convertible Notes represent a combined instrument that contains an embedded derivative, being the
conversion option. As a result of the foreign exchange impact on the conversion factor, the conversion
option does not meet the fixed for fixed criteria and therefore represents a derivative liability. In
accordance with IFRS 9, the Company has designated the entire Unsecured Convertible Loan at fair
value through profit or loss. The Unsecured Convertible Loan was initially recorded at fair value and re-
valued at each reporting date with changes in fair value being charged to interest expenses in the
consolidated statements of operations and comprehensive loss.
Fair value determination
The fair value of the Convertible Notes, including any adjustments thereto, has been determined using a
combination of the Black
Scholes option pricing model for the equity conversion portion and the
discounted cash flow method for the loan portion.
‐
Page 19
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
6. Unsecured convertible loan (continued)
The following assumptions were used to determine the fair value of the Convertible Notes:
‐
free interest rate
Risk
Expected volatility
Share price
Expected dividend yield
Annual loan interest rate
CAD/USD exchange rate
September 10, 2019
(at the repayment date)
1.6%
57%
$19.50
0%
5%
1.3153
July 31, 2019
(at year end)
2.03%
76%
$19.50
0%
5%
1.3148
Total interest expense and loss due to the change in fair value, charged to the consolidated statements
of operations and comprehensive loss for the years ended July 31, 2020, 2019 and 2018 are as follows:
Year ended
July 31,
2019
2020
2018
Interest expense
Change in fair value
$ 2,256
$ (79,119)
$ 31,317
$ 420,585
$
$
20,364
(407,709)
7. Share Capital and Warrant Reserve
a) Authorized share capital
The authorized share capital consists of an unlimited number of common shares with no par
value.
Retroactive Adjustment for Reverse Stock Split
In December 2019, the Board and TSX-V approved a 1-for-300 reverse stock split, or the Reverse
Split, which was implemented effective January 2, 2020. Consequently, all share numbers, share
prices, and exercise prices have been retroactively adjusted in these condensed interim
consolidated financial statements for all periods presented.
Page 20
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
7. Share Capital and Warrant Reserve (continued)
b) Issued share capital
During the years ended July 31, 2018, 2019 and 2020, the Company issued shares as follows:
i) On August 2, 2017, the Company and the Company’s President and CEO completed a non-
brokered private placement resulting in gross proceeds of $631,785. The non-brokered
private placement involved the sale of 13,528 shares at a price of $48.00 per unit.
ii) On September 5, 2017, the Company issued 8,333 common shares to the Sapientia
shareholders as consideration for the acquisition of all outstanding shares in the capital of
Sapientia.
iii) On October 13, 2017, the Company introduced a warrant exercise incentive program (the
“Warrant Incentive Program”) designed to encourage the early exercise of up to approximately
26 million outstanding common share purchase warrants (the “Warrants”).Under the terms of
the Incentive Program, the Company offered the following inducements: (i) a temporary
reduction in the respective exercise prices of the Warrants to $42.00, consistent with the
current trading value of BriaCell’s shares, for each Warrant that is exercised on or before
November 30, 2017 (the “Early Exercise Period“); and (ii) for each Warrant exercised during
the Early Exercise Period, the holder will receive, at no additional cost, one-half of one newly
issued common share purchase warrant (each an “Incentive Warrant“), with each whole
Incentive Warrant exercisable into one common share for a period of 24 months from the
issue date at an exercise price of $60.00. Any Warrants that are not exercised prior to the
expiry of the Early Exercise Period will remain outstanding in accordance with their original
terms, and in particular, will no longer be eligible for the reduced exercise price or issuance
of Incentive Warrants. In total, 6,810 warrants were exercised in connection with the Warrant
Incentive Program at an exercise price of $42.00 for aggregate gross proceeds of $286,020.
In addition, a total of 3,405 Incentive Warrants were granted in connection with the Warrant
Incentive Program, with each Incentive Warrant entitling the holder to purchase one additional
common share of the Company at an exercise price of $60.00, expiring December 21, 2019.
