UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☑þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MarchDecember 31, 2020
or
☐☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ________________
Commission file number: 001-37823
DelMar Pharmaceuticals,Kintara Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Nevada | 99-0360497 | |
(State or other jurisdiction of | (I.R.S. Employer |
12707 High Bluff Dr., Suite 200 | 92130 | |
(Address of principal executive offices) | (zip code) |
(858) 350-4364
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Common Stock | KTRA | The Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ þNo ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑þ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer | ☑ | Smaller reporting company | ☑ | |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☑þ
Number of shares of common stock outstanding as of May 12, 2020February 10, 2021 was 11,429,228.30,626,018.
TTABLEABLE OF CONTENTS
Page No. | ||||
Item 1. | 1 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 21 | ||
Item 3. | 45 | |||
Item 4 | 45 | |||
Item 1. | 46 | |||
Item 1A. | 46 | |||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 46 | ||
Item 3. | 46 | |||
Item 4. | 46 | |||
Item 5. | 46 | |||
Item 6. | 47 |
i
i
PART 1. - FINANCIAL INFORMATION
DelMar Pharmaceuticals,Kintara Therapeutics, Inc.
Condensed Consolidated Interim Financial Statements
(Unaudited)
For the ninesix months ended MarchDecember 31, 2020
(expressed in US dollars unless otherwise noted)
DelMar Pharmaceuticals,1
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Balance Sheets
Sheet
(expressed in US dollars unless otherwise noted)In thousands, except par value amounts)
Note | March 31, 2020 $ | June 30, 2019 $ | ||||||||
(unaudited) | ||||||||||
Assets | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | 4,973,378 | 3,718,758 | ||||||||
Prepaid expenses and deposits | 114,865 | 280,248 | ||||||||
Interest, taxes and other receivables | 10,339 | 26,187 | ||||||||
5,098,582 | 4,025,193 | |||||||||
Intangible assets - net | 3,659 | 12,062 | ||||||||
Total assets | 5,102,241 | 4,037,255 | ||||||||
Liabilities | ||||||||||
Current liabilities | ||||||||||
Accounts payable and accrued liabilities | 1,085,571 | 1,744,517 | ||||||||
Related party payables | 3 | 296,184 | 325,208 | |||||||
Total liabilities | 1,381,755 | 2,069,725 | ||||||||
Stockholders’ equity | ||||||||||
Preferred stock | ||||||||||
Authorized | ||||||||||
5,000,000 shares, $0.001 par value | ||||||||||
Issued and outstanding | ||||||||||
278,530 Series A shares at March 31, 2020 (June 30, 2019 – 278,530) | 3,5 | 278,530 | 278,530 | |||||||
648,613 Series B shares at March 31, 2020 (June 30, 2019 – 673,613) | 5 | 4,524,897 | 4,699,304 | |||||||
1 special voting share at March 31, 2020 (June 30, 2019 – 1) | - | - | ||||||||
Common stock | ||||||||||
Authorized | ||||||||||
95,000,000 shares at March 31, 2020 and June 30, 2019, $0.001 par value | ||||||||||
11,427,132 issued at March 31, 2020 (June 30, 2019 – 3,839,358) | 5 | 11,427 | 3,839 | |||||||
Additional paid-in capital | 5 | 56,395,453 | 50,954,741 | |||||||
Warrants | 5 | 8,382,588 | 6,588,283 | |||||||
Accumulated deficit | (65,893,587 | ) | (60,578,345 | ) | ||||||
Accumulated other comprehensive income | 21,178 | 21,178 | ||||||||
Total stockholders’ equity | 3,720,486 | 1,967,530 | ||||||||
Total liabilities and stockholders’ equity | 5,102,241 | 4,037,255 | ||||||||
Nature of operations, corporate history, and going concern (note 1) | ||||||||||
Subsequent events (note 8) |
|
|
|
|
|
| December 31, 2020 |
|
| June 30, 2020 |
| ||
|
| Note |
|
| $ |
|
| $ |
| |||
|
|
|
|
|
| (unaudited) |
|
|
|
|
| |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
| 17,158 |
|
|
| 2,392 |
|
Prepaid expenses and deposits |
|
|
|
|
|
| 551 |
|
|
| 356 |
|
Interest, taxes and other receivables |
|
|
|
|
|
| 8 |
|
|
| 9 |
|
Deferred loan costs |
|
| 6 |
|
|
| — |
|
|
| 94 |
|
|
|
|
|
|
|
| 17,717 |
|
|
| 2,851 |
|
Clinical trial deposit |
|
| 4 |
|
|
| 2,600 |
|
|
| — |
|
Intangible assets - net |
|
|
|
|
|
| — |
|
|
| 2 |
|
Property and equipment |
|
| 3 |
|
|
| 172 |
|
|
| — |
|
Deferred financing costs |
|
| 7 |
|
|
| — |
|
|
| 85 |
|
Total assets |
|
|
|
|
|
| 20,489 |
|
|
| 2,938 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
|
|
|
| 1,965 |
|
|
| 2,011 |
|
Loan payable, net of deferred loan costs |
|
| 6 |
|
|
| 473 |
|
|
| — |
|
Related party payables |
|
| 5 |
|
|
| 289 |
|
|
| 664 |
|
|
|
|
|
|
|
| 2,727 |
|
|
| 2,675 |
|
Milestone payment liability |
|
| 3 |
|
|
| 177 |
|
|
| — |
|
Total liabilities |
|
|
|
|
|
| 2,904 |
|
|
| 2,675 |
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
Authorized |
|
|
|
|
|
|
|
|
|
|
|
|
5,000 shares, $0.001 par value |
|
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
279 Series A shares at December 31, 2020 (June 30, 2020 – 279) |
| 5,7 |
|
|
| 279 |
|
|
| 279 |
| |
610 Series B shares at December 31, 2020 (June 30, 2020 – 649) |
|
| 7 |
|
|
| 4,257 |
|
|
| 4,525 |
|
24 Series C shares at December 31, 2020 (June 30, 2020 – 0) |
|
| 7 |
|
|
| 17,298 |
|
|
| — |
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
Authorized |
|
|
|
|
|
|
|
|
|
|
|
|
95,000 shares at December 31, 2020 and June 30, 2020, $0.001 par value |
|
|
|
|
|
|
|
|
|
|
|
|
25,868 issued at December 31, 2020 (June 30, 2020 – 11,458) |
|
| 7 |
|
|
| 25 |
|
|
| 11 |
|
Additional paid-in capital |
|
| 7 |
|
|
| 93,551 |
|
|
| 65,148 |
|
Accumulated deficit |
|
|
|
|
|
| (97,846 | ) |
|
| (69,721 | ) |
Accumulated other comprehensive income |
|
|
|
|
|
| 21 |
|
|
| 21 |
|
Total stockholders’ equity |
|
|
|
|
|
| 17,585 |
|
|
| 263 |
|
Total liabilities and stockholders’ equity |
|
|
|
|
|
| 20,489 |
|
|
| 2,938 |
|
Nature of operations, corporate history, going concern and management plans (note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent events (note 10) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
2
DelMar Pharmaceuticals,Kintara Therapeutics, Inc.
Condensed Consolidated Interim Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
|
|
|
|
|
| Three months ended December 31, |
|
| Six months ended December 31, |
| ||||||||||
|
| Note |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| |||||
|
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
| 2,584 |
|
|
| 712 |
|
|
| 3,941 |
|
|
| 1,434 |
|
General and administrative |
|
|
|
|
|
| 2,794 |
|
|
| 1,054 |
|
|
| 4,329 |
|
|
| 1,967 |
|
Merger costs |
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 500 |
|
|
| — |
|
In-process research and development |
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 16,094 |
|
|
| — |
|
|
|
|
|
|
|
| 5,378 |
|
|
| 1,766 |
|
|
| 24,864 |
|
|
| 3,401 |
|
Other (income) loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange loss |
|
|
|
|
|
| 3 |
|
|
| 2 |
|
|
| 2 |
|
|
| 2 |
|
Amortization of deferred loan costs |
|
| 6 |
|
|
| 25 |
|
|
| — |
|
|
| 51 |
|
|
| — |
|
Interest expense |
|
| 6 |
|
|
| 8 |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
Interest income |
|
|
|
|
|
| (1 | ) |
|
| (28 | ) |
|
| (2 | ) |
|
| (57 | ) |
|
|
|
|
|
|
| 35 |
|
|
| (26 | ) |
|
| 67 |
|
|
| (55 | ) |
Net loss for the period |
|
|
|
|
|
| 5,413 |
|
|
| 1,740 |
|
|
| 24,931 |
|
|
| 3,346 |
|
Computation of basic loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
|
|
|
|
| 5,413 |
|
|
| 1,740 |
|
|
| 24,931 |
|
|
| 3,346 |
|
Deemed dividend recognized on beneficial conversion features of Series C Preferred stock issuance |
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 3,181 |
|
|
| — |
|
Series A Preferred cash dividend |
|
| 7 |
|
|
| 2 |
|
|
| 2 |
|
|
| 4 |
|
|
| 4 |
|
Series B Preferred stock dividend |
|
| 7 |
|
|
| 4 |
|
|
| 3 |
|
|
| 9 |
|
|
| 5 |
|
Net loss for the period attributable to common stockholders |
|
|
|
|
|
| 5,419 |
|
|
| 1,745 |
|
|
| 28,125 |
|
|
| 3,355 |
|
Basic and fully diluted loss per share |
|
|
|
|
|
| 0.22 |
|
|
| 0.15 |
|
|
| 1.34 |
|
|
| 0.35 |
|
Basic and fully diluted weighted average number of shares |
|
|
|
|
|
| 24,845 |
|
|
| 11,408 |
|
|
| 20,976 |
|
|
| 9,473 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Statements of Stockholders’ Equity
(Unaudited)
(expressed in US dollars unless otherwise noted)In thousands)
For the three and six months ended December 31, 2020
|
| Number of shares |
|
| Common stock $ |
|
| Additional paid-in capital $ |
|
| Accumulated other comprehensive income $ |
|
| Preferred stock $ |
|
| Accumulated deficit $ |
|
| Stockholders' equity $ |
| |||||||
Balance - June 30, 2020 |
|
| 11,458 |
|
|
| 11 |
|
|
| 65,148 |
|
|
| 21 |
|
|
| 4,804 |
|
|
| (69,721 | ) |
|
| 263 |
|
Adgero merger (note 3) |
|
| 12,011 |
|
|
| 12 |
|
|
| 16,713 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,725 |
|
Issuance of Series C Preferred stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25,028 |
|
|
| — |
|
|
| 25,028 |
|
Series C placement agent warrants |
|
| — |
|
|
| — |
|
|
| 3,287 |
|
|
| — |
|
|
| (3,287 | ) |
|
| — |
|
|
| — |
|
Series C Preferred stock share issuance costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,386 | ) |
|
| — |
|
|
| (3,386 | ) |
Deemed dividend recognized on beneficial conversion features of Series C Preferred stock issuance |
|
| — |
|
|
| — |
|
|
| 3,181 |
|
|
| — |
|
|
| — |
|
|
| (3,181 | ) |
|
| — |
|
Exercise of warrants for cash |
|
| 993 |
|
|
| 1 |
|
|
| 993 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 994 |
|
Warrants issued for services |
|
| — |
|
|
| — |
|
|
| 45 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45 |
|
Stock option expense |
|
| — |
|
|
| — |
|
|
| 405 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 405 |
|
Series A Preferred cash dividend |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
Series B Preferred stock dividend |
|
| 4 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| (5 | ) |
|
| — |
|
Loss for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (19,518 | ) |
|
| (19,518 | ) |
Balance - September 30, 2020 |
|
| 24,466 |
|
|
| 24 |
|
|
| 89,777 |
|
|
| 21 |
|
|
| 23,159 |
|
|
| (92,427 | ) |
|
| 20,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C Preferred stock share issuance costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (69 | ) |
|
| — |
|
|
| (69 | ) |
Conversion of Series B Preferred stock to common stock |
|
| 10 |
|
|
| — |
|
|
| 268 |
|
|
| — |
|
|
| (268 | ) |
|
| — |
|
|
| — |
|
