TuHURA Biosciences, Inc./NV (HURA) FY 2024 MD&A

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, all of which are based on our current expectations not taking the Merger into account and will be affected by the Merger if it is consummated and by uncertainties and risks described throughout this filing, particularly in “Risk Factors.”. 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. In particular, our future business focus and operations will be substantially different than our historical business focus and operations if the Merger is consummated. 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, 2024, 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.

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 of ours (the “Reverse Acquisition”). We are also the parent company of Kayak Mergeco, our wholly owned subsidiary incorporated in the State of Delaware formed to facilitate the Merger with TuHURA. The following discussion and analysis of our financial condition and results of operations and liquidity and capital resources does not reflect material changes to our business, assets, liabilities, financial condition, operations, management, liquidity, capital resources, and prospects that will occur if the Merger is consummated.

On August 19, 2020, we merged with Adgero and changed our name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc. We are the parent company to the following entities:

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Del Mar (BC), a British Columbia, Canada corporation incorporated on April 6, 2010, which is a clinical stage company with a focus on the development of drugs for the treatment of cancer;

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Adgero, a Delaware corporation incorporated on October 26, 2015, which is a clinical-stage company with a focus on the development of photodynamic therapy for the treatment of rare, unmet medical needs, specifically orphan cancer indications;

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Adgero Bio, a Delaware corporation incorporated on November 16, 2007;

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Callco and Exchangeco are British Columbia, Canada corporations. Callco and Exchangeco were formed to facilitate the Reverse Acquisition; and

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Kayak Mergeco, a Delaware corporation incorporated on April 1, 2024.

Outstanding Securities

On November 10, 2022, we filed a Certificate of Change to our Articles of Incorporation, as amended, in order to effectuate a 1:50 reverse stock split (the “Reverse Stock Split”) of our issued and outstanding common stock as well as its authorized shares of common stock. As a result of the Reverse Stock Split, every 50 shares of issued and outstanding common stock were converted into one share of common stock with a proportionate reduction in our authorized shares of common stock. Any fractional shares of common stock resulting from the Reverse Stock Split were rounded up to the nearest whole post-Reverse Stock Split share. The Reverse Stock Split did not change the par value of our common stock. All outstanding securities entitling their holders to acquire

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shares of common stock were adjusted as a result of the Reverse Stock Split. All common share and per share data are retrospectively restated to give effect to the Reverse Stock Split for all periods presented herein.

As of October 7, 2024, we had 55,661 shares of common stock issued and outstanding, outstanding warrants to purchase 611 shares of common stock, outstanding stock options to purchase 222 shares of common stock, and outstanding restricted stock units to purchase 4 shares of common stock. All common stock warrants, stock options, and restricted stock units are convertible, or exercisable into, one share of common stock.

On June 30, 2023, we amended our Articles of Incorporation to increase the number of authorized shares of common stock from 5,500 to 75,000 shares.

On July 12, 2024, we filed Certificates of Withdrawal of Designation relating to the Special Voting Preferred Stock and the Series B Preferred Stock with the Secretary of State of Nevada and terminated the designation of its Special Voting Preferred Stock and Series B Preferred Stock. At the time of the filing of the such certificates, no shares of any of the previously designated Special Voting Preferred Stock and Series B Preferred Stock were outstanding.

On August 19, 2024, we issued 59 shares of common stock to the holders of Series C Preferred Stock, representing the 25% dividend payable on the fourth anniversary, and 235 shares of common stock to the holders of the Series C Preferred Stock upon the automatic conversion of the outstanding Series C Preferred Stock. Also on August 19, 2024, warrants to purchase 42 shares of Series C Preferred Stock expired unexercised.

On October 4, 2024, we filed Certificates of Withdrawal of Designation relating to the Series C-1 Preferred Stock, the Series C-2 Preferred Stock and the Series C-3 Preferred Stock (collectively, the “Series C Preferred Stock”) with the Secretary of State of Nevada and terminated the designation of our Series C Preferred Stock on October 7, 2024. At the time of the filing of such certificates, no shares of any of the previously designated Series C Preferred Stock were outstanding.

On October 4, 2024, at the Special Meeting, our stockholders approved a reverse stock split of our common stock, to be effected in the board of directors’ discretion of not less than 1-for-20 and not more than 1-for-40. We intend to effect a reverse stock split at a ratio within the range approved by our stockholders immediately prior to the consummation of the proposed Merger.

Proposed Merger with TuHURA

On October 4, 2024, at the Special Meeting, our stockholders approved the requisite proposals to effect the completion of the proposed Merger with TuHURA. The proposed Merger is expected to be consummated in mid-October 2024, subject to regulatory approval and the satisfaction of the remaining closing conditions under the Merger Agreement.

Related Parties

We acquired our initial patents and technology rights from Valent, an entity owned by Dr. Dennis Brown, our former Chief Scientific Officer. On February 13, 2024, we sent an Opt-Out Notice to Valent under the Valent Assignment Agreement whereby we assigned all rights, title, and interest in and to the patents for VAL-083 to Valent. As a result, Valent is a related party for the year ended June 30, 2024.

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, 2024, and June 30, 2023, is the US dollar 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)

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

For the years ended

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)

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Comparison of the years ended June 30, 2024 and June 30, 2023

Research and Development

Research and development expenses decreased to $2,663 for the year ended June 30, 2024, from $9,311 for the year ended June 30, 2023. The decrease was largely attributable to a $5,701 decrease in clinical development costs, as well as smaller decreases in personnel, intellectual property, database costs, and non-cash, share-based compensation expenses incurred during the year ended June 30, 2024, compared to the year ended June 30, 2023.

Clinical development costs have decreased in the year ended June 30, 2024, compared to the year ended June 30, 2023, primarily due to lower costs recognized for the GBM AGILE Study. Other research and development expenses, including intellectual property costs, database costs, and personnel costs, have decreased in the year ended June 30, 2024, compared to the year ended June 30, 2023, due to an overall reduction of activity resulting from the assignment of VAL-083 and its patents to Valent in the period. Non-cash, share-based compensation expense decreased to $225 for the year ended June 30, 2024, from $484 for the year ended June 30, 2023, due to the higher compensation expense recognized during the year ended June 30, 2023, for stock options granted in September 2022.

General and Administrative

General and administrative expenses were $5,788 for the year ended June 30, 2024, compared to $5,485 for the year ended June 30, 2023. Professional fees have increased for the year ended June 30, 2024, compared to the year ended June 30, 2023, largely due to costs incurred in relation to the Merger Agreement. This increase is offset by a decrease in lower personnel costs, non-cash, share-based compensation expenses, office and sundry, and travel in the current fiscal year compared to the same period in the prior fiscal year. Personnel costs have decreased in the year ended June 30, 2024, compared to the year ended June 30, 2023, largely due to a reduction in staff. Non-cash, share-based compensation expense decreased to $553 for the year ended June 30, 2024, from $1,206 for the year ended June 30, 2023, due to the recognition of higher compensation expense recognized during the year ended June 30, 2023, for stock options granted in September 2022. Office and sundry was lower during the year ended June 30, 2024, compared to the year ended June 30, 2023, due to reduced insurance costs.

Preferred Stock Dividends

During the year ended June 30, 2024, we issued 49 (2023 – 43) shares of common stock as a stock dividend on the Series C Preferred stock and recognized $173 (2023 - $362) as a direct increase in accumulated deficit.

For each of the years ended June 30, 2024, and June 30, 2023, 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.

Liquidity and Capital Resources

Comparison of the years ended June 30, 2024 and June 30, 2023

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Operating Activities

Net cash used in operating activities decreased to $7,176 for the year ended June 30, 2024, from $11,865 for the year ended June 30, 2023. During the year ended June 30, 2024, and 2023, we reported net losses of $8,320 and $14,649, respectively. Changes in adjustments to reconcile net loss to net cash used in operating activities for the year ended June 30, 2024, included stock option expense of $607 and restricted stock unit expense of $171 being recognized during the current fiscal year compared to $1,490 and $200, respectively, in the same period in the prior fiscal year. The most significant changes in working capital for the year ended June 30, 2024, were related to a decrease in clinical trial deposits of $870, a decrease in accounts payable and accrued liabilities of $577 and a decrease in prepaid expenses of $299. The most significant changes in working capital for the year ended June 30, 2023, were related to an increase in clinical trial deposits of $1,700, a decrease in accounts payable and accrued liabilities of $442 and a decrease in related party payables of $423.

Investing Activities

Net cash used in investing activities was $20 for the year ended June 30, 2024, for the purchase of equipment, compared to $232 for the year ended June 30, 2023.

Financing Activities

During the year ended June 30, 2024, we received $10,471 in net proceeds from sales of shares under our ATM Facility (as defined herein) with A.G.P./Alliance Global Partners (“AGP”), $105 in net proceeds from the sale of shares under the stock purchase agreement, dated as of August 2, 2022, (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park committed to purchase up to a maximum of $20,000 of shares of our common stock.

During the year ended June 30, 2023, we received $1,903 in net proceeds from the sale of shares under the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to a maximum of $20,000 of shares of the Company’s common stock.

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, 2024, we reported a loss of $8,320 and a negative cash flow from operations of $7,176. We had an accumulated deficit of $159,876 and had cash and cash equivalents of $4,909 as of June 30, 2024. 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 August 2, 2022, we entered into the Purchase Agreement under which we received approximately $2,008 in net proceeds as of June 30, 2024, for the issuance of an aggregate of 662 shares of common stock under the Purchase Agreement. On October 9, 2023, we received stockholder approval to issue 20% or more of our outstanding shares as of the date we entered into the Purchase Agreement with Lincoln Park. On February 22, 2024, we determined that we have concluded utilization of the equity facility pursuant to the terms of the Purchase Agreement. In addition, on June 28, 2023, we announced that we had been awarded approximately $2,000 in grant funding for our REM-001 project.

On September 19, 2023, we entered into a Sales Agreement, (the “Sales Agreement”) with AGP pursuant to which we may offer and sell, from time to time, through AGP, as sales agent and/or principal, shares of common stock having an aggregate offering price of up to $10,900 (the “ATM Facility”). From October 31, 2023, until June 30, 2024, we raised $10,471 in net proceeds from the sale of 53,151 shares of our common stock under the ATM Facility. On February 22, 2024, we determined that we have concluded utilization of the ATM facility.

Even with the proceeds from the grant funding, the stock purchase financing, and the ATM sales, we will require significant 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 these condensed consolidated financial statements.

Consequently, management is pursuing various financing alternatives to fund our operations in the short and long term so we can continue as a going concern. In addition, we initiated a process to explore and review a range of strategic alternatives focused on maximizing shareholder value, and as a result, entered into the Merger Agreement for the proposed Merger with TuHURA. If the Merger is not consummated, management intends to seek to secure the necessary financing through potential additional proceeds from grant funding, and the issue of new equity and/or the entering into of strategic partnership arrangements or pursue additional strategic transactions. In addition, if the Merger is not completed, we may not have sufficient capital to continue to operate our business in the

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long term and may become insolvent and be required to seek the protection of the bankruptcy courts and, without additional funding or a strategic transaction, we would likely be delisted from The Nasdaq Capital Market. Our ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence. 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:

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the consummation of the Merger, subject to regulatory approval and the satisfaction of the remaining closing conditions under the Merger Agreement;

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

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the costs associated with establishing manufacturing and commercialization capabilities;

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

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

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

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the effect of competing technological and market developments;

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

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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 complete the proposed Merger with TuHURA or 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, file for bankruptcy protection or pursue a dissolution of the Company and liquidation of all of our remaining assets. In such an event, the amount of cash available for distribution to our shareholders, if any, will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as we continue to fund our operations. We cannot provide assurance as to the amount of cash that will be available to distribute to shareholders, if any, after paying our debts and other obligations and setting aside funds for reserves, nor as to the timing of any such distribution, if any.

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, 2024, contained in Item 8 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:

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Fair value of financial instruments

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Accruals for research and development expenses and clinical trials

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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, 2024 and 2023, 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 each of the years ended June 30, 2024, and June 30, 2023, 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.

For the years ended June 30, 2024, and 2023, we issued stock options to our officers. The determination of grant-date fair value for options granted 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 option.

For the years ended June 30, 2024, and 2023, we issued restricted stock units (“RSUs”) to our officers. The RSUs were valued using the closing price of our common stock on the date of issuance of the respective RSUs with the total expense being recognized over the vesting period of the RSUs.

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 the years ended June 30, 2024, and 2023, 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.