The fair value of the warrants was $65,537. The fair value was estimated using the Black-
Scholes option pricing model and the following weighted average assumptions: share price -
$48.00; exercise price - $60.00; expected life - 24 months; annualized volatility - 114.68%;
dividend yield - 0%; risk free rate - 1.66%.
Page 21
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
7. Share Capital and Warrant Reserve (continued)
b) Issued share capital (continued)
iv) On March 27, 2018, the Company completed a brokered private placement (the “March 2018
Brokered Unit Offering”) of 144,408 units of the Company (the “March 2018 Units”) at a price
of $30.00 per March 2018 Unit for aggregate gross proceeds of $4,332,232. Under the
Brokered Unit Offering, each March 2018 Unit consists of one common share and one
common share purchase warrant (each, a “March 2018 Warrant”). The March 2018 Warrants
are valid for 36 months following the closing of the Brokered Unit Offering and each March
2018 Warrant is exercisable for one Common Share at an exercise price of $42.00. In
connection with the March 2018 Brokered Unit Offering and the Note Offering (together, the
“Offerings”), the Company paid commissions to certain participating dealers on a portion of
funds raised. In respect of the March 2018 Brokered Unit Offering, aggregate cash
commissions of $235,215 and an aggregate 8,711 broker warrants (the “March 2018 Broker
Warrants”) were paid. The March 2018 Broker Warrants issued in connection with the
Offerings are exercisable into one Common Share at an exercise price of $42.00 for a period
of 36 months from the issue date. The fair value of March 2018 Warrants and March 2018
Broker Warrants was $1,479,028 and $208,545, respectively, and was determined using the
Black-Scholes option pricing model and the following assumptions: share price - $39.00;
exercise price - $42.00; expected life - 36 months; annualized volatility - 100.61%; dividend
yield - 0%; risk free rate - 1.99%. Officers and members of the Company’s Board of Directors,
including BriaCell’s Chief Executive Officer, Chief Financial Officer and the Board’s Chairman
(the “Related Parties”), participated in the Brokered Unit Offering, which participation
constitutes a “related party transaction” as defined under Multilateral Instrument 61-101 -
Protection of Minority Security Holders in Special Transactions (“MI 61-101”) and TSX Venture
Exchange policy 5.9. Such related party transaction is exempt from the formal valuation and
minority shareholder approval requirements of MI 61-101 as neither the fair market value of
securities being issued to the related parties nor the consideration being paid by the related
parties exceeded 25% of the Company’s market capitalization.
v) During July 2018, the Company issued 3,561 shares at $30.00 per share in respect of the
partial conversion of certain Convertible Notes (Note 6). Upon exercise of these Convertible
Notes, the Noteholders received 3,561 warrants with an exercise price of $42.00, expiring in
July 31, 2021. The fair value of the warrants was $40,435. The fair value was estimated using
the Black-Scholes option pricing model and the following weighted average assumptions:
share price - $42.00; exercise price - $42.00; expected life - 36 months; annualized volatility
- 100.41%; dividend yield - 0%; risk free rate - 2.12%.
Page 22
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
7. Share Capital and Warrant Reserve (continued)
b) Issued share capital (continued)
vi) During the year ended July 31, 2019, 22,488 shares were issued at $30.00 per share in
respect of the partial conversion of certain Convertible Notes (Note 6). Upon exercise of these
Convertible Notes, the Noteholders received 22,488 warrants with an exercise price of $42.00,
expiring within three years. The fair value of the warrants was $266,526. The fair value was
estimated using the Black-Scholes option pricing model and the following weighted average
assumptions: share price - $31.50-$40.50; exercise price - 42.00; expected life - 36 months;
annualized volatility - 100.7%-70.6%; dividend yield - 0%; risk free rate - 1.6%-2.3%.
vii) On September 28, 2018, 3,333 shares were issued in respect of 3,333 warrants that were
exercised at an exercise price of $42.00 for gross proceeds of $140,000. The fair value of the
warrants in the amount of $34,140 were released from the Warrant reserve to Share Capital.
viii) On March 25, 2019 and April 1, 2019, the Company completed a non brokered private
placement (the “April 2019 Private Placement”) of 99,117 shares of the Company at a price
of $30.00 per share for aggregate gross proceeds of $2,973,524 (net proceeds: $2,855,784).