Conversion of Series C Preferred stock to common stock |
|
| 1,168 |
|
|
| 1 |
|
|
| 987 |
|
|
| — |
|
|
| (988 | ) |
|
| — |
|
|
| — |
|
Exercise of warrants for cash |
|
| 186 |
|
|
| — |
|
|
| 186 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 186 |
|
Warrants issued for services |
|
| — |
|
|
| — |
|
|
| 183 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 183 |
|
Exercise of stock options for cash |
|
| 35 |
|
|
| — |
|
|
| 21 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21 |
|
Stock option expense |
|
| — |
|
|
| — |
|
|
| 2,125 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,125 |
|
Series A Preferred cash dividend |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
Series B Preferred stock dividend |
|
| 3 |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| — |
|
Loss for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,413 | ) |
|
| (5,413 | ) |
Balance - December 31, 2020 |
|
| 25,868 |
|
|
| 25 |
|
|
| 93,551 |
|
|
| 21 |
|
|
| 21,834 |
|
|
| (97,846 | ) |
|
| 17,585 |
|
Note | Three months ended March 31, 2020 $ | Three months ended March 31, 2019 $ | Nine months ended March 31, 2020 $ | Nine months ended March 31, 2019 $ | ||||||||||||||
Expenses | ||||||||||||||||||
Research and development | 5 | 898,720 | 735,844 | 2,332,388 | 2,702,213 | |||||||||||||
General and administrative | 5 | 1,077,642 | 935,530 | 3,045,017 | 2,796,884 | |||||||||||||
1,976,362 | 1,671,374 | 5,377,405 | 5,499,097 | |||||||||||||||
Other (income) loss | ||||||||||||||||||
Change in fair value of derivative liability | 4 | - | 189 | - | (852 | ) | ||||||||||||
Foreign exchange (gain) loss | (2,416 | ) | 5,819 | (536 | ) | 16,754 | ||||||||||||
Interest income | (16,964 | ) | (13,397 | ) | (73,965 | ) | (49,513 | ) | ||||||||||
(19,380 | ) | (7,389 | ) | (74,501 | ) | (33,611 | ) | |||||||||||
Net loss for the period | 1,956,982 | 1,663,985 | 5,302,904 | 5,465,486 | ||||||||||||||
Computation of basic loss per share | ||||||||||||||||||
Net loss for the period | 1,956,982 | 1,663,985 | 5,302,904 | 5,465,486 | ||||||||||||||
Series B Preferred stock dividend | 5 | 1,473 | 23,202 | 6,071 | 75,477 | |||||||||||||
Net loss for the period attributable to common stockholders | 1,958,455 | 1,687,187 | 5,308,975 | 5,540,963 | ||||||||||||||
Basic and fully diluted loss per share | 0.17 | 0.67 | 0.52 | 2.27 | ||||||||||||||
Basic and fully diluted number of shares | 11,417,456 | 2,518,452 | 10,116,541 | 2,444,065 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
4
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Statements of Stockholders’ Equity
(Unaudited)
(In thousands)
For the three and six months ended December 31, 2019
|
| Number of shares |
|
| Common stock $ |
|
| Additional paid-in capital $ |
|
| Accumulated other comprehensive income $ |
|
| Preferred stock $ |
|
| Accumulated deficit $ |
|
| Stockholders' equity $ |
| |||||||
Balance - June 30, 2019 |
|
| 3,839 |
|
|
| 4 |
|
|
| 57,543 |
|
|
| 21 |
|
|
| 4,978 |
|
|
| (60,578 | ) |
|
| 1,968 |
|
Issuance of shares and warrants - net of issue costs |
|
| 4,895 |
|
|
| 5 |
|
|
| 6,578 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,583 |
|
Exercise of pre-funded warrants for cash |
|
| 2,655 |
|
|
| 2 |
|
|
| 24 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 26 |
|
Conversion of Series B Preferred stock to common stock |
|
| 6 |
|
|
| — |
|
|
| 174 |
|
|
| — |
|
|
| (174 | ) |
|
| — |
|
|
| — |
|
Shares issued for services |
|
| 7 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
Stock option expense |
|
| — |
|
|
| — |
|
|
| 51 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 51 |
|
Series A Preferred cash dividend |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
Series B Preferred stock dividend |
|
| 4 |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| — |
|
Loss for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,606 | ) |
|
| (1,606 | ) |
Balance - September 30, 2019 |
|
| 11,406 |
|
|
| 11 |
|
|
| 64,377 |
|
|
| 21 |
|
|
| 4,804 |
|
|
| (62,188 | ) |
|
| 7,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued for services |
|
| — |
|
|
| — |
|
|
| 35 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35 |
|
Shares issued for services |
|
| 5 |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
Stock option expense |
|
| — |
|
|
| — |
|
|
| 160 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 160 |
|
Series A Preferred cash dividend |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
Series B Preferred stock dividend |
|
| 4 |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| — |
|
Loss for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,740 | ) |
|
| (1,740 | ) |
Balance - December 31, 2019 |
|
| 11,415 |
|
|
| 11 |
|
|
| 64,578 |
|
|
| 21 |
|
|
| 4,804 |
|
|
| (63,933 | ) |
|
| 5,481 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
Kintara Therapeutics, Inc.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
|
|
|
| Six months ended December 31, |
| |||||
|
|
|
|
|
| 2020 |
|
| 2019 |
| ||
|
| Note |
|
| $ |
|
| $ |
| |||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
|
|
|
|
| (24,931 | ) |
|
| (3,346 | ) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
|
|
|
| 2 |
|
|
| 6 |
|
In-process research and development |
|
| 3 |
|
|
| 16,094 |
|
|
| — |
|
Change in fair value of milestone liability |
|
|
|
|
|
| (11 | ) |
|
| — |
|
Amortization of deferred loan costs |
|
|
|
|
|
| 51 |
|
|
| — |
|
Interest expense |
|
| 6 |
|
|
| 16 |
|
|
| — |
|
Shares issued for services |
|
| 7 |
|
|
| — |
|
|
| 8 |
|
Warrants issued for services |
|
| 7 |
|
|
| 228 |
|
|
| 35 |
|
Stock option expense |
|
| 7 |
|
|
| 2,530 |
|
|
| 211 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and deposits |
|
|
|
|
|
| (2,785 | ) |
|
| 156 |
|
Interest, taxes and other receivables |
|
|
|
|
|
| 1 |
|
|
| (4 | ) |
Accounts payable and accrued liabilities |
|
|
|
|
|
| (362 | ) |
|
| (994 | ) |
Related party payables |
|
|
|
|
|
| (374 | ) |
|
| (49 | ) |
Net cash used in operating activities |
|
|
|
|
|
| (9,541 | ) |
|
| (3,977 | ) |
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Cash acquired on merger with Adgero |
|
| 3 |
|
|
| 969 |
|
|
| — |
|
Proceeds on sale of equipment |
|
|
|
|
|
| 3 |
|
|
| — |
|
Net cash provided by investing activities |
|
|
|
|
|
| 972 |
|
|
| — |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from the issuance of shares and warrants |
|
| 7 |
|
|
| 21,638 |
|
|
| 6,583 |
|
Warrants exercised for cash |
|
| 7 |
|
|
| 1,180 |
|
|
| 27 |
|
Stock options exercised for cash |
|
|
|
|
|
| 21 |
|
|
| — |
|
Proceeds from loan |
|
| 6 |
|
|
| 500 |
|
|
| — |
|
Series A preferred cash dividend |
|
| 5 |
|
|
| (4 | ) |
|
| (4 | ) |
Net cash provided by financing activities |
|
|
|
|
|
| 23,335 |
|
|
| 6,606 |
|
Decrease in cash and cash equivalents |
|
|
|
|
|
| 14,766 |
|
|
| 2,629 |
|
Cash and cash equivalents – beginning of period |
|
|
|
|
|
| 2,392 |
|
|
| 3,719 |
|
Cash and cash equivalents – end of period |
|
|
|
|
|
| 17,158 |
|
|
| 6,348 |
|
Supplementary information (note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
6
DelMar Pharmaceuticals, Inc.
Condensed Consolidated Interim Statements of Stockholders’ Equity
(Unaudited)
(expressed in US dollars unless otherwise noted)
For the three and nine months ended March 31, 2020
Number of shares | Common stock $ | Additional paid-in capital $ | Accumulated other comprehensive income $ | Preferred stock $ | Warrants $ | Accumulated deficit $ | Stockholders’ equity $ | |||||||||||||||||||||||||
Balance - June 30, 2019 | 3,839,358 | 3,839 | 50,954,741 | 21,178 | 4,977,834 | 6,588,283 | (60,578,345 | ) | 1,967,530 | |||||||||||||||||||||||
Issuance of shares and warrants - net of issue costs | 4,895,000 | 4,895 | 2,489,251 | - | - | 4,088,820 | - | 6,582,966 | ||||||||||||||||||||||||
Exercise of warrants for cash | 2,655,000 | 2,655 | 2,421,830 | - | - | (2,397,935 | ) | - | 26,550 | |||||||||||||||||||||||
Conversion of Series B preferred stock to common stock | 6,250 | 6 | 174,401 | - | (174,407 | ) | - | - | - | |||||||||||||||||||||||
Shares issued for services | 6,925 | 7 | 4,836 | - | - | - | - | 4,843 | ||||||||||||||||||||||||
Stock option expense | - | - | 50,985 | - | - | - | - | 50,985 | ||||||||||||||||||||||||
Series A preferred cash dividend | - | - | - | - | - | - | (2,089 | ) | (2,089 | ) | ||||||||||||||||||||||
Series B preferred stock dividend | 3,700 | 4 | 2,042 | - | - | - | (2,046 | ) | - | |||||||||||||||||||||||
Loss for the period | - | - | - | - | - | - | (1,605,871 | ) | (1,605,871 | ) | ||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||
Balance - September 30, 2019 | 11,406,233 | 11,406 | 56,098,086 | 21,178 | 4,803,427 | 8,279,168 | (62,188,351 | ) | 7,024,914 | |||||||||||||||||||||||
Warrants issued for services | - | - | - | - | - | 34,672 | - | 34,672 | ||||||||||||||||||||||||
Shares issued for services | 4,747 | 5 | 3,339 | - | - | - | - | 3,344 | ||||||||||||||||||||||||
Stock option expense | - | - | 159,852 | - | - | - | - | 159,852 | ||||||||||||||||||||||||
Series A preferred cash dividend | - | - | - | - | - | - | (2,089 | ) | (2,089 | ) | ||||||||||||||||||||||
Series B preferred stock dividend | 3,700 | 4 | 2,548 | - | - | - | (2,552 | ) | - | |||||||||||||||||||||||
Loss for the period | - | - | - | - | - | - | (1,740,051 | ) | (1,740,051 | ) | ||||||||||||||||||||||
Balance - December 31, 2019 | 11,414,680 | 11,415 | 56,263,825 | 21,178 | 4,803,427 | 8,313,840 | (63,933,043 | ) | 5,480,642 | |||||||||||||||||||||||
Warrants issued for services | - | - | - | - | - | 98,625 | - | 98,625 | ||||||||||||||||||||||||
Shares issued for services | 8,752 | 8 | 4,091 | - | - | - | - | 4,099 | ||||||||||||||||||||||||
Warrants expired | - | - | 29,877 | - | - | (29,877 | ) | - | - | |||||||||||||||||||||||
Stock option expense | - | - | 96,191 | - | - | - | - | 96,191 | ||||||||||||||||||||||||
Series A preferred cash dividend | - | - | - | - | - | - | (2,089 | ) | (2,089 | ) | ||||||||||||||||||||||
Series B preferred stock dividend | 3,700 | 4 | 1,469 | - | - | - | (1,473 | ) | - | |||||||||||||||||||||||
Loss for the period | - | - | - | - | - | - | (1,956,982 | ) | (1,956,982 | ) | ||||||||||||||||||||||
Balance - March 31, 2020 | 11,427,132 | 11,427 | 56,395,453 | 21,178 | 4,803,427 | 8,382,588 | (65,893,587 | ) | 3,720,486 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
DelMar Pharmaceuticals, Inc.
Condensed Consolidated Interim Statements of Stockholders’ Equity …continued
(Unaudited)
(expressed in US dollars unless otherwise noted)
For the three and nine months ended March 31, 2019
Number of shares | Common stock $ | Additional paid-in capital $ | Accumulated other comprehensive income $ | Preferred stock $ | Warrants $ | Accumulated deficit $ | Stockholders’ equity $ | |||||||||||||||||||||||||
Balance - June 30, 2018 | 2,296,667 | 2,297 | 43,198,193 | 21,178 | 6,425,410 | 8,229,482 | (52,441,337 | ) | 5,435,223 | |||||||||||||||||||||||
Warrants issued for services | - | - | - | - | - | 30,661 | - | 30,661 | ||||||||||||||||||||||||
Shares issued for services | 706 | 1 | 4,138 | - | - | - | - | 4,139 | ||||||||||||||||||||||||
Performance stock unit expense | - | - | 61,514 | - | - | - | - | 61,514 | ||||||||||||||||||||||||
Stock option expense | - | - | 132,902 | - | - | - | - | 132,902 | ||||||||||||||||||||||||
Series A preferred cash dividend | - | - | - | - | - | - | (2,089 | ) | (2,089 | ) | ||||||||||||||||||||||
Series B preferred stock dividend | 4,960 | 4 | 36,081 | - | - | - | (36,085 | ) | - | |||||||||||||||||||||||
Loss for the period | - | - | - | - | - | - | (1,991,804 | ) | (1,991,804 | ) | ||||||||||||||||||||||
Balance - September 30, 2018 | 2,302,333 | 2,302 | 43,432,828 | 21,178 | 6,425,410 | 8,260,143 | (54,471,315 | ) | 3,670,546 | |||||||||||||||||||||||
Exercise and exchange of warrants | 296,667 | 297 | 2,936,881 | - | - | (2,210,697 | ) | - | 726,481 | |||||||||||||||||||||||
Conversion of Series B preferred stock to common stock | 10,000 | 10 | 279,041 | - | (279,051 | ) | - | - | - | |||||||||||||||||||||||
Warrants issued for services | - | - | - | - | - | (2,859 | ) | - | (2,859 | ) | ||||||||||||||||||||||
Shares issued for services | 607 | - | 2,617 | - | - | - | - | 2,617 | ||||||||||||||||||||||||
Performance stock unit expense | - | - | 61,514 | - | - | - | - | 61,514 | ||||||||||||||||||||||||
Stock option expense | - | - | 122,751 | - | - | - | - | 122,751 | ||||||||||||||||||||||||
Series A preferred cash dividend | - | - | - | - | - | - | (2,089 | ) | (2,089 | ) | ||||||||||||||||||||||
Series B preferred stock dividend | 4,735 | 5 | 16,185 | - | - | - | (16,190 | ) | - | |||||||||||||||||||||||
Loss for the period | - | - | - | - | - | - | (1,809,697 | ) | (1,809,697 | ) | ||||||||||||||||||||||
Balance - December 31, 2018 | 2,614,342 | 2,614 | 46,851,817 | 21,178 | 6,146,359 | 6,046,587 | (56,299,291 | ) | 2,769,264 | |||||||||||||||||||||||
Exercise and exchange of warrants – issue costs | - | - | (16,186 | ) | - | - | - | - | (16,186 | ) | ||||||||||||||||||||||
Warrants issued for services | - | - | - | - | - | 8,732 | - | 8,732 | ||||||||||||||||||||||||
Shares issued for services | 956 | 1 | 3,512 | - | - | - | - | 3,513 | ||||||||||||||||||||||||
Performance stock unit expense | - | - | 60,177 | - | - | - | - | 60,177 | ||||||||||||||||||||||||
Stock option expense | - | - | 99,735 | - | - | - | - | 99,735 | ||||||||||||||||||||||||
Series A preferred cash dividend | - | - | - | - | - | - | (2,089 | ) | (2,089 | ) | ||||||||||||||||||||||
Series B preferred stock dividend | 4,735 | 5 | 23,197 | - | - | - | (23,202 | ) | - | |||||||||||||||||||||||
Loss for the period | - | - | - | - | - | - | (1,663,985 | ) | (1,663,985 | ) | ||||||||||||||||||||||
Balance - March 31, 2019 | 2,620,033 | 2,620 | 47,022,252 | 21,178 | 6,146,359 | 6,055,319 | (57,988,567 | ) | 1,259,161 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
DelMar Pharmaceuticals, Inc.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited)
March 31, 2020
(expressed in US dollars unless otherwise noted)
Nine months ended March 31, | ||||||||||
2020 | 2019 | |||||||||
Note | $ | $ | ||||||||
Cash flows from operating activities | ||||||||||
Loss for the period | (5,302,904 | ) | (5,465,486 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||
Amortization of intangible assets | 8,403 | 13,548 | ||||||||
Change in fair value of derivative liability | 4 | - | (852 | ) | ||||||
Warrants issued for services | 133,297 | 36,534 | ||||||||
Shares issued for services | 12,286 | 10,269 | ||||||||
Performance stock unit expense | - | 183,205 | ||||||||
Stock option expense | 5 | 307,028 | 355,388 | |||||||
Changes in operating assets and liabilities | ||||||||||
Prepaid expenses and deposits | 165,383 | 794,859 | ||||||||
Interest, taxes and other receivables | 15,848 | 30,433 | ||||||||
Accounts payable and accrued liabilities | (658,946 | ) | (425,383 | ) | ||||||
Related party payables | (29,024 | ) | (47,189 | ) | ||||||
Net cash used in operating activities | (5,348,629 | ) | (4,514,674 | ) | ||||||
Cash flows from financing activities | ||||||||||
Net proceeds from the issuance of shares and warrants | 5 | 6,582,966 | - | |||||||
Net proceeds from the exercise of warrants | 5 | 26,550 | 726,179 | |||||||
Series A preferred stock dividend | 3 | (6,267 | ) | (6,267 | ) | |||||
Deferred financing costs | - | (25,000 | ) | |||||||
Net cash provided by financing activities | 6,603,249 | 694,912 | ||||||||
Increase (decrease) in cash and cash equivalents | 1,254,620 | (3,819,762 | ) | |||||||
Cash and cash equivalents - beginning of period | 3,718,758 | 5,971,995 | ||||||||
Cash and cash equivalents - end of period | 4,973,378 | 2,152,233 | ||||||||
Supplementary information (note 7) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
DelMar Pharmaceuticals,Kintara Therapeutics, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
MarchDecember 31, 2020
(expressed in US dollars unless otherwise noted)
1 | Nature of operations, corporate history, and going concern and management plans |
Nature of operations
Kintara Therapeutics, Inc. (formerly DelMar Pharmaceuticals, Inc.) (the “Company”) is a clinical stage drug development company with a focus on the treatmentdevelopment of solid tumor cancers.novel cancer therapies for patients with unmet medical needs. The Company is currently conductingdeveloping two phase 2 clinical trials in the United States and China with its product candidate,late-stage, Phase 3-ready therapeutics - VAL-083 as a potential new treatment for glioblastoma multiforme the most common and aggressive form of brainREM-001 for cutaneous metastatic breast cancer. Historical research indicates that VAL-083 is also active in other solid tumor cancers such as ovarian, lung, pediatric brain cancer, as well as other solid tumors of the central nervous system. The Company may pursue opportunities in these cancers in the future. In order to accelerate the Company’s development timelines, it leverages existing preclinical and clinical data from a wide range of sources. The Company may seek marketing partnerships in order to potentially offset clinical costs and to generate future royalty revenue from approved indications of its product candidate.candidates.
On June 9, 2020, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), by and among Adgero Acquisition Corp., the Company’s wholly-owned subsidiary incorporated in the State of Delaware (“Merger Sub”), and Adgero Biopharmaceuticals Holdings, Inc., a Delaware corporation (“Adgero”). On August 19, 2020, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into Adgero (the “Merger”), the separate corporate existence of Merger Sub ceased and Adgero continued its existence under Delaware law as the surviving corporation in the Merger and became a direct, wholly-owned subsidiary of the Company. As a result of the Merger, each issued and outstanding share of Adgero common stock, par value $0.0001 per share (the “Adgero Common Stock”) (other than treasury shares held by Adgero), was converted automatically into the right to receive 1.5740 shares (the “Exchange Ratio”) of the Company’s common stock, and cash in lieu of any fractional shares. Also, each outstanding warrant to purchase Adgero Common Stock was converted into a warrant exercisable for that number of shares of the Company’s common stock equal to the product of (x) the aggregate number of shares of Adgero Common Stock for which such warrant was exercisable and (y) the Exchange Ratio.
Following the completion of the Merger, the Company changed its name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc. and began trading on Nasdaq under the symbol “KTRA”.
Corporate history
The Company is a Nevada corporation formed on June 24, 2009 under the name Berry Only, Inc. On January 25, 2013, the Company entered into and closed an exchange agreement (the “Exchange Agreement”), with Del Mar Pharmaceuticals (BC) Ltd. (“Del Mar (BC)”), 0959454 B.C. Ltd. (“Callco”), and 0959456 B.C. Ltd. (“Exchangeco”) and the security holders of Del Mar (BC). Upon completion of the Exchange Agreement, Del Mar (BC) became a wholly-owned subsidiary of the Company (the “Reverse Acquisition”).
DelMar Pharmaceuticals,Kintara Therapeutics, Inc. is the parent company of Del Mar (BC), a British Columbia, Canada corporation incorporated on April 6, 2010,and Adgero, a Delaware corporation, which is aare clinical stage companycompanies with a focus on the development of drugs for the treatment of cancer. The Company is also the parent company to Callco and Exchangeco which are British Columbia, Canada corporations. Callco and Exchangeco were formed to facilitate the Reverse Acquisition.
In connection with the Merger, the Company also became the parent company of Adgero Biopharmaceuticals, Inc. (“Adgero Bio”), formerly a wholly-owned subsidiary of Adgero.
References to the Company refer to the Company and its wholly-owned subsidiaries, Del Mar (BC), Callcosubsidiaries.
Going concern and Exchangeco.management plans
Going concern
These condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Company will continue its operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.business.
For the ninesix months ended MarchDecember 31, 2020, the Company reported a loss of $5,302,904,$24.9 million, and a negative cash flow from operations of $5,348,629.$9.5 million. The Company had an accumulated deficit of $65,893,587$97.8 million and had cash and cash equivalents of $4,973,378$17.2 million as of MarchDecember 31, 2020. The Company is in the developmentclinical stage and has not generated any revenues to-date. The Company does not have the prospect of achieving revenues until such time that its product candidate iscandidates are commercialized, or partnered, which may not ever occur. In the near future, the Company will require additional funding to maintain its clinical trials, research and
7
development projects, and for general operations. These circumstances indicate substantial doubt exists about the Company’s ability to continue as a going concern within one year from the date of filing of these condensed consolidated interim financial statements.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
(expressed in US dollars unless otherwise noted)
Consequently, management is pursuing various financing alternatives to fund the Company’s operations so it can continue as a going concern. However, the coronavirus (“COVID-19”) pandemic has created significant economic uncertainty and volatility in the credit and capital markets. Management plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership arrangements but theultimate impact of the COVID-19 pandemic on the Company’s ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and any new information which may emerge concerning the severity of the COVID-19 pandemic.The Company may not be able to raise sufficient additional capital and may tailor its drug candidate development program based on the amount of funding the Company is able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.
These financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
2 | Significant accounting policies |
Reverse stock split
On May 7, 2019, the Company filed a Certificate of Change with the Secretary of State of Nevada that effected a 1-for-10 (1:10) reverse stock split of its common stock, par value $0.001 per share, which became effective on May 8, 2019. Pursuant to the Certificate of Change, the Company’s authorized common stock was decreased in the same proportion as the split resulting in a decrease from 70,000,000 authorized shares of common stock to 7,000,000 shares authorized. The par value of its common stock was unchanged at $0.001 per share, post-split. All common shares, warrants, stock options, conversion ratios, and per share information in these condensed consolidated interim financial statements give retroactive effect to the 1-for-10 reverse stock split. The Company’s authorized and issued preferred stock was not affected by the split.
Amended articles of incorporation
On June 26, 2019, the Company amended its articles of incorporation to increase the number of authorized shares of common stock from 7,000,000 to 95,000,000 shares.
Basis of presentation
The condensed consolidated interim financial statements of the Company have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) and are presented in United States dollars. The functional currency of the Company and each of its subsidiaries is the United States dollar.
The accompanying condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Adgero, Adgero Bio, Del Mar BC, Callco, and Exchangeco. All intercompany balances and transactions have been eliminated in consolidation.
The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set out below and have been consistently applied to all periods presented.
DelMar Pharmaceuticals, Inc.Certain prior period balances have been reclassified to conform with the current period’s presentation.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
(expressed in US dollars unless otherwise noted)
Unaudited interim financial data
The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and the notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited financial statements of the Company as of, and for the fiscal year ended,at June 30, 20192020 included in theour Form 10-K filed with the SEC on September 9, 2019.10-K. In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation. The results for three and nine monthssix-months ended MarchDecember 31, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2020,2021, or for any other future annual or interim period.
Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, expenses, contingent assets, and contingent liabilities as at the end of, or during, the reporting period. Actual results could significantly differ from those estimates. Significant areas requiring management to make estimates include the derivativefair value of the milestone payment liability, the valuation of equity instruments issued for services, and clinical trial accruals. Further details of the nature of these assumptions and conditions may be found in the relevant notes to these condensed consolidated interim financial statements.
Accruals for research and development expenses and clinical trials
As part of the process of preparing its financial statements, the Company is required to estimate its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants, and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment terms that do not match the periods over which materials or services are provided under such contracts. The Company’s objective is to reflect the appropriate expenses in its financial statements by matching those expenses with the period in which services are performed and efforts are expended. The Company accounts for these expenses according to the timing of various aspects of the expenses. The Company determines accrual estimates by taking into account discussion with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed. During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in it reporting amounts that are too high or too low for any particular period. For the three and nine months ended March 31, 2020 and 2019, there were no material adjustments to the Company’s prior period estimates of accrued expenses for clinical trials.
Loss per share
Income or loss per share is calculated based on the weighted average number of common shares outstanding. For the three and nine monthsix-month periods ended MarchDecember 31, 2020 and 2019 diluted loss per share does not differ from basic loss per share since the effect of the Company’s warrants, stock options, performance stock units, and convertible preferred shares is anti-dilutive. As of MarchDecember 31, 2020, potential common shares of 10,209,45611,709,568 (2019 – 862,502)9,963,596) related to outstanding common share warrants, 778,7502,152,701 (2019 – 292,683) relatingnil) related to outstanding Series C preferred stock warrants, 6,486,709 (2019 – 778,750) related to stock options, nil152,580 (2019 – 120,000)162,177) relating
8
to performance stock units,outstanding Series B convertible preferred shares, and 162,17720,348,764 (2019 – 210,279)nil) relating to outstanding Series BC convertible preferred shares were excluded from the calculation of net loss per common share.