Included in the April 2019 Private Placement were $500,000 from Mr. Jamieson Bondarenko,
an insider of the Company, and his participation in the April 2019 Private Placement is
considered a “related party transaction” pursuant to Multilateral Instrument 61-101 –
Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Company
is exempt from the requirements to obtain a formal valuation or minority shareholder approval
in connection with the insiders’ participation in the Private Placement in reliance of sections
5.5(a) and 5.7(1)(a) of MI 61-101.
ix) On September 9, 2019, the Company completed a non brokered private placement of 40,300
common shares at a price of $21.00 per common share for gross proceeds of $846,300.
x) On October 15, 2019, the Company completed non brokered private placement of 27,069
common shares at a price of $21.00 per common share for gross proceeds of $568,444.
Page 23
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
7. Share Capital and Warrant Reserve (continued)
c) Share Purchase Warrants
A summary of changes in share purchase warrants for the years ending July 31, 2020, 2019 and
2018 is presented below:
Weighted
Average
Exercise
Price
Number Of
Warrants
Balance, July 31, 2017
100,581 $
Exercised on Warrant Incentive Program (Note 7(b)(iii))
Granted on Warrant Incentive Program (Note 7(b)(iii))
Granted on Brokered Unit Offering (Note 7(b)(iv))
Granted from conversion of Notes (Note 7(b)(v))
Expired during the year (i)
Balance, July 31, 2018
Granted from conversion of Convertible Notes (Note
7(b)(xii))
Exercised Brokered Unit Offering (Note 7(b)(xii))
Expired during the year (ii)
Balance, July 31, 2019
Expired during the year (iii)
Balance, July 31, 2020
(6,810)
3,405
144,408
3,561
(43,650)
201,495
22,488
(3,333)
(10,384)
210,266
(31,738)
178,528
90
42
60
42
42
(78)
57
42
42
105
54
105
44
i. During the year ended July 31, 2018, 43,650 warrants with a fair value of $679,039 expired
and the Company recorded a charge to the warrant reserve with a corresponding credit to
accumulated deficit.
ii. During the year ended July 31, 2019, 10,384 warrants with a fair value of $269,282 expired
and the Company recorded a charge to the warrant reserve with a corresponding credit to
accumulated deficit.
iii. During the year ended July 31, 2020, 31,738 warrants with a fair value of $533,334 expired
and the Company recorded a charge to the warrant reserve with a corresponding credit to
accumulated deficit.
Page 24
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
7. Share Capital and Warrant Reserve (continued)
c) Share Purchase Warrants (continued)
As at July 31, 2020, warrants outstanding were as follows:
Number
of
Warrants
11,404
141,074
26,050
178,528
Exercise
Price
$ 90
$ 42
$ 36
Exercisable
At
July 31, 2020
Expiry
Date
11,404
April 26, 2021
141,074 March 27, 2021
26,050 October 2021-July 2022
178,528
d) Compensation Warrants
A summary of changes in compensation warrants for the years ended July 31, 2020, 2019 and
2018 is presented below:
Balance, July 31, 2017
Grant on brokered private placement (Note 7(b)(iv))
Grant from placement of Convertible Notes (Note 6)
Expired during 2018 (i)
Balance, July 31, 2018 and 2019
Expired during the year (ii)
Balance, July 31, 2020
Number
Of
Warrants
Weighted
Average
Exercise
Price
3,358 $
8,711
4,167
(463)
15,773 $
(1,983)
13,790 $
-
60
-
42
42
(60)
45
60
45
(i) During the year ended July 31, 2018, 463 compensation warrants with a fair value of $15,418
expired and the Company recorded a charge to the warrant reserve with a corresponding credit
to accumulated deficit
(ii) During the year ended July 31, 2019, 1,983 compensation warrants with a fair value of
$65,198 expired and the Company recorded a charge to the warrant reserve with a
corresponding credit to accumulated deficit.