DelMar Pharmaceuticals, Inc.Acquired in-process research and development expense
NotesThe Company acquired in-process research and development assets in connection with its Merger with Adgero. As the acquired in-process research and development assets were deemed to Condensed Consolidated Interim Financial Statements
(Unaudited)
Marchhave no current or alternative future use, an expense of $16.1 million was recognized in the condensed consolidated interim statements of operations for the six-month period ended December 31, 2020
2020.
(expressed in US dollars unless otherwise noted)Property and equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over its estimated useful life of five years. Depreciation expense is recognized from the date the equipment is put into use.
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date.
Not yet adopted
Recently adopted
Accounting StandardStandards Update (“ASU”) 2016-022020-06 — Leases (Topic 842)
The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU assetDebt - Debt with conversion and a lease liability on the consolidated balance sheetother options (subtopic 470-20) and derivatives and hedging – contracts in entity’s own equity (subtopic 815-40): accounting for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognitionconvertible instruments and contracts in the consolidated income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The adoption of ASU 2016-02 did not have a material impact on the Company’s results of operations or financial results.
ASU 2018-07 — Stock Compensation (Topic 718) Improvements to Nonemployee Shares-based Payment Accountingan entity’s own equity
The amendments in this update are intended to the reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees. The ASU expands the scope of Topic 718, Compensation —Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services. The existing guidance on nonemployee share-based payments is significantly different from current guidance for employee share-based payments. This ASU expands the scope of the employee share-based payments guidance to include share-based payments issued to nonemployees. By doing so, the FASB improves the accounting of nonemployee share-based payments issued to acquire goods and services used in its own operations. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of ASU 2018-07 did not have a material impact on the Company’s results of operations or financial results.
Not yet adopted
ASU 2017-11 — I. Accounting for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non-public Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
(expressed in US dollars unless otherwise noted)
The amendments in this update are intended to reduce the complexity associated withsimplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Specifically, a down round feature would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option)The ASU is part of the FASB’s simplification initiative, which aims to be accounted for as a derivative liability at fair value with changesreduce unnecessary complexity in fair value recognized in current earnings. In addition, the indefinite deferral of certain provisions of Topic 480 have been re-characterized to a scope exception. The re-characterization has no accounting effect. ASU 2017-11 is effective forU.S. GAAP. For public business entities that are not smaller reporting companies, the ASU’s amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, the effective date is for fiscal years beginning after December 15, 2019. Early adoption is permitted.2023, and interim periods within those fiscal years. The guidance may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company has not yet evaluated the impact of adoption of this ASU on its condensed consolidated interim financial statements and related disclosures.
ASU 2020-10 — Codification Improvements
The amendments in this update remove references to various FASB Concepts Statements, situates all disclosure guidance in the appropriate disclosure section of the Codification, and makes other improvements and technical corrections to the Codification. The amendments in Sections B and C of this amendment are effective for annual periods beginning after December 15, 2020, for public business entities. For all other entities, the amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. The Company has not yet evaluated the impact of adoption of this ASU on its condensed consolidated interim financial statements and related disclosures.
During the nine monthssix-months ended MarchDecember 31, 2020, other than ASU 2017-11,ASUs 2020-06 and 2020-10, there have been no new, or existing recently issued, accounting pronouncements that are of significance, or potential significance, that impact the Company’s condensed consolidated interim financial statements.
3 | Merger |
As described in Note 1, on August 19, 2020, the Company completed its Merger with Adgero in accordance with the terms of the Merger Agreement. To determine the accounting for this transaction under ASU 2017-01, an assessment must be made as to whether an integrated set of assets and activities should be accounted for as an acquisition of a business or an asset acquisition. The guidance requires an initial screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If that screen is met, the set is not a business. In connection with the Merger, substantially all of the fair value is concentrated in in-process research and development (“IPR&D”). As such, the Merger has been treated as an acquisition of Adgero assets and an assumption of Adgero liabilities.
9
Under the terms of the Merger Agreement, upon closing of the Merger, the Company issued 11,439,013 shares of Company common stock and 2,313,904 stock purchase warrants to the security holders of Adgero (“Adgero Warrants”). The Adgero Warrants are exercisable at $3.18 per share (note 6). The Adgero Warrants were valued using a Black-Scholes valuation with a weighted-average risk-free interest rate of 0.21%, a term of one year, a volatility of 115.96%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock at the date of measurement is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the instrument at the valuation date. The expected term has been estimated using the remaining life of the warrant. Also, in conjunction with the Merger, the Company issued 571,951 shares of common stock to the placement agent as a success fee. The shares of common stock issued to the former Adgero stockholders as well as the success fee shares, have been value at $1.34 per share which was the closing price of the Company’s common stock on August 19, 2020, the date the Merger closed.
The SeriesCompany incurred approximately $1.55 million of legal, consulting and other professional fees related to the Merger, of which approximately $1.1 million had been incurred in the year ended June 30, 2020. The transaction costs have been classified as merger expenses in the accompanying unaudited condensed consolidated interim statement of operations for the three months ended September 30, 2020.
The following summarizes total consideration transferred to the Adgero stockholders under the Merger as well as the assets acquired and liabilities assumed under the Merger:
$ (in thousands) | ||||
Consideration: | ||||
Common stock | 15,328 | |||
Warrants | 630 | |||
Success fee shares | 766 | |||
16,724 | ||||
Net assets acquired: | ||||
Cash | (969 | ) | ||
Other current assets | (11 | ) | ||
Property and equipment | (175 | ) | ||
Accounts payable and accrued liabilities | 337 | |||
Milestone payment liability | 188 | |||
In-process research and development | 16,094 |
The fair value of the IPR&D assets has been expensed as a charge in the condensed consolidated interim statements of operations for the six months ended December 31, 2020 as there is no alternative use for these assets. Property and equipment include office furniture that was subsequently sold and laboratory equipment that has not yet been put into use.
The milestone payment liability relates to an asset purchase agreement with St. Cloud Investments, LLC (“St. Cloud”) that Adgero has regarding the acquisition of REM-001. The Agreement, as amended, is dated November 26, 2012 (the “St. Cloud Agreement”). Pursuant to the terms of the St. Cloud Agreement, the Company is obligated to make certain payments under the agreement. The future contingent amounts payable under that agreement are as follows:
Upon the earlier of (i) a subsequent equity financing to take place after the Company conducts a Phase 2B clinical study in which fifty patients complete the study and their clinical data can be evaluated or (ii) the commencement of a clinical study intended to be used as a definitive study for market approval in any country, the Company is obligated to pay an aggregate amount of $300,000 in cash or an equivalent amount of common stock, with $240,000 to St. Cloud and $60,000 to an employee of the Company; and
Upon receipt of regulatory approval of REM-001 Therapy, the Company is obligated to pay an aggregate amount of $700,000 in cash or an equivalent amount of common stock, with $560,000 to St. Cloud and $140,000 to an employee of the Company.
With respect to the $300,000 and $700,000 potential milestone payments referenced above (each a “Milestone Payment”), if either such Milestone Payment becomes payable, and in the event the Company elects to pay either such Milestone Payment in shares of its common stock, the value of the common stock will equal the average of the closing price per share of the Company’s common stock over the twenty (20) trading days following the first public announcement of the applicable event described above.
10
The milestone payment liability has been determined using the discounted cash flow value of the two respective milestone payments. A Preferred Stockdiscount rate of 79% has been used which accounts for the probability of success given the phase of clinical development of REM-001. The term is heldbased on an estimate of the planned timing of completion of the respective milestones that would result in payment of the milestones. As at December 31, 2020, the Company has reviewed its estimates with respect to the planned timing of completion of the respective milestones and adjusted the liability accordingly.
$ (in thousands) | ||||
Balance – June 30, 2020 | — | |||
Addition | 188 | |||
Change in fair value estimate | (11 | ) | ||
Balance – December 31, 2020 | 177 |
4 | Clinical trial deposit |
In October 2020, the Company announced that it had entered into a final agreement with a contract research organization (“CRO”) for the management of the Company’s registration study for glioblastoma multiforme. Under the agreement, the Company will supply the drug for the study and the CRO will manage all operational aspects of the study including site activation and patient enrollment. The Company is required to make certain payments under the agreement related to patient enrollment milestones. For the three and six months ended December 31, 2020, the Company has recognized $750,000 and $1.25 million, respectively, of expenses for this study in relation to study startup and preparation for patient enrollment.
In relation to this study, the Company has made a deposit payment of $2.6 million to the CRO in relation to the commencement of recruitment of patients. It is anticipated that the deposit will be applied to future invoices, or refunded to the Company, beyond twelve months from December 31, 2020. The Company can terminate the study at any time. Upon termination, the Company will be liable for any payments due to the effective date of the termination as well as any non-refundable costs incurred by the CRO prior to the date of termination.
5 | Related party transactions |
Valent Technologies, LLC Agreements
One of the Company’s officers is a principal of Valent Technologies, LLC (“Valent”), an entity owned by Dr. Dennis Brown, the Company’s Chief Scientific Officer. Therefore, and as result Valent is a related party to the Company.
On September 12, 2010, the Company entered into a Patent Assignment Agreement (the “Valent Assignment Agreement”) with Valent pursuant to which Valent transferred to the Company all its right, title and interest in, and to, the patents for VAL-083 owned by Valent. The Company now owns all rights and title to VAL-083 and is responsible for the drug’s further development and commercialization. In accordance with the terms of the Valent Assignment Agreement, Valent is entitled to receive a future royalty on all revenues derived from the development and commercialization of VAL-083. In the event that the Company terminates the agreement, the Company may be entitled to receive royalties from Valent’s subsequent development of VAL-083 depending on the development milestones the Company has achieved prior to the termination of the Valent Assignment Agreement.
On September 30, 2014, the Company entered into an exchange agreement (the “Valent Exchange Agreement”) with Valent and Del Mar (BC). Pursuant to the Valent Exchange Agreement, Valent exchanged its loan payable in the outstanding amount of $278,530 (including aggregate accrued interest to September 30, 2014 of $28,530), issued to Valent by Del Mar (BC), for 278,530 shares of the Company’s Series A Preferred Stock. The Series A Preferred Stock has a stated value of $1.00 per share (the “Series A Stated Value”) and is not convertible into common stock. The holder of the Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in arrears. For the three monthsthree-months ended MarchDecember 31, 2020 and 2019 respectively, the Company recorded $2,089 related to the dividend payablepaid to Valent on the Series A Preferred Stock andwhile for the nine monthssix-months ended MarchDecember 31, 2020 and 2019 respectively, the Company recorded $6,267$4,178 related to the dividend (note 5).dividend. The dividends have been recorded as a direct increase in accumulated deficit.
Related party payables
At December 31, 2020 there is an aggregate amount of $289,397 (June 30, 2020 - $663,865) payable to the Company’s officers and directors for fees, expenses, and accrued liabilities.
6 | Loan from National Brain Tumor Society and National Foundation for Cancer Research |
11
$ (in thousands) | ||||
Balance – June 30, 2020 | — | |||
Funding | 500 | |||
Financing costs | (94 | ) | ||
Interest expense | 16 | |||
Amortization of deferred financing costs | 51 | |||
Balance – December 31, 2020 | 473 |
During the six-months ended December 31, 2020, the Company received a loan of $500,000 from National Brain Tumor Society (“NBTS”) and the National Foundation for Cancer Research to support VAL-083's preparation for participation in the Global Coalition for Adaptive Research's (“GCAR”) sponsored trial, Glioblastoma (“GBM”) Adaptive Global Innovative Learning Environment (“GBM AGILE”) study (the “NBTS Loan”). In relation to the NBTS Loan, the Company issued 125,000 share purchase warrants which are exercisable at a price of $1.09 per common share until June 19, 2025 and had been included in deferred financing costs as at June 30, 2020 (“NBTS Warrants”). The Company has issuedNBTS Loan is secured by a promissory note, accrues interest at a rate of 6% per annum and matures on June 19, 2021.
The NBTS Warrants were valued at $93,701 using a Black-Scholes valuation with a risk-free interest rate of 0.37%, a term of 5 years, a volatility of 89.82%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock purchase warrants. Based on the terms of certain of these warrants the Company determined that the warrants were a derivative liability which is recognized at fair value at the date of measurement is based on the transaction and re-measuredhistorical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the instrument at fair value each reporting periodthe valuation date. The expected term has been estimated using the remaining life of the warrant.