Page 25
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
7. Share Capital and Warrant Reserve (continued)
d) Compensation Warrants (continued)
As at July 31, 2020, compensation warrants outstanding were as follows:
Number Of
Compensation
Warrants
912
4,167
8,711
13,790
Exercise
Price
Exercisable at
Jul 31, 2020
$
$
$
90
42
42
912
4,167
8,711
13,790
Expiry Date
April 26, 2021 (i)
March 27, 2021 (ii)
March 27, 2021 (ii)
i. Each compensation warrant can be exercised at $90.00 into one unit of BriaCell comprising one
common share and one share purchase warrant. Each resultant share purchase warrant acquired
can be exercised into an additional common share of BriaCell at $105.00 if exercised by April 26,
2021.
ii. Each compensation warrant can be exercised at $42.00 into one common share of BriaCell for a
period of 36 months.
8. Share-Based Compensation and Share-Based Payment Reserve
The Company has adopted a stock option plan (the “Plan") under which it is authorized to grant options
to officers, directors, employees and consultants enabling them to acquire up to 10% of the issued and
outstanding common stock of the Company. The options can be granted for a maximum of 5 years and
vest as determined by the Board of Directors. The exercise price of each option granted may not be less
than the fair market value of the common shares at the time of grant.
A summary of changes in stock options for the years ended July 31, 2020, 2019 and 2018 is presented
below:
Balance, July 31, 2017
Granted (i)
Cancelled
Expired (ii)
Balance, July 31, 2018
Expired (iii)
Cancelled
Balance, July 31, 2019
Granted (iv)
Expired
Balance, July 31, 2020
Number of
options
outstanding
Weighted
average
exercise price
20,274 $
20,552
(583)
(8,833)
31,410 $
(2,167)
(6,000)
23,243 $
166
(3,440)
19,969
72
45
(90)
(69)
(246)
(111)
(54)
(249)
62
(48)
49
Page 26
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
8. Share-Based Compensation and Share-Based Payment Reserve
(continued)
i. During the year ended July 31, 2018, the Company issued a total of 20,552 options, as follows:
a. On May 1, 2018, the Company issued 8,385 stock options to two consultants of which 25%
vested immediately, and 25% vest every 90 days thereafter.
The fair value of the 6,667 stock options was $126,579. The fair value was estimated using
the Black-Scholes option pricing model with the following weighted average assumptions:
share price - $30.00; exercise price - $42.00; expected life - 36 months; annualized volatility
- 99.64%; dividend yield - 0%; risk free rate - 1.88%.
The fair value of the 1,667 stock options was $30,165. The fair value was estimated using the
Black-Scholes option pricing model with the following weighted average assumptions: share
price - $30.00; exercise price - $60.00; expected life - 45 months; annualized volatility -
99.22%; dividend yield - 0%; risk free rate - 1.88%.
The fair value of the 52 stock options was $988. The fair value was estimated using the Black-
Scholes option pricing model with the following weighted average assumptions: share price -
$30.00; exercise price - $42.00; expected life - 36 months; annualized volatility - 99.64%;
dividend yield - 0%; risk free rate - 1.88% .
b. On March 1, 2018, the Company issued 11,333 stock options to directors, officers, employees
and consultants of the Company, which vested immediately. The fair value of the stock options
was $239,119. The fair value was estimated using the Black-Scholes option pricing model
with the following weighted average assumptions: share price - $30.00; exercise price -
$45.00; expected life - 36 months; annualized volatility - 101.08%; dividend yield - 0%; risk
free rate - 1.99%.
c. On July 1, 2018, the Company issued 833 stock options to a consultant of the Company,
which vest in in four grants of 208 options each three months. The fair value of the stock
options was $18,916. The fair value was estimated using the Black-Scholes option pricing
model with the following weighted average assumptions: share price - $45.00; exercise price
- $51.00; expected life - 5 years; annualized volatility - 99.74%; dividend yield - 0%; risk free
rate - 2.04%.
ii. During the year ended July 31, 2018, 8,333 options with a fair value of $357,842 expired and the
Company recorded a charge to the share-based payment reserve with a corresponding credit to
accumulated deficit.
iii. During the year ended July 31, 2019, 6,000 options were cancelled and 2,167 options expired,
with a total fair value of $88,754 and the Company recorded a charge to the share-based payment
reserve with a corresponding credit to accumulated deficit.
iv. On September 9, 2019, the Company issued a total of 166 stock options to a consultant, which
vested immediately and expire on September 9, 2024. The fair value of the stock options was
$17,794. The fair value was estimated using the Black-Scholes option pricing model and the
following weighted average assumptions: share price - $16.50; exercise price - $21; expected life
- 5 years; annualized volatility - 88%; dividend yield - 0%; risk free rate – 1.4%
Page 27
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
8. Share-Based Compensation and Share-Based Payment Reserve
(continued)
v. During the year ended July 31, 2020, 3,440 options expired, as follows:
a. On November 1, 2019, 2,107 stock options with a fair value of $84,981 expired and the
Company recorded a charge to the share-based payment reserve with a corresponding
credit to accumulated deficit.
b. On February 14, 2020, 833 stock options with a fair value of $34,290 expired and the
Company recorded a charge to the share-based payment reserve with a corresponding
credit to accumulated deficit.
c. On March 22, 2020, 500 stock options with a fair value of $20,696 expired and the
Company recorded a charge to the share-based payment reserve with a corresponding
credit to accumulated deficit.
vi.
vii.
The Company recognized stock based compensation expense of $2,071 for the year ended July
31, 2020, (year ended July 31, 2018 - $60,586, year ended July 31, 2018 - $476,211) in relation
to the vesting of options issued in previous years.
As at July 31, 2020, stock options were outstanding for the purchase of common shares as
follows:
Number of
Options
Exercise
Price
Exercisable At
July 31,2020
Expiry Date
667 $ 77
1,917 $ 77
8,000 $ 45
1,667 $ 60
6,719 $ 42
833 $ 42
166 $ 21
Mar 1, 2021
667 November 4, 2025
1,917 November 4, 2020
8,000
1,667 March 10, 2022
6,719
833
166 September 9, 2024
May 1, 2021
July 1, 2023
19,969
19,969
As at July 31, 2020, stock options outstanding have a weighted average remaining contractual life of
0.98 years (July 31, 2018 – 1.74 years).