7 | Stockholders’ equity |
Preferred stock
Series C Preferred stock
|
| Series C Preferred Stock |
| |||||
|
| Number of shares |
|
| $ (in thousands) |
| ||
Balance – June 30, 2020 |
|
| — |
|
|
| — |
|
Issuance |
|
| 25,028 |
|
|
| 18,286 |
|
Conversion of Series C Preferred stock to common stock |
|
| (1,358 | ) |
|
| (988 | ) |
Balance – December 31, 2020 |
|
| 23,670 |
|
|
| 17,298 |
|
In connection with the changesMerger (note 3), the Company issued 25,028 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) in fair value recordedthree separate closings of a private placement (Series C-1, C-2, and C-3) in August, 2020. Each share of Series C Preferred Stock was issued at a purchase price of $1,000 per share and is convertible into shares of common stock based on the condensed consolidated interim statementrespective conversion prices which were determined at the closing of operations.each round of the private placement. Subject to ownership limitations, the owners of the Series C Preferred Stock are entitled to receive dividends, payable in shares of common stock at a rate of 10%, 15%, 20% and 25% of the number of shares of common stock issuable upon conversion of the Series C Preferred Stock, on the 12th, 24th, 36th and 48th month, anniversary of the initial closing of the private placement which occurred on August 19, 2020. The Series C Preferred Stock dividends do not require declaration by the Board of Directors and are accrued annually as of the date the dividend is earned in an amount equal to the applicable rate of the stated value. Any outstanding shares of Series C Preferred Stock will automatically convert to shares of common stock on August 19, 2024.
The conversion prices for the Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series C-3 Preferred Stock are $1.16, $1.214 and $1.15, respectively. Based on the conversion prices of the three respective classes of the Series C Preferred Stock, the originally issued 25,028 shares of Series C Preferred Stock were convertible into an aggregate of 21,516,484 shares of common stock. The cumulative dividends to be issued on the 12th, 24th, 36th and 48th month anniversary of the initial closing of the private placement for the initially issued 25,028 shares of Series C Preferred Stock were 15,061,952 shares of common stock.
The derivative liabilities balanceconversion feature of the Series C Convertible Preferred Stock at the time of issuance was zero at March 31, 2020determined to be beneficial on the commitment date. Because the Series C Convertible Preferred Stock was perpetual with no stated maturity date, and June 30, 2019. The derivative liabilities balance consistedthe conversions could occur any time from inception, the Company immediately recorded a non-cash deemed dividend of 2,180 agent warrants at March 31, 2020 and June 30, 2019.$3.18 million
12
Changes inrelated to the beneficial conversion feature arising from the issuance of Series C Convertible Preferred Stock. This non-cash deemed dividend increased the Company’s derivative liability are summarized as follows:net loss attributable to common stockholders and net loss per share.
Three months ended | ||||||||
March 31, | ||||||||
2020 | 2019 | |||||||
$ | $ | |||||||
Opening balance | - | 76 | ||||||
Change in fair value of warrants | - | 189 | ||||||
Closing balance | - | 265 | ||||||
Less current portion | - | - | ||||||
Long term portion | - | 265 |
DelMar Pharmaceuticals, Inc.
NotesThe Series C Preferred Stock shall with respect to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
(expresseddistributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock and (ii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series C Preferred Stock. The Series C Preferred Stock shall be pari passu in US dollars unless otherwise noted)
Nine months ended | ||||||||
March 31, | ||||||||
2020 | 2019 | |||||||
$ | $ | |||||||
Opening balance | - | 1,117 | ||||||
Change in fair value of warrants | - | (852 | ) | |||||
Closing balance | - | 265 | ||||||
Less current portion | - | - | ||||||
Long term portion | - | 265 |
liquidation to the Company’s Series A and Series B Preferred Stock. The liquidation value of the Series C Preferred Stock at December 31, 2020 is the stated value of $23,670,000.
Total gross proceeds from the private placement were $25 million, or approximately $21.6 million in net proceeds after deducting financing costs of $3.4 million with respect to agent commissions and expenses, as well as legal and accounting fees. Of the total financing costs, $84,944 was deferred as of June 30, 2020. In addition, the Company issued warrants to purchase 2,504 shares of Series C Stock to the placement agent (“Series C Agent Warrants”) that are convertible into an aggregate 2,152,701 shares of common stock.
A total of 23,670 (June 30, 2020 – Nil) shares of Series C Preferred Stock are outstanding as of December 31, 2020, such that a total of 20,348,764 (June 30, 2020 – Nil) shares of common stock are issuable upon conversion of the Series C Preferred Stock as at December 31, 2020. Converted shares are rounded up to the nearest whole share.
Series B Preferred Stock
Series B Preferred Stock | ||||||||
2020 | ||||||||
Number of shares | $ | |||||||
Balance – June 30, 2019 | 673,613 | 4,699,304 | ||||||
Conversion of Series B Preferred stock to common stock | (25,000 | ) | (174,407 | ) | ||||
Balance – March 31, 2020 | 648,613 | 4,524,897 |
|
| Series B Preferred Stock (in thousands) |
| |||||
|
| Number of shares |
|
| $ |
| ||
Balance – June 30, 2020 |
|
| 649 |
|
|
| 4,525 |
|
Conversion of Series B Preferred stock to common stock |
|
| (39 | ) |
|
| (268 | ) |
Balance – December 31, 2020 |
|
| 610 |
|
|
| 4,257 |
|
During the year ended June 30, 2016, the Company issued an aggregate of 902,238 shares of Series B Preferred Stock at a purchase price of $8.00 per share. Each share of Series B Preferred Stock is convertible into 0.25 shares of common stock equating to a conversion price of $32.00 (the “Conversion Price”) and will automatically convert to common stock at the earlier of 24 hours following regulatory approval of VAL-083 with a minimum closing bid price of $80.00, or five years from the respective final closing dates.date of the filing of the Certificate of Designation which was April 29, 2016. Therefore, all of the Series B Preferred stock will convert to common stock on April 29, 2021. The holders of the Series B Preferred Stock are entitled to an annual cumulative, in arrears, dividend at the rate of 9% payable quarterly. The 9% dividend accrues quarterly commencing on the date of issue and is payable quarterly on June 30, September 30, December 31, and March 31, and June 30 of each year commencing on June 30, 2016. Dividends are payable solely by delivery of shares of common stock, in an amount for each holder equal to the aggregate dividend payable to such holder with respect to the shares of Series B Preferred Stock held by such holder divided by the Conversion Price. The Series B Preferred Stock does not contain any repricing features. Each share of Series B Preferred Stock entitles its holder to vote with the common stock on an as-converted basis.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
(expressed in US dollars unless otherwise noted)
The Series B Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock and (ii) senior to the Special Voting Preferred Stock and (iii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series B Preferred Stock. The Series B Preferred Stock shall be pari passu in liquidation to the Company’s Series A and Series C Preferred Stock. The liquidation value of the Series B Preferred Stock at MarchDecember 31, 2020 is the stated value of $5,188,904$4.9 million (June 30, 20192020 - $5,388,904)$5.2 million).
In addition, the Company and the holders entered into a royalty agreement, pursuant to which the Company will pay the holders of the Series B Preferred Stock, in aggregate, a low, single-digit royalty based on their pro rata ownership of the Series B Preferred Stock on products sold directly by the Company or sold pursuant to a licensing or partnering arrangement (the “Royalty Agreement”).
Upon conversion of a holder’s Series B Preferred Stock to common stock, such holder shall no longer receive ongoing royalty payments under the Royalty Agreement but will be entitled to receive any residual royalty payments that have vested. Rights to the royalties shall vest during the first three years following the applicable closing date, in equal thirds to holders of the Series B Preferred Stock on each of the three vesting dates, upon which vesting dates such royalty amounts shall become vested royalties.
Pursuant to the Series B Preferred Stock dividend, during the three monthsthree-months ended MarchDecember 31, 2020, the Company issued 3,7003,479 (2019 – 4,735)3,700) shares of common stock for an amount of $1,473and recognized $4,453 (2019 – $23,202)$2,552) and during the nine monthssix-months ended MarchDecember 31,
13
2020, the Company issued 11,1007,179 (2019 – 14,430)7,400) shares of common stock for an amount of $6,071and recognized $9,633 (2019 – $75,477)$4,598). These dividends have been recognized as a direct increase in accumulated deficit.
A total of 648,613 (2019610,238 (June 30, 2020 – 841,113)648,613) shares of Series B Preferred Stock are outstanding as of MarchDecember 31, 2020, such that a total of 162,177 (2019152,580 (June 30, 2020 – 210,279)162,177) shares of common stock are issuable upon conversion of the Series B Preferred Stock as at MarchDecember 31, 2020. Converted shares are rounded up to the nearest whole share.
Series A Preferred Stock
Effective September 30, 2014, the Company filed a Certificate of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of Nevada. Pursuant to the Series A Certificate of Designation, the Company designated 278,530 shares of preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have a stated value of $1.00 per share (the “Series A Stated Value”) and are not convertible into common stock. The holder of the Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in arrears. Upon any liquidation of the Company, the holder of the Series A Preferred Stock will be entitled to be paid, out of any assets of the Company available for distribution to stockholders, the Series A Stated Value of the shares of Series A Preferred Stock held by such holder, plus any accrued but unpaid dividends thereon, prior to any payments being made with respect to the common stock. The Series A Preferred Stock is held by Valent (note 3)4).
The Series A Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock, and (ii) senior to the Company’s Special Voting Preferred Stock and (iii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series A Preferred Stock. The Series A Preferred Stock shall be pari passu in liquidation to the Company’s Series B and Series C Preferred Stock. The liquidation value of the Series A Preferred stock at MarchDecember 31, 2020 and June 30, 2019 is the stated value of2020 was $278,530.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
(expressed in US dollars unless otherwise noted)
There was no change to the Series A Preferred stock for the three or nine month periodssix-months ended MarchDecember 31, 2020 or 2019.
Common stock
Stock Issuances
NineSix months ended MarchDecember 31, 20202019
Underwritten public offering
On August 16, 2019, the Company closed on the sale of (i) 4,895,000 shares of its common stock, par value $0.001 per share (the “Common Stock”), (ii) pre-funded warrants (“PFW”) to purchase an aggregate of 2,655,000 shares of Common Stock and (iii) common warrants to purchase an aggregate of 7,762,500 shares of Common Stock (“2020 Investor Warrants”), including 800,000 shares of Common Stock and 2020 Investor Warrants to purchase an aggregate of 1,012,500 shares of Common Stock sold pursuant to a partial exercise by the underwriters of the underwriters’ option to purchase additional securities, in the Company’s underwritten public offering (the “Offering”). Each share of Common Stock or PFW, as applicable, was sold together with a 2020 Investor Warrant to purchase one share of Common Stock at a combined effective price to the public of $1.00 per share of Common Stock and accompanying 2020 Investor Warrant.
The net proceeds from the Offering, including from the partial exercise of the underwriters’ option to purchase additional securities, were $6,582,966 after deducting underwriting discounts and commissions, and other offering expenses.
The 2020 Investor Warrants are exercisable at $1.00 per share until their expiry on August 16, 2024 and the PFW are exercisable at $0.01 per share at any time after August 16, 2019. The Company also issued 377,500 warrants to the underwriters of the Offering. The underwriter warrants are exercisable at $1.15 per share commencing February 10, 2020 until their expiry on August 14, 2022.
During the ninesix months ended MarchDecember 31, 2020,2019, all of the 2,655,000 PFW were exercised at $0.01 per PFW for proceeds of $26,550.
Shares issued for services
During the six months ended December 31, 2020, the Company issued $nil (2019 – 11,672) shares of common stock for services resulting in the recognition of $nil (2019 – $8,187) in expense. All of the shares issued for services for the three and six-months ended December 31, 2019 have been recognized as research and development expense.
14
2017 Omnibus Incentive Plan
As approved by theThe Company’s stockholders at the annual meetingBoard of stockholders held on April 11, 2018, on July 7, 2017, as amended on February 1, 2018, the Company’s board of directorsDirectors has approved adoption of the Company’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”). The board that has also been approved by the Company’s stockholders. In addition, the Board of directors alsoDirectors approved a form of Performance Stock Unit Award Agreement to be used in connection with grants of performance stock units (“PSUs”) under the 2017 Plan. Under the 2017 Plan, 780,0006,700,000 shares of Company common stock are currently reserved for issuance, less the number of shares of common stock issued under the Del Mar (BC) 2013 Amended and Restated Stock Option Plan (the “Legacy Plan”) or that are subject to grants of stock options made, or that may be made, under the Legacy Plan. AAs of December 31, 2020, a total of 164,235142,375 shares of common stock have been issuedare outstanding under the Legacy Plan and/or are subject to outstanding stock options granted under the Legacy Plan, and a total of 614,5156,344,334 shares of common stock have been issued under the 2017 Plan and/or are subject to outstanding stock options granted under the 2017 Plan leaving 1,250178,291 (after deducting accumulated stock option exercises of 35,000) shares of common stock available at MarchDecember 31, 2020 for issuance under the 2017 Plan if all such options under the Legacy Plan were exercised.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
(expressed in US dollars unless otherwise noted)
The maximum number of shares of Company common stock with respect to which any one participant may be granted awards during any calendar year is 8% of the Company’s fully diluted shares of common stock on the date of grant (excluding the number of shares of common stock issued under the 2017 Plan and/or the Legacy Plan or subject to outstanding awards granted under the 2017 Plan and/or the Legacy Plan). No award will be granted under the 2017 Plan on, or after, July 7, 2027, but awards granted prior to that date may extend beyond that date.
2027.
During the nine monthssix-months ended MarchDecember 31, 2020, and subject to approval by the Company’s stockholders, the Company’s boarda total of directors approved an increase in the number of shares of common stock available to be issued under the 2017 Plan by 1,500,000. The increase brings the total number of shares available under the 2017 Plan to 2,280,000.
During the nine months ended March 31, 2020, the Company’s board of directors approved an aggregate 1,041,016222,584 stock options issued to officers and directors of the Company. OfCompany were amended such that the total grant, 549,199period to exercise vested stock options are subject to stockholder approval of the 2017 Plan share increase. The total grant date aggregate fair value of the remaining 491,817 stock options granted was $238,760. All of these stock options granted to officers and directors have an exercise price of $0.61 and expire on September 5, 2029. Of the 1,041,016 stock options approved by the board of directors, 375,000 vest pro rata monthly over one year from the date of approval bytermination of continuous service with the boardCompany was extended from 90 days to one year. Of the total of directors222,584, 66,850 had their expiry increased from September 26, 2020 to June 26, 2021 and 666,016155,734 had their expiry increased from November 19, 2020 to August 19, 2021. As a result of the amendments, a total of $8,569 stock-based compensation expense has been recognized. In addition, 250,000 stock options previously granted to an officer of the Company were amended such that the vesting of the stock options was changed from a completely contingent vesting to a time-based vesting such that 1/6th of the stock options vest as to one-sixth on the six-month anniversary of the amendment date of approval by the board of directors with the remaining five-sixthsportion vesting pro ratein equal monthly installments over a period of 30 months commencing on the seven-month anniversary of the boardamendment date. A total compensation expense of directors’ approval date.
In addition,$319,376 will be recognized over the amended vesting period for the 250,000 stock options. Also, during the ninesix months ended MarchDecember 31, 2020, the Company granted 250,000Board of Directors approved the acceleration of vesting of 279,675 stock options to purchase shares of the Company’s common stock previously granted on September 5, 2019 to an executive officer of the Company subject to stockholder approvalresulting in accelerated expense of $53,455. The exercise price of the share increasestock options is $0.61 per share.
During the six-months ended December 31, 2020, a total of 4,758,687 stock options were granted to executive officers and directors of the 2017 Plan. The optionsCompany. Of these, 4,698,687 have an exercise price of $0.735$1.70 per share and expire November 12, 2029. The60,000 have an exercise price of $1.355 per share. Of the total granted, 4,278,687 stock options vest uponas to 1/6 on the achievementsix-month anniversary of certain clinical development milestones.
Stock Options
Stock option disclosurethe grant date with the remaining portion vesting in equal monthly installments over a period of 30 months commencing on the tables below excludes 799,199seven-month anniversary of the grant date. Of the total stock option grants approved byoptions granted to executive officers and directors, 480,000 vest in 12 equal monthly installments beginning on October 15, 2020. All of the board of directors thatstock options granted have a 10-year term and are subject to approval bycancellation upon the Company’s stockholdersgrantees’ termination of service for the share reserve increase under the 2017 Plan. Of these options, 549,199 are exercisable at $0.61 per share until September 5, 2029 and 250,000 are exercisable at $0.735 until November 12, 2029.Company, with certain exceptions.
Stock Options
The following table sets forth the aggregatechanges in stock options outstanding under all plans as of March 31, 2020:plans:
Number of stock options | Weighted average exercise price | |||||||
outstanding | $ | |||||||
Balance – June 30, 2019 | 288,183 | 22.31 | ||||||
Granted | 491,817 | 0.61 | ||||||
Expired | (1,250 | ) | (40.00 | ) | ||||
Balance – March 31, 2020 | 778,750 | 8.58 |
|
| Number of stock options outstanding (in thousands) |
|
| Weighted average exercise price |
| ||
Balance – June 30, 2020 |
|
| 1,559 |
|
|
| 4.61 |
|
Granted |
|
| 4,999 |
|
|
| 1.68 |
|
Exercised |
|
| (35 | ) |
|
| 0.61 |
|
Expired |
|
| (22 | ) |
|
| 41.44 |
|
Forfeited |
|
| (14 | ) |
|
| 1.42 |
|
Balance – December 31, 2020 |
|
| 6,487 |
|
|
| 2.26 |
|
DelMar Pharmaceuticals, Inc.15
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
(expressed in US dollars unless otherwise noted)
The following table summarizes stock options outstanding and exercisable under all plans at MarchDecember 31, 2020:
Exercise price $ | Number Outstanding at March 31, 2020 | Weighted average remaining contractual life (years) | Number exercisable at March 31, 2020 | |||||||||||
0.61 | 491,817 | 9.43 | 288,168 | |||||||||||
6.10 | 30,000 | 8.60 | 24,445 | |||||||||||
7.00 | 5,451 | 8.23 | 3,180 | |||||||||||
8.70 | 12,000 | 7.59 | 12,000 | |||||||||||
9.83 | 83,647 | 8.14 | 51,117 | |||||||||||
10.60 | 3,600 | 8.03 | 2,400 | |||||||||||
11.70 | 30,000 | 2.91 | 30,000 | |||||||||||
14.11 | 2,500 | 2.17 | 2,500 | |||||||||||
20.00 | 13,125 | 1.52 | 13,125 | |||||||||||
21.10 | 14,400 | 7.27 | 12,000 | |||||||||||
29.60 | 4,500 | 4.84 | 4,500 | |||||||||||
37.60 | 4,500 | 5.86 | 4,500 | |||||||||||
41.00 | 4,000 | 6.61 | 4,000 | |||||||||||
42.00 | 41,250 | 2.81 | 41,250 | |||||||||||
44.80 | 3,000 | 5.86 | 3,000 | |||||||||||
49.50 | 22,460 | 4.31 | 22,460 | |||||||||||
53.20 | 8,000 | 6.10 | 8,000 | |||||||||||
61.60 | 1,500 | 3.00 | 1,500 | |||||||||||
92.00 | 3,000 | 3.17 | 3,000 | |||||||||||
778,750 | 531,145 |
Exercise price $ |
|
| Number Outstanding at December 31, 2020 (in thousands) |
|
| Weighted average remaining contractual life (years) |
|
| Number exercisable at December 31, 2020 (in thousands) |
| ||||
| 0.61 |
|
|
| 975 |
|
|
| 8.68 |
|
|
| 853 |
|
| 0.74 |
|
|
| 250 |
|
|
| 8.86 |
|
|
| — |
|
| 1.36 |
|
|
| 300 |
|
|
| 9.73 |
|
|
| — |
|
| 1.70 |
|
|
| 4,699 |
|
|
| 9.71 |
|
|
| 120 |
|
| 6.10 |
|
|
| 30 |
|
|
| 7.85 |
|
|
| 27 |
|
| 7.00 |
|
|
| 3 |
|
|
| 7.48 |
|
|
| 3 |
|
| 8.70 |
|
|
| 12 |
|
|
| 6.84 |
|
|
| 12 |
|
| 9.83 |
|
|
| 83 |
|
|
| 7.39 |
|
|
| 72 |
|
| 10.60 |
|
|
| 4 |
|
|
| 7.28 |
|
|
| 3 |
|
| 11.70 |
|
|
| 30 |
|
|
| 2.16 |
|
|
| 30 |
|
| 15.70 |
|
|
| 3 |
|
|
| 1.42 |
|
|
| 3 |
|
| 20.00 |
|
|
| 9 |
|
|
| 1.08 |
|
|
| 9 |
|
| 21.10 |
|
|
| 14 |
|
|
| 6.52 |
|
|
| 14 |
|
| 29.60 |
|
|
| 5 |
|
|
| 4.09 |
|
|
| 5 |
|
| 37.60 |
|
|
| 5 |
|
|
| 5.11 |
|
|
| 5 |
|
| 41.00 |
|
|
| 4 |
|
|
| 5.86 |
|
|
| 4 |
|
| 42.00 |
|
|
| 33 |
|
|
| 2.62 |
|
|
| 33 |
|
| 44.80 |
|
|
| 3 |
|
|
| 5.11 |
|
|
| 3 |
|
| 49.50 |
|
|
| 13 |
|
|
| 6.13 |
|
|
| 13 |
|
| 53.20 |
|
|
| 8 |
|
|
| 5.35 |
|
|
| 8 |
|
| 61.60 |
|
|
| 1 |
|
|
| 2.25 |
|
|
| 1 |
|
| 92.00 |
|
|
| 3 |
|
|
| 2.42 |
|
|
| 3 |
|
|
|
|
|
| 6,487 |
|
|
|
|
|
|
| 1,221 |
|
Included in the number of stock options outstanding are 2,500 stock options granted at an exercise price of CA $20.00.CA$20.00. The exercise price of these options shown in the above table have been converted to US $14.11US$15.70 using the period ending closing exchange rate. Stock options issuedgranted during the ninesix months ended MarchDecember 31, 2020 have been valued using a Black-Scholes pricing model with the following assumptions:
December 31, 2020 | |||||
Dividend rate | — | % | |||
Volatility | 121% to 153 | % | |||
Risk-free rate | 0.19% to | % | |||
Term – years | 0.4 to |
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
(expressed in US dollars unless otherwise noted)
The estimated volatility of the Company’s common stock at the date of issuance of the stock options is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the stock options at the valuation date. The expected life of the stock options has been estimated using the plain vanilla method.
The Company has recognized the following amounts as stock option expense for the periods noted:noted (in thousands):
Three months ended March 31, | Nine months ended March 31, | |||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||
$ | $ | $ | $ |
| Three months ended December 31, |
|
| Six months ended December 31, |
| |||||||||||||||||||||||
| 2020 $ |
|
| 2019 $ |
|
| 2020 $ |
|
| 2019 $ |
| |||||||||||||||||||||
Research and development | 22,754 | 12,889 | 55,058 | 64,466 |
|
| 572 |
|
|
| 24 |
|
|
| 663 |
|
|
| 32 |
| ||||||||||||
General and administrative | 73,437 | 86,846 | 251,970 | 290,922 |
|
| 1,553 |
|
|
| 136 |
|
|
| 1,867 |
|
|
| 179 |
| ||||||||||||
|
| 2,125 |
|
|
| 160 |
|
|
| 2,530 |
|
|
| 211 |
| |||||||||||||||||
96,191 | 99,735 | 307,028 | 355,388 |
16
All of the stock option expense for the periods ended MarchDecember 31, 2020 and 2019 has been recognized as additional paid in capital. The aggregate intrinsic value of stock options outstanding at MarchDecember 31, 2020 was $0$789,343 (2019 - $0)$39,198) and the aggregate intrinsic value of stock options exercisable at MarchDecember 31, 2020 was $0$571,657 (2019 - $0)$7,472). As of MarchDecember 31, 2020, there was $96,061$5.7 million in unrecognized compensation expense that will be recognized over the next 2.432.75 years. No stock options granted under the Company’s equity plans have been exercised during the nine months ended March 31, 2020. Upon the exercise of stock options new shares will be issued.
The following table sets forth changes in unvested stock options under all plans at March 31, 2020:plans:
Number of Options | Weighted average exercise price $ | Weighted average grant date fair value $ |
| Number of Options (in thousands) |
|
| Weighted average exercise price $ |
| ||||||||||||
Unvested at June 30, 2019 | 84,990 | 11.35 | 5.82 | |||||||||||||||||
Unvested at June 30, 2020 |
|
| 858 |
|
|
| 0.98 |
| ||||||||||||
Granted | 491,817 | 0.61 | 0.40 |
|
| 4,999 |
|
|
| 1.68 |
| |||||||||
Vested | (329,202 | ) | 2.15 | 1.18 |
|
| (577 | ) |
|
| 1.09 |
| ||||||||
Unvested at March 31, 2020 | 247,605 | 2.25 | 1.23 | |||||||||||||||||
Forfeited |
|
| (14 | ) |
|
| 1.42 |
| ||||||||||||
Unvested at December 31, 2020 |
|
| 5,266 |
|
|
| 1.63 |
|
The aggregate intrinsic value of unvested stock options at December 31, 2020 was $217,686 (2019 - $31,726). The unvested stock options have a remaining weighted average contractual term of 9.64 (2019 – 9.52) years.