Page 28
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
9. Income Taxes
The provision for taxes differs from the amount obtained by applying the combined Canadian Federal and
Provincial statutory income tax rate of 27% (2019 - 27%) to the effective tax rate is as follows:
Net loss before recovery of income taxes
Expected income tax (recovery) expense
Differences in foreign tax rates
Tax rate changes and other adjustments
Share-based compensation and non-deductible expenses
Share issuance cost booked directly to equity
Change in deferred tax assets not recognized
Income tax (recovery) expense
Year Ended
Year Ended
July 31, 2020
July 31, 2019
$
$
$
(4,944,221) $
(5,789,662)
(1,334,940) $
(38,360)
-
1,300
-
1,372,000
(1,563,209)
(52,740)
7,240
16,982
(31,736)
1,623,463
-
$
-
Deferred Tax
The following table summarizes the components of deferred tax:
Deferred Tax Assets
Operating tax losses carried forward- USA
92,620
101,510
July 31, 2020
July 31, 2019
Deferred tax liabilities
Intellectual property
Convertible debentures
(92,620)
-
(98,033)
(3,477)
$
- $
-
Unrecognized Deferred Tax Assets
Deferred taxes are provided as a result of temporary differences that arise due to the differences between the
income tax values and the carrying amount of assets and liabilities. Deferred tax assets have not been
recognized in respect of the following deductible temporary differences because it is not probable that the
future taxable profit will be available against which the Company can utilize the benefits:
Page 29
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
9. Income Taxes (continued)
The following table summarizes the components of the unrecognized deductible temporary
differences:
Deferred Tax Assets
Non-capital losses carried forward - USA
Non-capital losses carried forward - Canada
Short term loans
Share issuance costs
Marketable securities
Property, plant and equipment - Canada
Property, plant and equipment - USA
July 31, 2020
July 31, 2019
$
14,951,440 $
5,349,060
10,000
370,460
107,000
3,330
11,148,719
4,219,013
-
570,483
106,998
3,327
-
$
20,791,290 $
16,048,540
The Canadian and U.S. Losses expire as noted in the table below. Share issuance and financing
costs will be fully amortized in 2024. The remaining deductible temporary differences may be carried
forward indefinitely. Deferred tax assets have not been recognized in respect of these items because
it is not probable that future taxable profit will be available against which the group can utilize the
benefits therefrom.
The Company has Canadian non-capital income tax losses which expire as noted in the below table.
2035
2036
2037
2038
2039
2040
767,440
467,980
573,270
1,250,140
1,056,060
1,234,170
5,349,060
$
The Company has U.S. tax loss carry forwards which expire as noted in the below table.
2033 $
2034
2035
2036
Indefinite
$
1,240
631,660
1,134,120
2,546,090
10,638,330
14,951,440
Page 30
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
10. Related Party Transactions and Balances
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other
party or exercise significant influence over the other party in making operating and financial decisions.
This would include the Company's senior management, who are considered to be key management
personnel by the Company. Parties are also related if they are subject to common control or significant
influence. Related parties may be individuals or corporate entities. A transaction is considered to be a
related party transaction when there is a transfer of resources or obligations between related parties.
As at July 31, 2020, included in accounts payable and accrued liabilities are amounts owing to a company
controlled by an officer in the amount of $52,500 (July 31, 2019 – $7,000) for consulting fees and amounts
owing to directors of $602,287 (July 31, 2019– $26,200) for director’s fees.
During the years ended July 31, 2020, 2019 and 2018, the Company incurred the following expenses
charged by directors and key management personnel or companies controlled by these individuals:
Year ended
July 31,
2019
2020
2018
a) Paid or accrued professional
company controlled by an officer of the Company
fees to a
b) Paid or accrued consulting fees to companies
controlled by individual directors.
c) Paid or accrued wages and consulting fees to
directors
d) Share based compensation to directors and
officers
$ 42,000
$ 42,000
$ 42,000
$ 56,804
$ 121,112
$ 126,000
$ 541,310
$ 280,938
$ 263,365
$ -
$ - $ 207,471
11. Capital Management
The Company's capital comprises share capital, share-based payment reserve, warrant reserve, and
accumulated other comprehensive loss. The Company manages its capital structure, and makes
adjustments to it, based on the funds available to the Company in order to support the Company’s
business activities. The Board of Directors does not establish quantitative return on capital criteria for
management; it relies on the expertise of the Company's management to sustain future development of
the business.
The intellectual property in which the Company currently has an interest is in the development stage; as
such, the Company is dependent on external financing to fund its activities. In order to carry out the
planned research and development and pay for administrative costs, the Company intends to raise
additional amounts as needed.
Page 31
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
12. Financial Risk Factors
The Company's risk exposures and the impact on the Company's financial instruments are summarized
below:
a)
Credit risk
The Company has no significant concentration of credit risk arising from operations.