Common Stock Warrants
The following table sets forth changes in outstanding common stock warrants:
|
| Number of Warrants (in thousands) |
|
| Weighted average exercise price $ |
| ||
Balance – June 30, 2020 |
|
| 10,309 |
|
|
| 2.71 |
|
Issuance of Adgero Warrants |
|
| 2,314 |
|
|
| 3.18 |
|
Exercise of warrants (i) |
|
| (1,180 | ) |
|
| 1.00 |
|
Warrants issued for services (ii) |
|
| 380 |
|
|
| 1.53 |
|
Expiry of warrants (iii) |
|
| (113 | ) |
|
| 30.00 |
|
Balance – December 31, 2020 |
|
| 11,710 |
|
|
| 2.67 |
|
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
i) | A total of 1,179,707 2020 Investor Warrants were exercised at $1.00 per share. |
ii) | Warrants issued for services are exercisable at various prices and expire at the various dates noted in the table below. |
iii) | The warrant expiries include the 2015 Investor Warrants, the 2015 Agent Warrants, and certain warrants issued for services. All of the expired warrants were exercisable at $30 per share. |
(expressed in US dollars unless otherwise noted)17
Warrants
The following table summarizes changes in the Company’s outstanding common stock warrants as of MarchDecember 31, 2020:
Description of warrants |
| Number (in thousands) |
|
| Exercise price $ |
|
| Expiry date | ||
2020 Investor warrants |
|
| 6,558 |
|
|
| 1.00 |
|
| August 16, 2024 |
2019 Investor warrants |
|
| 760 |
|
|
| 3.10 |
|
| June 5, 2024 |
2019 Investor warrants |
|
| 280 |
|
|
| 12.50 |
|
| September 22, 2022 |
2017 Investor warrants |
|
| 208 |
|
|
| 35.00 |
|
| April 19, 2022 |
NBTS Warrants |
|
| 125 |
|
|
| 1.09 |
|
| June 19, 2025 (i) |
Warrants issued for services |
|
| 13 |
|
|
| 30.00 |
|
| February 1, 2021 |
Warrants issued for services |
|
| 6 |
|
|
| 17.80 |
|
| January 25, 2023 |
Warrants issued for services |
|
| 34 |
|
|
| 11.70 |
|
| February 27, 2023 |
Warrants issued for services |
|
| 14 |
|
|
| 9.00 |
|
| September 15, 2023 and October 11, 2023 |
Warrants issued for services |
|
| 280 |
|
|
| 0.75 |
|
| November 18, 2023 |
Warrants issued for services |
|
| 250 |
|
|
| 0.64 |
|
| January 20, 2024 |
Warrants issued for services |
|
| 330 |
|
|
| 1.49 |
|
| September 22, 2023 |
Warrants issued for services |
|
| 50 |
|
|
| 1.82 |
|
| November 13, 2023 |
2020 Underwriter Warrants |
|
| 377 |
|
|
| 1.15 |
|
| August 14, 2022 |
2019 Agent warrants |
|
| 47 |
|
|
| 3.88 |
|
| June 3, 2024 |
2018 Agent warrants |
|
| 40 |
|
|
| 12.50 |
|
| September 20, 2022 |
2017 Agent warrants |
|
| 14 |
|
|
| 40.60 |
|
| April 12, 2022 |
2016 Agent warrants |
|
| 10 |
|
|
| 40.00 |
|
| May 12, 2021 |
Adgero Warrants |
|
| 1,206 |
|
|
| 3.18 |
|
| April 8, 2021 |
Adgero Warrants |
|
| 353 |
|
|
| 3.18 |
|
| August 31, 2021 |
Adgero Warrants |
|
| 755 |
|
|
| 3.18 |
|
| January 17, 2022 |
|
|
| 11,710 |
|
|
|
|
|
|
|
(i) | ||||
NBTS Warrants were issued in | ||||
connection with respect to the NBTS Loan (note 5). |
Series C Preferred Stock Warrants
In connection with the Series C Preferred Stock private placement, the Company issued 2,504 Series C Agent Warrants. The Series C Agent Warrants have an exercise price of $1,000 per share, provide for a cashless exercise feature, and are exercisable for a period of four years from August 19, 2020. The Series C Preferred Stock issuable upon exercise of the Series C Agent Warrants is convertible into shares of common stock in the same manner as each respective underlying series of outstanding Series C Preferred Stock, and will be entitled to the same dividend rights as each respective series.
The Series C Agent Warrants were valued at a total of approximately $3.3 million using a binomial pricing model with a risk-free interest rate of 0.27%, a term of 4.0 years, and a volatility of 95.2% to 95.8%. The estimated volatility of the Company’s common stock at the date of measurement is based on the historical volatility of the Company’s common stock. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the instrument at the valuation date. The expected term has been estimated using the contractual term of the warrant.
The following table sets forth changes in outstanding Series C Agent Warrants:
|
| Number of Warrants |
|
| Conversion price $ |
| ||
Balance – June 30, 2020 |
|
| — |
|
|
|
|
|
Issuance of Preferred Series C-1 Agent Warrants |
|
| 1,959 |
|
|
| 1.16 |
|
Issuance of Preferred Series C-2 Agent Warrants |
|
| 219 |
|
|
| 1.21 |
|
Issuance of Preferred Series C-3 Agent Warrants |
|
| 326 |
|
|
| 1.15 |
|
Balance – December 31, 2020 |
|
| 2,504 |
|
|
|
|
|
18
The following table summarizes the Company’s outstanding warrantsSeries C Agent Warrants as of MarchDecember 31, 2020:
Description of warrants | Number | Exercise price $ | Expiry date | |||||||
2020 Investor warrants | 7,762,500 | 1.00 | August 16, 2024 | |||||||
2019 Investor warrants | 760,500 | 3.10 | June 5, 2024 | |||||||
2018 Investor warrants | 280,000 | 12.50 | September 22, 2022 | |||||||
2017 Investor warrants | 207,721 | 35.00 | April 19, 2022 | |||||||
2015 Investor warrants | 97,905 | 30.00 | July 31, 2020 | |||||||
Warrants issued for services | 250,000 | 0.64 | January 20, 2024 | |||||||
Warrants issued for services | 280,000 | 0.75 | November 18, 2023 | |||||||
Warrants issued for services | 26,500 | 30.00 | July 1, 2020 to February 1, 2021 | |||||||
Warrants issued for services | 6,000 | 17.80 | January 25, 2023 | |||||||
Warrants issued for services | 33,600 | 11.70 | February 27, 2023 | |||||||
Warrants issued for services | 12,000 | 9.00 | September 15, 2023 | |||||||
Warrants issued for services | 2,000 | 9.00 | October 11, 2021 | |||||||
2020 Underwriter Warrants | 377,500 | 1.15 | August 14, 2022 | |||||||
2019 Agent warrants | 46,800 | 3.875 | June 3, 2024 | |||||||
2018 Agent warrants | 40,000 | 12.50 | September 20, 2022 | |||||||
2017 Agent warrants | 13,848 | 40.60 | April 12, 2022 | |||||||
2016 Agent warrants | 10,402 | 40.00 | May 12, 2021 | |||||||
2015 Agent warrants | 2,180 | 30.00 | July 15, 2020 | |||||||
10,209,456 |
Series C Agent Warrants |
| Number |
|
| Conversion price $ |
|
| Number of conversion shares (in thousands) |
|
| Cumulative common stock dividends (in thousands) |
| ||||
Series 1 |
|
| 1,959 |
|
|
| 1.16 |
|
|
| 1,689 |
|
|
| 1,182 |
|
Series 2 |
|
| 219 |
|
|
| 1.21 |
|
|
| 180 |
|
|
| 126 |
|
Series 3 |
|
| 326 |
|
|
| 1.15 |
|
|
| 283 |
|
|
| 198 |
|
|
|
| 2,504 |
|
|
|
|
|
|
| 2,152 |
|
|
| 1,506 |
|
8 | Supplementary statement of cash flows information |
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2020
The Company incurred the following non-cash investing and financing transactions (in thousands):
|
| Six months ended December 31, 2020 |
|
| Six months ended December 31, 2019 |
| ||
Series B Preferred Stock common stock dividend (note 7) |
|
| 9 |
|
|
| 5 |
|
Deemed dividend recognized on beneficial conversion features of Series C Preferred stock issuance (note 7) |
|
| 3,181 |
|
|
| — |
|
Non-cash issue costs (note 7) |
|
| 3,287 |
|
|
| — |
|
Issue costs in accounts payable (note 7) |
|
| 40 |
|
|
| — |
|
Income taxes paid |
|
| — |
|
|
| — |
|
Interest paid |
|
| — |
|
|
| — |
|
(expressed in US dollars unless otherwise noted)
9 | Financial instruments |
The Company has financial instruments that are measured at fair value. To determine the fair value, the Company uses the fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market participants would use to value an asset or liability. The three levels of inputs that may be used to measure fair value are as follows:
Level one - inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level two - inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals; and
Level three - unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. As at December 31, 2020, the Company’s milestone payment liability was measured using level 3 inputs (note 3).
December 31, 2020 | ||||||||||||
Liability | Level 1 | Level 2 | Level 3 | |||||||||
Milestone payment liability | — | — | 177 |
The Company’s financial instruments consist of cash and cash equivalents, other receivables, accounts payable, related party payables and derivative liability.loan payable. The carrying values of cash and cash equivalents, other receivables, accounts payable and related party
19
payables approximate their fair values due to the immediate or short-term maturity of these financial instruments.
Derivative liability
The Company accounts for certain warrants under the authoritative guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, on the understanding that in compliance with applicable securities laws, the warrants require the issuance of securities upon exercise and do not sufficiently preclude an implied right to net cash settlement. The Company classifies these warrants on its balance sheet as a derivative liability which is fair valued at each reporting period subsequent to the initial issuance. The Company has used a Black-Scholes Option Pricing Model (based on a closed-form model that uses a fixed equation) to estimate the fair value of the loan payable is equal to its principal and accrued interest of $516,027 as at December 31, 2020.
10 | Subsequent events |
Warrants
Subsequent to December 31, 2020, 2,276,814 stock purchase warrants which is equivalentwere exercised at $1.00 per share for gross cash proceeds of $2,276,814. In addition, 471,283 warrants were exercised on a cashless basis for 257,979 shares of common stock. The Company also issued 100,000 stock purchase warrants for services at an exercise price of $1.47 per share and 12,500 warrants issued for services at an exercise price of $30.00 per share expired.
Series C Preferred Stock
Subsequent to the fair valueDecember 31, 2020, 1,515 shares of the warrants calculated using the Binomial-Lattice Pricing Model. Determining the appropriate fair-value model and calculating the fair valueSeries C-1 Preferred Stock were converted into 1,306,041 shares of warrants requires considerable judgment. Any change in the estimates (specifically probabilities and volatility) used may cause the value to be higher or lower than that reported. The estimated volatility of the Company’s common stock, at the date912 shares of issuance,Series C-2 Preferred Stock were converted into 751,239 shares of common stock, and at each subsequent reporting period, is based on the historical volatility150 shares of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similarSeries C-3 Preferred Stock were converted into 130,436 shares of common stock.
Series B Preferred Stock
Subsequent to the expected remaining life of the warrants at the valuation date. The expected life of the warrants is assumed to be equivalent to their remaining contractual term.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
MarchDecember 31, 2020,
6,250 shares of Series B Preferred Stock were converted into 1,563 shares of common stock.
Stock options
(expressed in US dollars unless otherwise noted)
The derivative is not traded in an active market and the fair value is determined using valuation techniques. The Company uses judgmentSubsequent to select a variety of methods to make assumptions that are based on specific management plans and market conditions at the end of each reporting period. The Company uses a fair value estimate to determine the fair value of the derivative liability. The carrying value of the derivative liability would be higher, or lower, as management estimates around specific probabilities change. The estimates may be significantly different from those amounts ultimately recorded in the consolidated financial statements because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market. All changes in the fair value are recorded in the consolidated statement of operations and comprehensive loss each reporting period. This is considered to be a Level 3 financial instrument as volatility is considered a Level 3 input.
The fair value of derivative liabilities at MarchDecember 31, 2020, and June 30, 2019 was $0.33,750 stock options were exercised at $0.61 per share for gross proceeds of $20,588.
Nine months ended | ||||||||
March 31, | ||||||||
2020 | 2019 | |||||||
$ | $ | |||||||
Series B Preferred share common stock dividend (note 5) | 6,071 | 75,477 | ||||||
Income taxes paid | - | - | ||||||
Interest paid | - | - |
The Company has evaluated its subsequent events from MarchDecember 31, 2020 through the date these condensed consolidated interim financial statements were issued and has determined that there are no subsequent events requiring disclosure in these condensed consolidated interim financial statements other than the items noted below.
Subsequent to March 31, 2020, the Company issued 2,096 shares of common stock for services.