Management believes that the credit risk concentration with respect to financial instruments
is remote.
b)
Liquidity risk
The Company's approach to managing liquidity risk is to ensure that it will have sufficient
liquidity to meet liabilities as they come due. As at July 31, 2020, the Company has a negative
working capital balance of $4,548,526 (July 31, 2019 – negative working capital balance of
$1,185,354) and long term loans of $306,878 (July 31, 2019 – nil). the Company has not yet
achieved profitable operations and expects to incur further losses in the development of its
products; these factors cast significant doubt about the Company’s ability to continue as a
going concern.
Accounts payable and accrued liabilities
Short-Term Loan
Government grant
Market Risk
i.
Interest rate risk
Carrying
amount
$
$
4,562,856
306,878
191,572
5,061,306
Contractual
cash flows
4,562,856
$
306,878
210,271
5,080,005
$
Within 1
year
4,562,856
$
-
-
$
4,562,856
1-2 years
-
$
306,878
210,271
517,149
$
2-5
years
-
$
-
-
$
-
5+
years
-
$
-
-
$
-
Interest Rate risk is the risk that the fair value of a financial instrument will fluctuate
because of changes in market interest rates. Loans payable include fixed interest rates;
however, the Company does not believe it is exposed to material interest rate risk.
ii.
Price risk
As the Company has no revenues, price risk is remote.
iii.
Exchange risk
The Company is exposed to foreign exchange risk as a portion of the Company’s
transactions occur in a foreign currency (mainly its research operations which are
conducted primarily in the United States of America in US dollars) and, therefore, the
Company is exposed to foreign currency risk at the end of the reporting period through its
U.S. denominated accounts payable and cash. As at July 2020, a 5% depreciation or
appreciation of the U.S. dollar against the Canadian dollar would have resulted in an
approximate $175,000 (2019 - $45,000, 2018 - $55,000) decrease or increase,
respectively, in total loss and comprehensive loss.
Page 32
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
12. Financial Risk Factors (continued)
c)
COVID-19
Since January 2020, the Coronavirus outbreak has dramatically expanded into a worldwide
pandemic creating macro-economic uncertainty and disruption in the business and financial
markets. Many countries around the world, including Canada and the United States have been
taking measures designated to limit the continued spread of the Coronavirus, including the
closure of workplaces, restricting travel, prohibiting assembling, closing international borders
and quarantining populated areas. Such measures present concerns that may dramatically
affect the Company’s ability to conduct its business effectively, including, but not limited to,
adverse effect relating to employees’ welfare, slowdown and stoppage of manufacturing,
commerce, shipping, delivery, work, travel and other activities which are essential and critical
for maintaining on-going business activities. Given the uncertainty around the extent and
timing of the future spread or mitigation of COVID-19 and around the imposition or relaxation
of protective measures, the Company cannot reasonably estimate the impact to its future
results of operations, cash flows or financial condition; infections may become more
widespread and the limitation on the ability to work, travel and timely sell and distribute
products, as well as any closures or supply disruptions, may be extended for longer periods
of time and to other locations, all of which would have a negative impact on the Company’s
business, financial condition and operating results. In addition, the unknown scale and
duration of these developments have macro and micro negative effects on the financial
markets and global economy which could result in an economic downturn that could affect
demand for the Company’s products and have a material adverse effect on its operations and
financial results, earnings, cash flow and financial condition.
13. Research and Development Costs
Wages and Salaries
Clinical Trials and Investigational drug costs
Office Rent
Licensing
Supplies
Insurance product
Patents
Year ended
July 31,
2019
2020
2018
$ 855,864
$ 728,823
3,605,738
2,104,366
51,316
33,707
241,990
2,110
- 25,715
5,012
49,184
61,954
131,652
$ 4,917,287
$ 2,980,144
$ 558,114
2,194,327
69,871
34,967
81,915
5,596
167,789
$ 3,112,579
Page 33
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
14. General and Administration Costs
Year ended
July 31,
2019
2020
2018
Consulting (Note 10)
Insurance
Amortization
Professional fees (Note 10)
Regulatory, filing and transfer agent fees
Rent
Shareholder communications
Travel
$ 193,720
19,012
18,741
1,054,130
49,117
25,827
132,694
2,607
$ 342,940
16,000
18,743
289,720
52,879
15,576
338,241
48,103
$ 515,960
20,867
16,894
244,131
85,496
15,081
289,208
46,251
Wages and salaries (Note 10)
249,080
68,367
110,456
Other
15. Commitments
112,537
53,902
43,369
$ 1,857,465
$ 1,244,471
$ 1,387,713
The Company’s lease arrangement for office space in Berkeley, California ends in January 2021 and
the lease commitment is on a monthly basis in the amount of $2,368 per month.
Page 34
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
16. Events After the Reporting Period
a)
b)
On August 18, 2020, the Company issued 50,000 common shares to Sichenzia Ross Ference
LLP or certain members or employees of Sichenzia Ross Ference LLP as compensation for legal
services. The shares were valued at $7.48 per share.
On November 17, 2020, the Company closed a brokered private placement (the "Offering") of an
unsecured convertible debenture unit of the Company (the "Unit") to a single subscriber,
purchased at a price of $375,000, less an original discount of approximately 29.33%, for
aggregate gross proceeds of $265,000.
The Unit is comprised of (A) $375,000 principal amount (“Principal Amount”) of a 5.0% convertible
unsecured debenture of the Company (the “Debenture”), due on the earlier of (i) 5 years from the
issue date; (ii) the Company receiving $2,000,000 or more by way of private placement or public
offering; or (iii) such earlier date as the principal amount hereof may become due, subject to
extension upon mutual agreement of the Company and the holder of the Debenture; and (B)
69,188 common share purchase warrants of the Company (“Warrants”).
The Debenture is convertible, at the option of the holder thereof, from the period beginning on
May 16, 2021, until the repayment of the Debenture in full, into that number of common shares of
the Company (“Common Shares”) computed on the basis of the principal amount of the
Debenture divided by the conversion price of $5.42 per Common Share (the “Conversion Price”).
Each Warrant entitles the holder thereof to purchase one Common Share of the Company (each
a “Warrant Share”) for a period of five (5) years from the Closing Date at a price of $5.42 per
Warrant Share, subject to adjustment as set forth in the Warrants. Each Warrant may also be
exercised by presentation and surrender of the Warrant to the Company with a written notice of
the Subscriber’s intention to effect a cashless exercise.
The Debenture will bear interest at a rate of 5.0% per annum and the Debenture may be prepaid
in full or in part by the Company during the initial 120 day period after issuance of the Debenture
without penalty. After 120 days, and only if the Company elects to prepay the Debenture prior to
November 16, 2021, the Company will be required to pay a cash prepayment penalty equal to
35% of the Principal Amount of the Debenture (the “Prepayment Penalty”). In the event of default
on the Debenture, the interest rate will increase to 12% per annum and a cash penalty payment
equal to 40% of the Principal Amount of the Debenture will be added to the Principal Amount of
the Debenture (the “Default Penalty”); and the Principal Amount, any accrued and unpaid interest
and any other amount owing pursuant the Debenture, including any Prepayment Penalty and/or
Default Penalty outstanding at that time shall be accelerated, and shall become immediately due
and payable at the option of the holder.
Page 35
BriaCell Therapeutics Corp
Notes to the Consolidated Financial Statements
For the Years Ended July 31, 2020 and 2019
(Expressed in Canadian Dollars)
16. Events After the Reporting Period (continued)
In consideration for the services rendered by ThinkEquity, a division of Fordham Financial
Management, Inc. (the "Broker"), the Broker received a cash commission of $26,500 from the
Company in connection with the Offering. As additional consideration, the Company also issued
to the Broker 4,890 non-transferable compensation warrants (the "Compensation Warrants").
Each Compensation Warrant is exercisable to acquire one Common Share at an exercise price
of $5.42 at any time in whole or in part for a period of five (5) years from the Closing Date.
Page 36