20 Item 2.Management’s Discussion and Analysis of Financial Condition and Results of This Management’s Discussion and Analysis (“MD&A”) contains “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995, which represent our projections, estimates, expectations, or beliefs concerning, among other things, financial items that relate to management’s future plans or objectives or to our future economic and financial performance. In some cases, you can identify these statements by terminology such as “may”, “should”, “plans”, “believe”, “will”, “anticipate”, “estimate”, “expect” “project”, or “intend”, including their opposites or similar phrases or expressions. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation by us or any other person that our events or plans will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this report. Except as may be required under applicable securities laws, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this report or to reflect the occurrence of unanticipated events. You should review the factors and risks we describe under “Risk Factors” in Impact of Coronavirus (“COVID-19”) on our Operations, Financial Condition, Liquidity and Results of Operations In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China and on March 11, 2020 it was declared a pandemic by the World Health Organization. The ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the duration and severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or us, may determine are needed. To date, the COVID-19 pandemic has not caused significant disruption to our clinical studies. Each of our ongoing Phase 2 clinical studies is being conducted at a single site which has reduced the risk of disruption. Patient visits are currently taking place on schedule for both the MD Anderson Cancer Center We have cash available to fund planned operations into the fourth quarter of calendar Background On June 9, 2020, we entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), by and among Adgero Acquisition Corp., our wholly-owned subsidiary incorporated in the State of Delaware (“Merger Sub”), and Adgero Biopharmaceuticals Holdings, Inc., a Delaware corporation (“Adgero”). On August 19, 2020, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into Adgero (the “Merger”), the separate corporate existence of Merger Sub ceased and Adgero continued its existence under Delaware law as the surviving corporation in the Merger and became our direct, wholly-owned subsidiary. As a result of the Merger, each issued and outstanding share of Adgero common stock, par value $0.0001 per share (the “Adgero Common Stock”) (other than treasury shares held by Adgero), was converted automatically into the right to receive 1.5740 shares (the “Exchange Ratio”) of our common stock, and cash in lieu of any fractional shares. Also, each outstanding warrant to purchase Adgero Common Stock was converted into a warrant exercisable for that number of shares of our common stock equal to the product of (x) the aggregate number of shares of Adgero Common Stock for which such warrant was exercisable and (y) the Exchange Ratio. Following the completion of the Merger, we changed our name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc. and began trading on Nasdaq under the symbol “KTRA”. 21 We are the parent company of Del Mar (BC), a British Columbia, Canada corporation, and Adgero. We are also the parent company to Callco and Exchangeco which are British Columbia, Canada corporations. Callco and Exchangeco were formed to facilitate the Reverse Acquisition. References to “we”, “us”, and “our”, refer to Kintara and our wholly-owned subsidiaries, Del Mar (BC), Adgero, Callco and Exchangeco. We are dedicated to the development of novel cancer therapies for patients with unmet medical needs. Our mission is to benefit patients by developing and commercializing anti-cancer therapies for patients whose solid tumors exhibit features that make them resistant to, or unlikely to respond to, currently Our two lead candidates are VAL-083, a novel, validated, DNA-targeting agent, for the treatment of Recent Highlights On January 13, 2021, we announced the initiation of patient recruitment for the VAL-083 study arm of the Global Coalition for Adaptive Research (“GCAR”) registrational Phase 2/3 clinical trial for GBM. The trial, titled GBM AGILE (Glioblastoma Adaptive Global Innovative Learning Environment) Study, is a revolutionary, patient-centered, adaptive platform trial for registration evaluating multiple therapies for patients with newly-diagnosed and recurrent GBM. We also announced that VAL-083 is the only therapeutic agent currently being evaluated in all three GBM patient subtypes: newly-diagnosed methylated MGMT; newly-diagnosed unmethylated MGMT; and recurrent. On November 19, 2020 at the Society of Neuro-Oncology (“SNO”) Annual Meeting we announced positive data updates from our ongoing Phase 2 clinical studies in newly-diagnosed first-line, newly-diagnosed adjuvant, and recurrent GBM. On October 21, 2020, we announced we had entered into a definitive agreement with GCAR to include VAL-083 in GCAR’s GBM AGILE Study. We plan to utilize the GBM AGILE Study to serve as the basis for VAL-083’s new drug application (“NDA”) submission and registration. On August 19, 2020, we completed our merger with Adgero and through three closings of a private placement, the first of which also closed on August 19, 2020, we raised aggregate gross proceeds of approximately $25 million, or net proceeds of approximately $21.6 million. Private Placement of Series C Preferred Stock In conjunction with the closing of the Merger, and through a series of three private placement closings, we issued a total of 25,028 shares of Series C Convertible Preferred Stock (the “Series C Stock”) at a purchase price of $1,000 per share for total aggregate gross proceeds of approximately $25 million, or net proceeds of approximately $21.6 million. Each closing of the private placement was priced at-the-market under the rules of the Nasdaq Stock Market. The Series C Stock was issued in three series (C-1, C-2, and C-3) at conversion prices equal to $1.16, $1.214 and $1.15, respectively. As result, we issued a total of 25,028 shares of Series C Stock, which will be convertible into an aggregate of 21,516,484 shares of common stock. The Series C Stock will be entitled to receive dividends, payable in shares of common stock at a rate of 10%, 15%, 20% and 25% of the number of shares of common stock issuable upon conversion of the Series C Stock, on the 12th, 24th, 36th and 48th month, anniversary of the initial closing of the private placement which occurred on August 19, 2020; provided, that the holder of such shares has not converted the shares of Series C Stock prior to the applicable dividend rate. In connection with the private placement, we entered into a Placement Agency Agreement (the “Placement Agency Agreement”), with Aegis Capital Corp., which acted as our exclusive placement agent (the “Placement Agent”) for the private placement. Pursuant to the terms of the Placement Agency Agreement, in connection with the three closings of the private placement, we paid the Placement Agent an aggregate cash fee of $2,502,800, a non-accountable expense allowance of approximately $650,840 and issued to the Placement Agent, or its designees, warrants to purchase 2,504 shares of Series C Stock (the “Placement Agent Warrants”). The Placement Agent Warrants have an exercise price of $1,000 per share, provide for a cashless exercise feature and are exercisable for a period of four years from the date of the initial closing of the private placement. The Series C Stock issuable upon exercise of the Placement Agent Warrants will be convertible into shares of common stock and will be entitled to the same dividend rights as the outstanding Series C Stock. In addition, and as compensation for advisory services rendered in connection with the Merger, we issued 571,951 shares of common stock to the Placement Agent. 22 Targeted Clinical Milestones (calendar quarters) Below are our planned, or expected, milestones for the respective time periods noted: Q1 2021 Commence Enrollment – GCAR GBM AGILE Registration Study Q2 2021 American Association for Cancer Research Posters – Data Updates for Phase 2 GBM Studies VAL-083: Top Line Results – Phase 2 Recurrent/Adjuvant GBM Study REM-001: First patient enrolled – CMBC lead-in study Q4 2021 REM-001: Top Line Results – CMBC lead-in study Q1 2022 VAL-083: Graduation from Stage 1 to Stage 2 in the GCAR GBM AGILE Registration Study Product Pipeline 23 VAL-083 Background VAL-083 is a first-in-class, small-molecule, DNA-targeting chemotherapeutic that has demonstrated activity against a range of tumor types in prior Phase 1 and Phase 2 clinical studies sponsored by the US National Cancer Institute (“NCI”). “First-in-class” means that VAL-083 embodies a unique molecular structure which is not an analogue or derivative of any approved product, or product under development, for the treatment of cancer. As part of our business strategy, we leverage and build upon these prior NCI investments and data from more than 40 NCI- Phase 1 and Phase 2 clinical studies, which includes an estimated 1,100 patient safety database. Prior studies of VAL-083 have shown increased median overall survival benefits versus radiation alone validating the tumor affecting properties of VAL-083. Our recent research has highlighted the opportunities afforded by VAL-083’s unique mechanism of action and its potential to address unmet medical needs MGMT-unmethylated GBM, Operations.Operationsourthis report on Form 10-K for the year ended June 30, 20192020 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.References to “we”, “us”, and “our”, refer to DelMar Pharmaceuticals, Inc. and our wholly-owned subsidiaries, Del Mar (BC), Callco and Exchangeco.(“MDACC”) study being conducted in Houston, Texas and the Sun Yat-sen University Cancer Center (“SYSUCC”) study being conducted in China. In addition, thus far, any disruptions to patient treatments have been within allowances under each study protocol. Access to the sites by our clinical monitors has been limited during the COVID-19 pandemic but the recording of study data in both studies and patient treatments at both study sites are being conducted per protocol at this time.2020.2021. Consequently, management is pursuing various financing alternatives to fund our operations so we can continue as a going concern. However, the COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets. Management plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership arrangements but theThe ultimate impact of the COVID-19 pandemic on our ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and new information which may emerge concerning the severity of the COVID-19 pandemic. Wemay not be able to raise sufficient additional capital and may tailor our drug candidate development programprograms 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.Recent HighlightsKintara Therapeutics, Inc. (formerly DelMar Pharmaceuticals, Inc.) is a clinical stage, biopharmaceutical company focused on the development and commercialization of new cancer therapies.●On May 5, 2020 we announced enrollment of our 22nd patient (study over 90% enrolled) in the adjuvant arm of our ongoing Phase 2 clinical study investigating adjuvant treatment (pre-temozolomide -- or TMZ – maintenance therapy) of MGMT-unmethylated glioblastoma multiforme (“GBM”) with VAL-083. The adjuvant arm of the Phase 2 study of VAL-083 being conducted at the MDACC is designed to enroll up to 24 newly-diagnosed patients who have undergone surgery and chemoradiation with TMZ but will now receive VAL-083 in place of standard of care TMZ for adjuvant therapy. Additionally, in the recurrent arm of the study, which is also being conducted at MDACC, 72 patients out of a planned 83 patients have been enrolled as of May 5, 2020.●On March 26, 2020 we received a listing extension from the Staff of the Listing Qualifications Department of The Nasdaq Capital Market LLC (“Nasdaq”). The extension granted us until September 21, 2020 to regain compliance with the $1.00 Minimum Bid Price requirement for continued listing on Nasdaq.On April 20, 2020, we received a second notification letter from Nasdaq stating that in response to the current extraordinary market conditions, Nasdaq had filed a rule change with the Securities and Exchange Commission to suspend the compliance period for the minimum closing bid price requirement from April 16, 2020 through June 30, 2020. As a result, we have until December 7, 2020 to regain compliance. We can regain compliance if at any time during the suspension or during the remaining compliance period resuming after the suspension the closing bid price of our common stock is at least $1.00 per share for a minimum of ten consecutive business days.●On February 19, 2020 we announced we had enrolled the final patient in our ongoing Phase 2 clinical study investigating the first-line treatment of VAL-083 with radiation therapy in newly-diagnosed, MGMT-unmethylated GBM being conducted at SYSUCC.●On January 29, 2020 we announced the publication of previously released interim clinical data in the February 2020 issue of peer-reviewed journal, Glioma. The article highlights results from the first 22 patients of our ongoing Phase 2 clinical study investigating the first-line treatment of VAL-083 with radiation therapy in newly-diagnosed, MGMT-unmethylated GBM being conducted at SYSUCC.VAL-083 Clinical Studiesdevelopingavailable therapies, with particular focus on orphan cancer indications. GBMdrug-resistant solid tumors such as glioblastoma multiforme (“GBM”) and potentially other solid tumors, including ovarian cancer, non-small cell lung cancer (“NSCLC”), and diffuse intrinsic pontine glioma (“DIPG”) and REM-001, a late-stage photodynamic therapy (“PDT”) for the treatment of cutaneous metastatic breast cancer (“CMBC”). PDT is a treatment that uses light sensitive compounds, or photosensitizers, that, when exposed to specific wavelengths of light, act as a catalyst to produce a form of oxygen that induces local tumor cell death. byin a well-defined and acknowledged biomarker selected population within the larger GBM population. We are thus focusing our initial development efforts on patients whose tumors exhibit biological features that make them resistant to, or unlikely to respond to, currently available therapies.therapies as identified by the National Comprehensive Cancer Network (“NCCN”). For example, our research demonstrating VAL-083’s activity in GBM is independent of the MGMTO6-methyl guanine methyltransferase (“MGMT”) methylation status allows us to focus patient selection based on this important biomarker.biomarker and thus improve the probability of success in our current and future clinical studies.The evaluationWe are currently conducting two open-label, biomarker-driven, Phase 2 studies in MGMT-unmethylated GBM. MGMT is a DNA-repair enzyme that is associated with resistance to temozolomide (“TMZ”), the current standard-of-care chemotherapy used in the treatment of GBM. Greater than 60% of GBM patients have MGMT-unmethylated tumors and exhibit a high expression of MGMT, promoter methylation status has increasingly become common practicewhich is correlated with TMZ treatment failure and poor patient outcomes as indicated in the diagnostic assessment of GBM. In September 2017, the National Comprehensive Cancer Network (“NCCN”) updated itsNCCN guidelines for the standardGBM treatment published in September 2017. Our research to-date demonstrates that VAL-083’s anti-tumor activity is independent of GBM based on MGMT methylation status. We believe these guidelines provide for enhanced opportunities for us to capitalize on VAL-083’s unique mechanism of action by utilizingexpression. In our current Phase 2 studies we are using MGMT methylation as a biomarker to optimizeidentify patients for treatment with VAL-083 in three distinct GBM patient selection for our novel DNA-targeting agent to focus on the majority ofpopulations:patients who are diagnosed with MGMT-unmethylated tumors.currently comprising two ongoing, separate Phase 2 clinical studies for:Our current priority is to leverage this research, and VAL-083’s unique mechanism of action, to efficiently advance VAL-083 for the most promising indications, including: