UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30,~~, 2019~~ 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________.

Commission File Number: ~~001-11038~~001-36291

____________________

DIAMEDICA THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

British Columbia

(State or other jurisdiction of incorporation or organization)

Not Applicable

(I.R.S. Employer Identification No.)

2Two Carlson Parkway, Suite 260

Minneapolis, Minnesota 55447

(Address of principal executive offices) (Zip code)

(763) 312-~~6755~~-6755

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Voting common shares, no par value per share	DMAC	The Nasdaq Stock Market LLC

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 ☒ NO ☐

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 ☒ 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 ☒

As of ~~November 6, 2019,~~August 10, 2020, there were ~~12,006,874~~18,739,074 voting common shares of the registrant outstanding.

This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, that are subject to the safe harbor created by those sections. For more information, see “Cautionary Note Regarding Forward-Looking Statements.”

As used in this report, references to “DiaMedica,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires, refer to DiaMedica Therapeutics Inc. and its subsidiaries, all of which are consolidated in DiaMedica’s condensed consolidated financial statements. References in this report to “common shares” mean our voting common shares, no par value per share.

We own various unregistered trademarks and service marks, including our corporate logo. Solely for convenience, the trademarks and trade names in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that the owner of such trademarks and trade names will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

Statements in this report that are not descriptions of historical facts are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations and are subject to risks and uncertainties that could negatively affect our business, operating results, financial condition and share price. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “will,” “would,” the negative of these terms or other comparable terminology, and the use of future dates.

The forward-looking statements in this report include, among other things, statements about:

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under “Part I. Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019 and “Part II. Item 1A. Risk Factors” in this report. Moreover, we operate in a very competitive and rapidly-changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Except as required by law, including the securities laws of the United States, we do not intend to update any forward-looking statements to conform these statements to actual results or to changes in our expectations.

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating revenues:
License revenues	$	—		$	500		$	—		$	500
													2020			2019			2020			2019
Operating expenses:
Research and development		1,617			1,210			6,098			3,071		$	1,629		$	1,874		$	3,010		$	4,481
General and administrative		1,044			777			2,725			2,073			1,079			867			2,102			1,681
Operating loss		(2,661	)		(1,487	)		(8,823	)		(4,644	)		(2,708	)		(2,741	)		(5,112	)		(6,162	)

Other (income) expense:
Governmental assistance - research incentives		(263	)		(196	)		(663	)		(1,046	)		(65	)		(226	)		(180	)		(400	)
Other (income) expense, net		38			39			(20	)		61
Change in fair value of warrant liability		—			—			—			39
Total other (income) expense		(225	)		(157	)		(683	)		(946	)
Other income, net														(178	)		(54	)		(51	)		(58	)
Total other income														(243	)		(280	)		(231	)		(458	)

Loss before income tax expense		(2,436	)		(1,330	)		(8,140	)		(3,698	)		(2,465	)		(2,461	)		(4,881	)		(5,704	)

Income tax expense		12			57			29			74			9			8			18			17

Net loss		(2,448	)		(1,387	)		(8,169	)		(3,772	)		(2,474	)		(2,469	)		(4,899	)		(5,721	)

Other comprehensive income
Unrealized (gain) loss on marketable securities		5			—			(6	)		—
Unrealized gain (loss) on marketable securities														(13	)		8			27			11

Net loss and comprehensive loss	$	(2,453	)	$	(1,387	)	$	(8,163	)	$	(3,772	)	$	(2,487	)	$	(2,461	)	$	(4,872	)	$	(5,710	)

Basic and diluted net loss per share	$	(0.20	)	$	(0.18	)	$	(0.68	)	$	(0.51	)	$	(0.17	)	$	(0.21	)	$	(0.36	)	$	(0.48	)
Weighted average shares outstanding – basic and diluted		12,006,874			7,836,683			11,981,233			7,406,378			14,139,074			11,979,401			13,623,400			11,968,200

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Additional paid-in capital

Balance at beginning of period
$ 63,380 $ 47,974 $ 62,993 $ 41,033
Issuance of common shares and warrants, net offering costs of $529
— — — 5,840
Exercise of common share purchase warrants
— 32 — 645
Exercise of stock options
— — 75 43
Share-based compensation
451 110 763 555
Balance at end of period
63,831 48,116 63,831 48,116

Accumulated other comprehensive income

Balance at beginning of period
11 — — —
Unrealized gain (loss) on marketable securities
(5 ) — 6 —
Balance at end of period
6 — 6 —

Accumulated deficit

Balance at beginning of period
(51,689 ) (42,619 ) (45,968 ) (40,234 )
Net loss
(2,448 ) (1,387 ) (8,169 ) (3,772 )
Balance at end of period
(54,137 ) (44,006 ) (54,137 ) (44,006 )

Total shareholders’ equity
$ 9,700 $ 4,110 $ 9,700 $ 4,110

	Common Shares		Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Total Shareholders’ Equity
Balances at December 31, 2019		12,006,874	$	64,232	$	2	$	(56,617	)	$	7,617
Issuance of common shares net of offering costs of $819		2,125,000		7,682		—		—			7,682
Exercise of common stock options		7,200		16		—		—			16
Share-based compensation expense		—		829		—		—			829
Unrealized gain on marketable securities		—		—		27		—			27
Net loss		—		—		—		(4,899	)		(4,899	)
Balances at June 30, 2020		14,139,074	$	72,759	$	29	$	(61,516	)	$	11,272

DiaMedica Therapeutics Inc.
Notes to the Condensed Consolidated Financial Statements

2.	Risks ~~Uncertainties~~ and ~~Going Concern~~Uncertainties

DiaMedica operates in a highly regulated and competitive environment. The development, manufacturing and marketing of pharmaceutical products require approval from, and are subject to ongoing oversight by, the Food and Drug Administration ~~(“FDA”)~~(FDA) in the United States, the European Medicines Agency ~~(“EMA”)~~(EMA) in the European Union and comparable agencies in other countries. ~~As a result, DiaMedica is subject to many risks and uncertainties, including those described in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2018 under “~~~~Part I. Item 1A. Risk Factors~~.” We are in the clinical stage of development of our initial product candidate, DM199, for the treatment of CKD and AIS. The Company has not completed the development of any product candidate and, accordingly, has not begun to commercialize any product candidate or generate any revenues from the commercial sale of any product candidate. DM199 requires significant additional clinical testing and investment prior to seeking marketing approval and is not expected to be commercially available for at least three to five years, if at all.

Additionally, clinical testing is currently being adversely impacted by the novel strain of the coronavirus (COVID-19) pandemic. We are experiencing slower than expected enrollment in the REDUX clinical trial due to the reduction or suspension of activities at our clinical study sites as they address staff and patient safety concerns and patient concerns related to visiting clinical study sites. We anticipate that the COVID-19 pandemic will likely continue to adversely affect our ability to recruit or enroll subjects and we cannot provide any assurance as to when sites will be able to resume enrollment at a normal rate.

The Company’s future success is dependent upon the success of its development efforts, its ability to demonstrate clinical progress for its DM199 product candidate in the United States or other markets, its ability to obtain required governmental approvals of its product candidate, its ability to license or market and sell its DM199 product candidate and its ability to obtain additional financing to fund these efforts.

As of ~~September~~June 30, ~~2019,~~2020, we have incurred losses of ~~$54.1~~$61.5 million since our inception in 2000. For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, we incurred a net loss of ~~$8.2~~$4.9 million and negative cash flows from operating activities of ~~$7.2~~$3.8 million. We expect to continue to incur operating losses until such time as any future product sales, royalty payments, licensing fees, and/or milestone payments generate revenue sufficient to fund our continuing operations. For the foreseeable future, we expect to incur significant operating losses as we continue the ~~research,~~ development and clinical trials of, and to seek regulatory approval for, our DM199 product candidate. As of ~~September~~June 30, ~~2019,~~2020, DiaMedica had cash and cash equivalents of ~~$4.7~~$5.0 million, marketable securities of ~~$5.0~~$6.8 million, working capital of ~~$9.6~~$11.2 million and shareholders’ equity of ~~$9.7~~$11.3 million. Our principal source of cash has been net proceeds from the issuance of equity securities. Although the Company has previously been successful in obtaining financing through equity securities offerings, there is no assurance that we will be able to do so in the future. This is particularly true if our clinical data is not positive or economic and market conditions deteriorate.

We ~~anticipate~~expect that we will need substantial additional capital to further our research and development activities, complete the required clinical trials ~~fund our~~and regulatory activities and otherwise develop our product candidate, DM199, or any future product candidates, to a point where they may be commercially sold. We expect our current cash resources towill be sufficient to allow us to complete ~~our current ongoing Phase II REMEDY trial in patients with AIS and the first two~~all three cohorts in ~~the~~our REDUX Phase II study in patients with CKD and to otherwise fund our planned operations ~~into the fourth quarter of 2020.~~through 2021. However, the amount and timing of our future funding requirements will depend on many factors, including the timing and results of ~~our~~ ongoing development efforts, ~~including enrollment in our clinical trials,~~ the potential expansion of current development programs, potential new development programs and related general and administrative support. We may require significant additional funds earlier than we currently expect and there is no assurance that we will not need or seek additional funding prior to such time. We may elect to raise additional funds even before we need them if market conditions for raising additional capital are favorable.

The accompanying interim condensed consolidated financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business and do not include any adjustments relating to the recoverability or classification of assets or the amounts of liabilities that might result from the outcome of these uncertainties. Our ability to continue as a going concern, realize the carrying value of our assets and discharge our liabilities in the ordinary course of business is dependent upon a number of factors, including our ability to obtain additional financing, the success of our development efforts, our ability to obtain marketing approval for our initial product candidate, DM199, in the United States, the European Union or other markets, and ultimately our ability to license and/or market and sell our initial product candidate. These factors, among others, raise substantial doubt about our ability to continue operations as a going concern. See Note 3 titled “Liquidity and Management’s Plans.”

3.	~~Liquidity~~ ~~and Management Plans~~

As of December 31, 2018 and September 30, 2019, the Company had an accumulated deficit of $46.0 million and $54.1 million, respectively, and the Company has not generated positive cash flow from operations since its inception.

Additional funding will be required to continue the Company’s research and development and other operating activities. In the next 12 months, we will likely seek to raise additional funds through various sources, such as equity or debt financings, or through strategic collaborations and license agreements. We can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. This risk would increase if our clinical data is not positive or economic and market conditions deteriorate.

There can be no assurances that we will be able to obtain additional financing on commercially reasonable terms, or at all. To the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our shareholders will be diluted. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. The availability of financing may be affected by our clinical data and other results of scientific and clinical research; the ability to attain regulatory approvals; market acceptance of our product candidates; the state of the capital markets generally with particular reference to pharmaceutical, biotechnology, and medical companies; the status of strategic alliance agreements; and other relevant commercial considerations.

If adequate funding is not available when needed, we may be required to scale back our operations by taking actions that may include, among other things, reducing use of outside professional service providers, reducing the number of our employees or employee compensation, or implementing other cost reduction strategies; significantly modify or delay the development of our DM199 product candidate; license to third parties the rights to commercialize our DM199 product candidate for CKD, AIS or other indications that we would otherwise seek to pursue, or otherwise relinquish significant rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us; and/or divest assets or cease operations through a merger, sale, or liquidation of our company.

4.	Summary of Significant Accounting Policies

Interim f~~inancial~~ s~~tatements~~financial statements

We have prepared the accompanying condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States ~~(“US GAAP”)~~(US GAAP) for interim financial information and with the instructions to Form 10-Q and Regulation S-X of the Securities and Exchange Commission ~~(“SEC”)~~(SEC). Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. These condensed consolidated financial statements reflect all adjustments consisting of normal recurring accruals which, in the opinion of management, are necessary to present fairly our consolidated financial position, consolidated results of operations, consolidated statement of shareholders’ equity and consolidated cash flows for the periods and as of the dates presented. Our fiscal year ends on December 31. The condensed consolidated balance sheet as of December 31, ~~2018~~2019 was derived from our audited consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with ~~the~~our annual consolidated financial statements and the notes thereto. The nature of our business is such that the results of any interim period may not be indicative of the results to be expected for the entire year. ~~Certain prior period amounts have been reclassified to conform to the current basis of presentation.~~

Cash and cash equivalents

The Company considers all bank deposits, including money market funds, and other investments, purchased with an original maturity to the Company of three months or less, to be cash and cash equivalents. The carrying amount of our cash equivalents approximates fair value due to the short maturity of the investments.

Concentration of c~~redit~~ r~~isk~~credit risk

Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash, ~~and~~ cash equivalents and marketable securities.

The Company maintains its cash balances primarily with two financial institutions. These balances generally exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in cash and cash equivalents.

The Company believes that the credit risk related to marketable securities is limited due to the adherence to an investment policy focused on the preservation of principal.

Marketable s~~ecurities~~securities

The Company’s marketable securities typically consist ~~solely~~ of obligations of the United States government and its agencies, investment grade corporate obligations and bank certificates of deposit, which are classified as available-for-sale ~~securities~~ and ~~were~~included in current assets as they are intended to fund current operations. Securities are valued ~~in accordance with the fair value measurement guidance discussed below.~~based on market prices for similar assets using third party certified pricing sources. Available-for-sale securities are carried at fair value with unrealized gains and losses reported as a component of shareholders’ equity in accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization or accretion is included in interest income. Realized gains and losses, if any, are calculated on the specific identification method and are included in other income in the condensed consolidated statements of operations.

Available-for-sale securities are reviewed for possible impairment at least quarterly, or more frequently if circumstances arise that may indicate impairment. When the fair value of the securities declines below the amortized cost basis, impairment is indicated and it must be determined whether it is other than temporary. Impairment is considered to be other than temporary if the Company: (i) intends to sell the security, (ii) will more likely than not be forced to sell the security before recovering its cost, or (iii) does not expect to recover the security’s amortized cost basis. If the decline in fair value is considered other than temporary, the cost basis of the security is adjusted to its fair market value and the realized loss is reported in earnings. Subsequent increases or decreases in fair value are reported as a component of shareholders’ equity in accumulated other comprehensive income (loss). There were no other-than-temporary unrealized losses as of June 30, 2020.

Fair value m~~easurements~~measurements

Under the authoritative guidance for fair value measurements, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a 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 in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The hierarchy is broken down into three levels defined as follows:

Level 1 Inputs — quoted prices in active markets for identical assets and liabilities

Level 2 Inputs — observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 Inputs — unobservable inputs

As of ~~September~~June 30, ~~2019,~~2020, the Company believes that the carrying amounts of its other financial instruments, including amounts receivable, accounts payable and accrued liabilities, approximate their fair value due to the short-term maturities of these instruments. See Note 5,4, titled “Marketable Securities” for additional information.

~~Recently adopted accounting p~~~~ronouncements~~

~~In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02,~~ ~~Leases~~~~. The guidance in ASU 2016-02 supersedes the lease recognition requirements in the Accounting Standards Codification Topic 840,~~ ~~Leases~~. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The new standard requires the immediate recognition of all excess tax benefits and deficiencies in the statements of operations and requires classification of excess tax benefits as an operating activity as opposed to a financing activity in the statements of cash flows. This standard became effective for us on January 1, 2019.

The FASB has subsequently issued the following amendments to ASU 2016-02, which have the same effective date and transition date of January 1, 2019, and which we collectively refer to as the new leasing standards:

●

~~ASU No. 2018-01,~~ ~~Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842~~, which permits an entity to elect an optional transition practical expedient to not evaluate under Topic 842 land easements that existed or expired prior to adoption of Topic 842 and that were not previously accounted for as leases under the prior standard, ASC 840, ~~Leases~~.

●

~~ASU No. 2018-10,~~ ~~Codification Improvements to Topic 842, Leases~~~~, which amends certain narrow aspects of the guidance issued in ASU 2016-02.~~

●

~~ASU No. 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements~~, which allows for a transition approach to initially apply ASU 2016-02 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption as well as an additional practical expedient for lessors to not separate non-lease components from the associated lease component.

●

~~ASU No. 2018-20,~~ ~~Narrow-Scope Improvements for Lessors~~~~, which contains certain narrow scope improvements to the guidance issued in ASU 2016-02.~~

~~Additional information and disclosures required by this new standard are contained in Note 9, titled “~~~~Operating Lease~~.”

We adopted the new leasing standards on January 1, 2019, using a modified retrospective transition approach to be applied to leases existing as of, or entered into after, January 1, 2019; and, consequently, financial information will not be updated and the disclosures required under Topic 842 will not be provided for dates and periods prior to January 1, 2019. We have reviewed our existing lease contracts and the impact of the new leasing standards on our consolidated results of operations, financial position and disclosures. Upon adoption of the new leasing standards, we recognized a lease liability and related right-of-use asset on our condensed consolidated balance sheet of approximately $205,000.

~~In June 2018, the FASB issued ASU No. 2018-07, “~~~~Improvements to Nonemployee Share-Based Payment Accounting~~,” to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU is effective for public entities for fiscal years beginning after December 15, 2018. Prior to the adoption of this ASU, share-based compensation awarded to non-employees was subject to revaluation over its vesting terms. Subsequent to the adoption of this ASU, non-employee share-based payment awards are measured on the date of grant, similar to share-based payment awards granted to employees. We adopted this standard on January 1, 2019 and the adoption of this ASU did not have a material impact on our financial position or our condensed consolidated statements of operations.

Accrued interest receivable on available-for-sale securities ~~was $25,000 as of September 30, 2019 and~~ is included in amounts ~~receivable.~~receivable and was $18,000 and $25,000 as of June 30, 2020 and December 31, 2019, respectively.

There were no transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Under the terms of the Company’s investment policy, purchases of marketable securities are limited to investment grade governmental and corporate obligations and bank certificates of deposit with a primary objective of principal preservation. Maturities of individual securities are less than one year and the amortized cost of all securities approximated fair value as of ~~September~~June 30, 2020 and December 31, 2019.

9.	Operating Lease

We lease certain office space under a non-cancelable operating lease. This lease does not have significant rent escalation holidays, concessions, leasehold improvement incentives or other build-out clauses. Further this lease does not contain contingent rent provisions. This lease terminates on August 31, 2022 and we do not have an option to renew. This lease does include both lease (e.g., fixed rent) and non-lease components (e.g., common-area and other maintenance costs). The non-lease components are deemed to be executory costs and are therefore excluded from the minimum lease payments used to determine the present value of the operating lease obligation and related right-of-use asset.

This lease does not provide an implicit rate and, due to the lack of a commercially salable product, we are generally considered unable to obtain commercial credit. Therefore, we estimated our incremental borrowing rate to be 9%, considering the quoted rates for the lowest investment-grade debt and the interest rates implicit in recent financing leases. We used our estimated incremental borrowing rate and other information available at the lease commencement date in determining the present value of the lease payments.

Our operating lease cost and variable lease costs were ~~$49,000~~$32,000 and ~~$40,000,~~$26,000, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Variable lease costs consist primarily of common area maintenance costs, insurance and taxes which are paid based upon actual costs incurred by the lessor.

Maturities of our operating lease obligation are as follows as of ~~September~~June 30, ~~2019~~2020 (in thousands):

2019
$ 16
2020
66
2021
68
2022
46
Total lease payments
$ 196
Less interest portion
(25 )
Present value of lease obligation
$ 171

110.	Shareholders’ Equity

Authorized capital stock

The Company has authorized share capital of an unlimited number of voting common shares and the shares do not have a stated par value.

Common shareholders are entitled to receive dividends as declared by the Company, if any, and are entitled to one vote per share at the Company's annual general meeting and any special meeting.

Equity issued during the ~~the nine~~six months ended ~~September~~June 30, 2020

On February 13, 2020, we issued and sold an aggregate of 2,125,000 common shares in a public, underwritten offering at a public offering price of $4.00 per share. As a result of the offering, we received gross proceeds of $8.5 million, which resulted in net proceeds to us of approximately $7.7 million, after deducting the underwriting discount and offering expenses.

During the six months ended June 30, 2020, 7,200 common shares were issued on the exercise of options for gross proceeds of $16,000 and no warrants were exercised.

Equity issued during the six months endedJune 30 ~~201~~9, 2019

During the ~~nine~~six months ended ~~September~~June 30, 2019, 50,000 common shares were issued on the exercise of options for gross proceeds of $75,000 and no warrants were exercised.

~~Equity issued~~ ~~during~~ ~~the nine months ended September 30,~~ ~~2018~~

On March 29, 2018, the Company completed, in two tranches, a brokered and non-brokered private placement of 1,322,965 units at a price of $4.90 per unit for aggregate gross proceeds of approximately $6.3 million. Each unit consisted of one common share and one half of one common share purchase warrant. The Company issued 661,482 warrants. Each warrant entitles the holder to purchase one common share at a price of $7.00 at any time prior to expiry on March 19, 2020 and March 29, 2020 for Tranche 1 and Tranche 2, respectively. The warrants are subject to early expiry under certain conditions. The warrant expiry date can be accelerated at the option of the Company, in the event that the volume-weighted average trading price of the Company’s common shares exceeds $12.00 per common share for any 21 consecutive trading days. In connection with this offering, the Company paid aggregate finder’s fees of approximately $384,000 and issued an aggregate of 80,510 compensation warrants. Each compensation warrant entitles the holder to purchase one common share at $4.90 for a period of 2 years from the closing of the offering, subject to acceleration on the same terms as the common share purchase warrants.

During the nine months ended September 30, 2018, 128,594 common shares were issued on the exercise of warrants for gross proceeds of $521,000 and 16,954 common shares were issued on the exercise of options for gross proceeds of $43,000.

Shares reserved

Common shares reserved for future issuance are as follows:

	~~September~~June 30,~~, 2019~~ 2020
Stock options outstanding		~~1,251,893~~1,413,988
Deferred share units outstanding		~~21,183~~47,237
Shares available for grant under the DiaMedica Therapeutics Inc. ~~Stock Option~~Omnibus Incentive Plan		~~1,372,675~~1,103,551
Common shares issuable under common share purchase warrants		~~807,563~~255,000
Total		~~3,453,314~~2,819,776

112.Net Loss Per Share

~~Net Loss Per Share~~

We compute net loss per share by dividing our net loss (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period, if any, are weighted for the portion of the period that they were outstanding. The computation of diluted earnings per share, or EPS, is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Our diluted EPS is the same as basic EPS due to common equivalent shares being excluded from the calculation, as their effect is anti-dilutive.

The following table summarizes our calculation of net loss per common share for the periods (in thousands, except share and per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Net loss	$	(2,448	)	$	(1,387	)	$	(8,169	)	$	(3,772	)	$	(2,474	)	$	(2,469	)	$	(4,899	)	$	(5,721	)
Weighted average shares outstanding—basic and diluted		12,006,874			7,836,683			11,981,233			7,406,378			14,139,074			11,979,401			13,623,400			11,968,200
Basic and diluted net loss per share	$	(0.20	)	$	(0.18	)	$	(0.68	)	$	(0.51	)	$	(0.17	)	$	(0.21	)	$	(0.36	)	$	(0.48	)

The following outstanding potential common shares were not included in the diluted net loss per share calculations as their effects were not dilutive:

~~14.~~12.

Share-Based Compensation

2019 Omnibus Incentive Plan

The DiaMedica Therapeutics Inc. 2019 Omnibus Incentive Plan ~~(the “2019 Plan”)~~(2019 Plan) was adopted by the Board of Directors in March 2019 and approved by our shareholders at our annual general and special meeting of shareholders held on May 22, 2019. The 2019 Plan permits the Board, or a committee or subcommittee thereof, to grant to the Company’s eligible employees, non-employee directors and consultants non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards and other stock-based awards. We grant options to purchase common shares under the 2019 Plan at no less than the fair market value of the underlying common shares as of the date of grant. Options granted to employees and non-employee directors have a maximum term of ten years and generally vest in approximately equal quarterly installments over one to three years. Options granted to non-employees have a maximum term of five years and generally vest in approximately equal quarterly installments over one year. Subject to adjustment as provided in the 2019 Plan, the maximum number of the Company’s common shares authorized for issuance under the 2019 Plan is 2,000,000 shares. As of ~~September~~June 30, ~~2019,~~2020, options to purchase ~~627,325~~870,395 common shares were outstanding and there were 26,054 common shares reserved for deferred stock units (DSUs) outstanding under the 2019 Plan.

~~Stock~~Prior stock option plan

The DiaMedica Therapeutics Inc. Stock Option Plan, Amended and Restated November 6, 2018 ~~(the “Prior Plan”)~~(Prior Plan), was terminated by the Board of Directors in conjunction with the shareholder approval of the 2019 Plan. Awards outstanding under the Prior Plan remain outstanding in accordance with and pursuant to the terms thereof. Options granted under the Prior Plan have terms similar to those used under the 2019 Plan. As of ~~September~~June 30, ~~2019,~~2020, options to purchase ~~624,568~~543,593 common shares were outstanding under the Prior Plan.

As the TSX Venture Exchange was the principal trading market for the Company’s common shares, all options granted prior to December 31, 2018 ~~under the Prior Plan~~ were priced in Canadian dollars. Options granted after December 31, 2018 ~~under the 2019 Plan and the Prior Plan~~ have been priced in United States dollars.

~~Deferred~~Prior deferred share unit plan

The DiaMedica Therapeutics Inc. Amended and Restated Deferred Share Unit Plan ~~(the “DSU Plan”)~~(DSU Plan) was terminated by the Board of Directors in conjunction with the shareholder approval of the 2019 Plan. Awards outstanding under the DSU Plan remain outstanding in accordance with and pursuant to the terms thereof. As of ~~September~~June 30, ~~2019,~~2020, there were 21,183 common shares reserved for DSUs outstanding.

The aggregate number of common shares reserved for issuance for awards granted under the 2019 Plan, the Prior Plan and the DSU Plan as of ~~September~~June 30, ~~2019~~2020 was ~~1,273,076.~~1,461,225.

Share-based compensation expense for each of the periods presented is as follows (in thousands):

	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended June 30					Six Months Ended June 30
	2019		2018		2019		2018		2020		2019			2020		2019
Research and development	$	151	$	26	$	276	$	129	$	131	$	67		$	238	$	125
General and administrative		300		84		487		426		305		115			591		187
Total share-based compensation	$	451	$	110	$	763	$	555	$	436	$	182	��	$	829	$	312

We recognize share-based compensation based on the fair value of each award as estimated using the Black-Scholes option valuation model. Ultimately, the actual expense recognized over the vesting period will only be for those shares that actually vest.

A summary of option activity is as follows (in thousands except share and per share amounts):

Information about stock options outstanding, vested and expected to vest as of ~~September~~June 30, ~~2019,~~2020, is as follows:

~~Item~~ITEM 2. ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon accounting principles generally accepted in the United States of America and discusses the financial condition and results of operations for DiaMedica Therapeutics Inc. and its subsidiaries for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.

This discussion should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this ~~report.~~report and our Annual Report on Form 10-K for the year ended December 31, 2019, which includes additional information about our critical accounting policies and practices and risk factors. The following discussion contains forward-looking statements that involve numerous risks and uncertainties. Our actual results could differ materially from the forward-looking statements as a result of these risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for additional cautionary information.

We are a clinical stage biopharmaceutical company primarily focused on the development of novel recombinant, or synthetic, proteins. Our goal is to use our patented and licensed technologies to establish our company as a leader in the development and commercialization of therapeutic treatments from novel recombinant proteins. Our current focus is on chronic kidney disease ~~(“CKD”)~~(CKD) and acute ischemic stroke ~~(“AIS”)~~(AIS). We plan to advance DM199, our lead drug candidate, through required clinical trials to create shareholder value by establishing its clinical and commercial potential as a therapy for CKD and AIS.

DM199 is a recombinant form of human tissue kallikrein-1 ~~(“KLK1”)~~(KLK1). KLK1 is a serine protease (protein), produced primarily in the kidneys, pancreas and salivary glands, which plays a critical role in the regulation of local blood flow and vasodilation (the widening of blood vessels which decreases blood pressure) in the body, as well as an important role in inflammation and oxidative stress (an imbalance between potentially damaging reactive oxygen species, or free radicals, and antioxidants in ~~your~~the body). We believe DM199 has the potential to treat a variety of diseases where healthy functioning requires sufficient activity of KLK1 and its system, the kallikrein-kinin ~~system (“KKS”).~~system.

In October 2019, the ~~FDA~~U.S. Food and Drug Administration (FDA) accepted ~~the protocol for~~ our Phase II clinical trial ~~in participants with CKD. The Phase II trial is designed to assess the safety and efficacy of DM199, at 3 µg/kg and 5 µg/kg dose levels, in~~protocol for the treatment of CKD ~~in two cohorts:~~caused by rare or significant unmet diseases. The trial named REDUX, Latin for restore, is a multi-center, open-label investigation of approximately 90 participants with mild or moderate CKD ~~caused by IgA nephropathy (IgAN)~~(Stage II or III) and albuminuria, who are being enrolled in three cohorts (30 participants per cohort). The study is being conducted in the United States at 13 sites and is focused on participants with CKD: Cohort I is focused on non-diabetic, hypertensive African Americans with Stage II or III CKD.

~~In December 2018,~~ African Americans are at greater risk for CKD than Caucasians, and those African Americans who have the ~~FDA accepted our Investigational New Drug application for~~APOL1 gene mutation are at an even higher risk. The study is designed to capture the ~~initiation of a Phase Ib clinical trial of DM199~~APOL1 gene mutation as an exploratory biomarker in this cohort. Cohort II is focused on participants with ~~moderate or severe CKD caused by Type I or~~IgA Nephropathy (IgAN). Cohort III, which was added after completion of our recent public offering, is focused on participants with Type II ~~diabetes. We initiated dosing patients in this study in February 2019~~diabetes mellitus with CKD, hypertension and ~~completed enrollment in July 2019.~~albuminuria. The study ~~was performed to assess the pharmacokinetics (“PK”) of three~~will evaluate two dose levels of DM199 ~~(3, 5 and 8 µg/kg), administered in a single~~within each cohort. Study participants will receive DM199 by subcutaneous ~~dose as well as the evaluation of~~injection twice weekly for 95 days. The primary study endpoints include safety, tolerability, blood pressure, albuminuria and ~~secondary pharmacodynamic (“PD”) endpoints. As we announced~~kidney function, which will be evaluated by changes from baseline in ~~June 2019, interim results met primary~~estimated glomerular filtration rate (eGFR) and ~~secondary endpoints. PK profiles, at~~albuminuria, as measured by the ~~3µg/kg dose level, were similar between moderate~~urinary albumin to creatinine ratio. Participant enrollment and ~~severe CKD patients, and consistent with healthy subjects tested previously. Therefore, we do not believe~~ dosing ~~adjustment is warranted, based on the presence or severity of CKD and a full renal~~for this study ~~will likely not be required. The results from this Phase Ib study were used to guide the design of our Phase II trial~~commenced in ~~patients suffering from rare and significant unmet causes of CKD.~~December 2019.

In February 2018, we initiated treatment on the first patient in our Phase II REMEDY trial assessing the safety, tolerability and markers of therapeutic efficacy of DM199 in patients suffering from AIS. As of ~~October 31, 2019,~~August 5, 2020, we ~~reached our enrollment goal~~had enrolled 18 subjects, including 7 African American subjects into Cohort I and 11 subjects with ~~92 participants and enrollment has been closed.~~

~~In September 2018, we entered~~IgAN into a license and collaboration agreement with Ahon Pharma, which granted Ahon Pharma exclusive rights to develop and commercialize DM199 for acute ischemic stroke in mainland China, Taiwan, Hong Kong S.A.R. and Macau S.A.R. Under the termsCohort II of the ~~agreement,~~REDUX study. Due to actions implemented to combat the COVID-19 pandemic, we ~~received an upfront payment of $500,000 on signing and were entitled~~continued to ~~receive an additional payment of $4.5 million upon~~experience slower than expected enrollment in the ~~earlier of regulatory clearance to initiate a~~REDUX clinical trial ~~in China or July 1, 2019. On August 12, 2019, after extensive good faith discussions with Ahon Pharma, we were unable to agree upon mutually acceptable revised terms to~~during the ~~agreement and we terminated the agreement for non-payment~~second quarter of ~~the $4.5 million milestone, thereby regaining worldwide rights for DM199 for acute ischemic stroke.~~

2020. We have not generated any revenues from product sales. Since our inception, we have financed our operations from public and private sales of equity, the exercise of warrants and stock options, interest income on funds available for investment and government grants and tax credits. We have incurred losses in each year since our inception. Our net losses were $8.2 million and $3.8 million for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, we had an accumulated deficit of $54.1 million. Substantially all of our operating losses resulted from expenses incurred in connection with our product candidate development programs, our primary research and development (“R&D”) activities, and general and administrative (“G&A”) support costs associated with our operations.

~~We expect to continue to incur significant expenses and increased operating losses for at least the next several years. In the near term, we anticipate that our expenses will increase as we:~~

In addition, we expect our operating expenses to increase in 2019 compared to the comparable periods in 2018 as a result of our Nasdaq-listed U.S. public reporting company status obtained in December 2018.

~~While we expect our rate of future negative cash flow per month will vary~~believe this is due to the ~~timing~~reduction or suspension of ~~expenses incurred,~~activities at our clinical study sites as they address staff and patient safety concerns and patient concerns related to visiting clinical study sites in light of the COVID-19 pandemic. We anticipate that the COVID-19 pandemic will likely continue to adversely affect our ability to recruit or enroll subjects and we ~~expect our current cash resources~~cannot provide any assurance as to when clinical sites will be ~~sufficient~~able to ~~allow us~~resume enrollment at a normal rate or any guidance at this time as to when we will complete ~~our current ongoing Phase II REMEDY trial in patients with AIS and the first two cohorts~~enrollment in the ~~Phase II~~study. While results observed to date in the REDUX study indicate a safety profile consistent with past studies, there is insufficient data at this time to evaluate or comment upon efficacy.

Enrollment in ~~patients~~the ReMEDy study began in February 2018 and concluded in October 2019. We enrolled 92 participants to assess DM199 in the treatment of participants who experienced an AIS. The study drug (DM199 or placebo) was administered as an intravenous (IV) infusion within 24 hours of stroke symptom onset, followed by subcutaneous injections later that day and once every 3 days for 21 days. The study was designed to measure safety and tolerability along with ~~CKD~~multiple tests designed to investigate DM199’s therapeutic potential including plasma-based biomarkers and ~~to otherwise fund our planned operations into~~standard functional stroke measures assessed at 90 days post-stroke. Standard functional stroke measurements include the ~~fourth quarter~~Modified Rankin Scale, National Institutes of ~~2020. However,~~Health Stroke Scale, the ~~amount~~Barthel Index and ~~timing~~C-reactive protein, a measure of ~~future funding requirements will depend on many factors,~~inflammation. Positive top-line results, including the ~~timing~~achievement of primary safety and ~~results of our ongoing development efforts, including enrollment~~tolerability endpoints and no DM199-related serious adverse events, were announced on May 13, 2020. In addition, there was also a demonstrated therapeutic effect in our clinical trials, the potential expansion of our current development programs, potential new development programs, and related G&A support. We may require significant additional funds earlier than we currently expect and there is no assuranceparticipants that ~~we will not need or seek additional funding~~received tissue plasminogen activator (tPA) prior to ~~such time. We may elect~~enrollment but not in participants receiving mechanical thrombectomy prior to ~~raise additional funds even before we need them if market conditions for raising additional capital are favorable.~~enrollment according to top-line phase II results.

From a strategic perspective, we continue to believe that strategic alternatives with respect to our DM199 product candidate, including licenses and business collaborations, with other regional and global pharmaceutical and biotechnology companies can be important in advancing the clinical development of DM199. Therefore, as a matter of course and from time to time, we ~~continue to~~ engage in discussions with third parties regarding these matters.

~~Since our inception, we have incurred losses while advancing the development of our therapeutic product candidates.~~ We have not generated any revenues from product sales. Since our inception, we have financed our operations from public and private sales of equity, the exercise of warrants and ~~do not expect to do so~~stock options, interest income on funds available for ~~a number~~investment and government grants. We have incurred losses in each year since our inception. Our net losses were $4.9 million and $5.7 million for the six months ended June 30, 2020 and 2019, respectively. As of ~~years. We may never generate sales revenues~~June 30, 2020, we had an accumulated deficit of $61.5 million. Substantially all of our operating losses resulted from expenses incurred in connection with the development of our ~~current~~ DM199 product candidate, ~~as we may never succeed in obtaining regulatory approval or commercial sale of this product candidate. We received $500,000 in license revenue last year.~~our primary research and development (R&D) activities, and general and administrative (G&A) support costs associated with our operations.

On August 10, 2020, we issued and sold an aggregate of 4,600,000 common shares in a public underwritten offering at a public offering price of $5.00 per share, receiving gross proceeds of $23.0 million and net proceeds of approximately $21.1 million, after deducting the underwriting discount and offering expenses. See Note 13 titled “Subsequent Event.”

We expect to continue to incur significant expenses and continuing operating losses in 2020, up slightly from 2019. Our expenses will increase further if we progress to advanced stages of clinical development over the next several years. In the near term, we anticipate that our expenses will increase as we:

While we expect our rate of future negative cash flow per month will vary due to the timing of expenses incurred, we expect our current cash resources, including the approximately $21.1 million in net proceeds from our recent August 2020 public offering, to be sufficient to allow us to complete all three cohorts in our REDUX Phase II study in patients with CKD and to otherwise fund our anticipated operations through 2021. However, the amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, including enrollment in our clinical trials, the potential expansion of our current development programs, potential new development programs, related G&A support and the effects of the COVID-19 pandemic. We may require significant additional funds earlier than we currently expect and there is no assurance that we will not need or seek additional funding prior to such time. We may elect to raise additional funds even before we need them if market conditions for raising additional capital are favorable.

R&D expenses consist primarily of fees paid to external service providers such as contract research ~~organizations and contract manufacturing organizations related to clinical trials;~~organizations; contractual obligations for clinical development including clinical sites, outsided nursing services and laboratory testing, and preclinical trials; development of manufacturing processes, costs for production runs of DM199; salaries, benefits, and share-based compensation and other ~~R&D~~ personnel costs.

At this time, due to the risks inherent in the clinical development process and the early stage of our product development programs, we are unable to estimate with any certainty the costs we will incur in the continued development of DM199 or any of our preclinical development programs. We currently expect a delay in the timing of costs incurred as a result of the COVID-19 pandemic, but not a significant overall increase in costs. However, we continue to assess the effect of the pandemic on our REDUX trial by monitoring the spread of the COVID-19 virus and the actions implemented to combat the virus. We expect that our R&D expenses will ~~continue to~~ increase in the future if we are successful in advancing DM199, or any of our preclinical programs, into advanced stages of clinical development. The process of conducting clinical trials necessary to obtain regulatory approval and manufacturing scale-up to support expanded development and potential future commercialization is costly and time consuming. Any failure by us or delay in completing clinical trials, manufacturing scale-up or in obtaining regulatory approvals could lead to increased R&D expenses and, in turn, have a material adverse effect on our results of operations.

G&A expenses consist primarily of salaries and related benefits, including share-based compensation related to our executive, finance, business development and support functions. Other G&A expenses include insurance, rent and utilities, travel expenses and professional fees for auditing, tax and legal services. We expect our G&A expenses will increase in the future as we expand our development and operating activities. In addition, our G&A expenses have increased in 2019 compared to comparable periods in 2018 due to increased costs associated with our listing on The Nasdaq Capital Market and U.S. public reporting company status, which commenced in December 2018.

We have instituted a number of procedural changes related to protecting the health and safety of our employees in response to the COVID-19 pandemic. During the second quarter of 2020 our office was closed and we converted to telework for all employees and put all non-essential travel on hold. We have encouraged our employees to interact with each other and vendors through audio and video conferencing. Recently, as restrictions on businesses have relaxed, we have partially re-opened our office allowing, but not requiring, employees to return to the office two days per week, subject to additional distancing and cleaning requirements. We did not incur significant additional expenses during the second quarter of 2020 related to these changes, nor do we expect to incur significant additional expenses going forward. We expect to continue to restrict non-essential travel for the foreseeable future.

Other (income) expense consists primarily of governmental assistance – research incentives, interest income and foreign currency exchange gains and losses.

~~In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02,~~ ~~Leases~~~~. The guidance in ASU 2016-02 supersedes the lease recognition requirements in the Accounting Standards Codification Topic 840,~~ ~~Leases~~. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The new standard requires the immediate recognition of all excess tax benefits and deficiencies in the income statement and requires classification of excess tax benefits as an operating activity as opposed to a financing activity in the statements of cash flows. This standard became effective for us on January 1, 2019.

~~In June 2018, the FASB issued ASU No. 2018-07, “~~~~Improvements to Nonemployee Share-Based Payment Accounting~~,” to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU is effective for public entities for fiscal years beginning after December 15, 2018, with early adoption permitted. Prior to the adoption of this ASU, share-based compensation awarded to non-employees was subject to revaluation over its vesting terms. Subsequent to the adoption of this ASU, non-employee share-based payment awards are measured on the date of grant, similar to share-based payment awards granted to employees. We adopted this standard on January 1, 2019 and the adoption of this ASU did not have a material impact on our financial position or our condensed consolidated statements of operations.

Comparison of the Three ~~and~~ ~~Nine M~~~~onths~~ Eand Six ~~nded~~ M~~September~~onths endedJune 30, 2020, and 2019 ~~and 2018~~

The following table summarizes our unaudited results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):

R&D expenses ~~increased~~decreased to $1.6 million for the three months ended ~~September~~June 30, ~~2019, up~~2020, down from ~~$1.2~~$1.9 million for the three months ended ~~September~~June 30, ~~2018, an increase~~2019, a decrease of ~~$0.4~~$0.3 million. R&D expenses ~~increased~~decreased to ~~$6.1~~$3.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$3.1~~$4.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018, an increase~~2019, a decrease of ~~$3.0~~$1.5 million. The ~~increase~~decrease for the ~~nine months ended September 30, 2019~~six month comparison was primarily due to non-recurring costs of approximately ~~$1.4~~$1.3 million incurred for a new production run of the DM199 drug substance ~~as well as~~during the six months ended June 30, 2019 and a net decrease in year-over-year clinical study costs. The decrease in clinical study costs was due to a combination of the decrease in costs incurred ~~in conjunction with~~for the ReMEDy stroke study as it winds down and non-recurring costs of the Phase Ib1b CKD study which was started and completed in the prior year period. These decreases were partially offset by costs incurred for the REDUX Phase II ~~clinical studies~~CKD study initiated late in ~~CKD patients~~2019 and ~~related non-clinical testing. Increased personnel and~~increased non-cash share-based compensation costs also contributed to the increase. The increase for the three months ended September 30, 2019 was due to costs incurred in conjunction with the Phase Ib and Phase II CKD studies and non-cash share-based compensation costs, partially offset by a decline in costs incurred in conjunction with the Phase II REMEDY study in AIS patients.costs.

G&A expenses were ~~$1.0~~$1.1 million for the three months ended ~~September~~June 30, ~~2019, compared to $777,000~~2020, up from $867,000 for the three months ended ~~September~~June 30, ~~2018.~~2019. G&A expenses increased to ~~$2.7 million for the nine months ended September 30, 2019, up from~~ $2.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018. These increases were~~2020, up $0.4 million from $1.7 million for the six months ended June 30, 2019. The increase for the six-month comparison was primarily due to ~~costs associated with our status as a Nasdaq-listed U.S. public reporting company, which commenced in December 2018, including~~ increased ~~professional service, compliance and~~ non-cash share-based compensation costs. ~~Increased personnel costs also contributed to the increase on a year-to-date basis.~~

Total other income ~~net, increased~~decreased to ~~$225,000~~$243,000 for the three months ended ~~September~~June 30, ~~2019, up~~2020, down from ~~$157,000~~$280,000 for the prior year period. Total other income ~~net,~~ decreased to ~~$683,000~~$231,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$946,000~~$458,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~year-to-date~~ decrease for the six-month comparison is primarily related to ~~the initial recognition of~~reduced R&D incentives ~~from the Australian Government paid for qualifying research work performed by DiaMedica Australia Pty Ltd.~~associated with decreased ReMEDy stroke study costs during the ~~nine~~six months ended ~~September~~June 30, ~~2018. The increase in the quarterly comparison relates to increased study costs, compared to the prior year period, driving an increase in the eligible R&D incentive. The year-to-date decrease was~~2019, partially offset by ~~and the current quarter increase was augmented by, increased interest income earned on marketable securities during the three and nine months ended September 30, 2019.~~reduced foreign currency transaction losses.

The following tables summarize our liquidity and capital resources as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, and our sources and uses of cash for each of the ~~nine~~six month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, and is intended to supplement the more detailed discussion that follows (in thousands):

We had cash and cash equivalents of ~~$4.7~~$5.0 million, marketable securities of ~~$5.0~~$6.8 million, current liabilities of ~~$1.1~~$1.2 million and working capital of ~~$9.6~~$11.2 million as of ~~September~~June 30, ~~2019,~~2020, compared ~~$16.8~~to $3.9 million in cash and cash equivalents, marketable securities of $4.0 million, $1.3 million in current liabilities and ~~$16.7~~$7.5 million in working capital as of December 31, ~~2018.~~2019. The ~~decreases~~increases in our combined cash, ~~and~~ cash equivalents and marketable securities and in our working capital are due primarily to our ~~operating loss incurred for the nine months ended September 30, 2019.~~February 2020 public offering of common shares.

Net cash used in operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$7.2~~$3.8 million compared to ~~$3.8~~$6.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. This ~~increase~~decrease relates primarily to the ~~increase~~decrease in the net loss, partially offset by the effects of the changes in operating assets and liabilities.

Investing activities consist primarily of purchases of marketable securities and property and equipment during the respective periods. Net cash used in investing activities was ~~$4.9~~$2.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$63,000~~$7.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. This ~~increase~~decrease was due to a combination of a decline in the purchase of and an increase in the maturities of marketable securities during the current year period.

Financing activities consist primarily of net proceeds from the sale of common shares ~~and warrants and proceeds from~~in the ~~exercise of stock options and warrants, and in 2019, principal payments on financing lease obligations.~~current year period. Net cash provided by financing activities was ~~$71,000 for the nine months ended September 30, 2019, compared to $6.4~~$7.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018. Cash flows from financing activities~~2020 compared to $72,000 for ~~2018 included net proceeds from~~the six months ended June 30, 2019. This increase was due to our ~~March 2018 private placements of our common shares and warrants to purchase common shares and the exercise of warrants to purchase common shares which expired in~~ February ~~2018.~~

~~In December 2018, we completed an initial~~2020 public offering of ~~our~~common shares.

On February 13, 2020, we issued and sold an aggregate of 2,125,000 common shares in ~~the United States by issuing 4,100,000 common shares~~a public, underwritten offering at ana public offering price of $4.00 per share, resulting in net proceeds to us of approximately ~~$14.7~~$7.7 million, after deducting the underwriting ~~discounts and commissions~~discount and offering expenses.

On March 29, 2018, we completed, in two tranches, a brokered and non-brokered private placement of 1,322,965 units at a price of $4.90 per unit for aggregate gross proceeds of approximately $6.3 million. Each unit consisted of one common share and one-half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a price of $7.00 at any time prior to expiration on March 19, 2020 and March 29, 2020 for tranche 1 and tranche 2, respectively. The warrants are subject to early expiration under certain conditions. In connection with the offering, we paid an aggregate cash fee of approximately $384,000 to brokers and issued an aggregate of 80,510 compensation options. Each compensation option entitles the holder to purchase one common share at $4.90, the offering price, for a period of two years from the closing of the offering, subject to acceleration on the same terms as the warrants issued to the investors.

Since our inception, we have incurred losses while advancing the development of our product candidates. We have not generated any revenues from product sales and do not expect to do so for a number of years. We do not know when, or if, we will ~~generate any sales revenue from~~be able to license and/or market and sell our DM199 product candidate or any future product candidates. We ~~do not~~ expect the development work required to ~~generate any revenue from sales of product candidates unless and until we~~ obtain regulatory approval ~~which~~ may take at least an additional three to five years. We ~~expect to~~will likely continue to incur substantial operating losses until such time as any future product sales, royalty payments, licensing fees and/or milestone payments are sufficient to generate revenues to fund our continuing operations. We expect our operating losses to ~~increase~~continue in the near term asand increase if we ~~continue research,~~progress to advanced stages of clinical development and ~~clinical trials of, and~~we seek regulatory approval for our DM199 product candidate. ~~In addition,~~However, with the effects of the COVID-19 pandemic slowing the enrollment in our REDUX trial we expect our operating expenses for the year ended December 31, 2020 to ~~increase in 2019 compared~~be comparable to or slightly less than our operating expenses for the ~~comparable periods of 2018 as a result of our Nasdaq-listed U.S. public reporting company status obtained in~~year ended December ~~2018.~~31, 2019. In the long-term, subject to obtaining regulatory approval of our DM199 product candidate or any other future product candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution.

We currently expect a delay in the timing of costs incurred as a result of the COVID-19 pandemic, but not a significant overall increase in costs. However, we continue to assess the effect of the pandemic on our REDUX trial by monitoring the spread of the COVID-19 virus and the actions implemented to combat the virus.

Accordingly, despite the completion of our recent public offerings, we expect we will need substantial additional capital to further our R&D activities, planned clinical trials, regulatory activities and otherwise develop our product candidate, DM199, or any future product candidates, to a point where they may be commercially sold. While we are striving to achieve these plans, there is no assurance that these and other strategies will be achieved or that additional funding will be obtained on favorable terms or at all. While we expect our rate of future negative cash flow per month will vary due to the timing of expenses incurred, we expect our current cash resources, including the approximately $21.1 million in net proceeds from our recent August 2020 public offering, to be sufficient to allow us to complete ~~our current ongoing Phase II REMEDY trial in patients with AIS and the first two~~all three cohorts in ~~the~~our REDUX Phase II study in patients with CKD and to otherwise fund our ~~planned~~anticipated operations ~~into the fourth quarter of 2020.~~through 2021. However, the amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, including enrollment in our clinical trials, the potential expansion of our current development programs, potential new development programs, and related G&A support. We may require significant additional funds earlier than we currently expect and there is no assurance that we will not need or seek additional funding prior to such time. We may elect to raise additional funds even before we need them if market conditions for raising additional capital are favorable.

Since our inception, we have financed our operations from public and private sales of equity, the exercise of warrants and stock options, interest income on funds available for investment and government incentive grants, ~~and tax credits,~~ and we expect to continue this practice for the foreseeable future. We do not have any existing credit facilities under which we could borrow funds. We may seek to raise additional funds through various sources, such as equity or debt financings, or through strategic collaborations and license agreements. We can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. This is particularly true if our clinical data is not positive or economic and market conditions deteriorate.

To the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our shareholders will be diluted. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. The availability of financing will be affected by our clinical data and other results of scientific and clinical research; the ability to attain regulatory approvals; market acceptance of our product candidates; the state of the capital markets generally with particular reference to pharmaceutical, biotechnology, and medical companies; the status of strategic alliance agreements; and other relevant commercial considerations.

We have no off-balance sheet arrangements (as defined by applicable SEC regulations) that could have a current material effect or that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

There have been no material changes to our critical accounting policies and estimates from the information provided in “Part II. Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies,” included in our annual report on Form 10-K for the fiscal year ended December 31, ~~2018, other than as a result of DiaMedica’s adoption of ASU 2016-02,~~ ~~Leases~~~~, and related guidance requiring the recognition of an operating lease right-of-use asset and related operating lease obligation in our condensed consolidated balance sheets. See Note 4, “~~~~Summary of Significant Accounting Policies~~~~,” to our condensed consolidated financial statements contained in this report.~~2019.

~~For a discussion of all recently adopted and recently issued but not yet adopted accounting pronouncements, see Note 4, “~~~~Summary of Significant Accounting Policies~~~~,” to our condensed consolidated financial statements contained in this report.~~

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended ~~(“Exchange Act”)~~(Exchange Act)) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered in this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of such period to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

~~There~~Despite most employees working remotely due to the COVID-19 pandemic, there was no change in our internal control over financial reporting that occurred during the three months ended ~~September~~June 30, ~~2019~~2020 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

In March 2013, we entered into a clinical research agreement with PRA Netherlands to perform a double-blinded, placebo-controlled, single-dose and multiple-dose study to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics and proof of concept of DM199 in healthy subjects and in patients with Type 2 diabetes mellitus. In one arm of this study, we enrolled 36 patients with Type 2 diabetes who were treated with two SCsubcutaneous dose levels of DM199 over a 28-day period. This study achieved its primary endpoint and demonstrated that DM199 was well-tolerated. The secondary endpoints for this study, however, were not met. The secondary efficacy endpoints were confounded due to what we believe were significant execution errors caused by protocol deviations occurring at the clinical trial site that were unable to be reconciled. To date, we have been unable to obtain the complete study records from PRA Netherlands and generate a final study report. On November 14, 2017, we initiated litigation with PRA Netherlands in the United States District Court, Southern District of New York, to compel them to comply with the terms of the clinical research agreement, including providing full study records and to recover damages. After PRA Netherlands objected to ~~the~~personal jurisdiction and venue, on August 24, 2018, we re-filed our complaint against both PRA Netherlands and its U.S. ~~subsidiary,~~parent, PRA Health Sciences, Inc. (“PRA USA” and collectively with PRA Netherlands, ~~“PRA”)~~PRA), in the United States District Court, District of Delaware. PRA again objected to the venue and personal jurisdiction. The complaint alleges, among other things, that PRA failed to conduct the study in accordance with the study protocol and with generally accepted standards for conducting such clinical trials and that PRA further refused to provide us with all data, records and documentation, and/or access thereto, related to the study in accordance with the clinical trial study agreement. The complaint seeks to compel PRA to comply with the terms of the clinical trial study agreement, including providing full study records and to recover damages. ~~PRA again objected to jurisdiction over PRA Netherlands and on~~On November 19, 2018, PRA Netherlands and PRA USA filed motions to dismiss the ~~lawsuit based on jurisdiction and other grounds. We subsequently~~lawsuit. On February 20, 2019, we filed a motion seeking to transfer the Delaware action to the United States District Court, District of Minnesota. PRA ~~opposed~~Netherlands and PRA USA filed an opposition to our motion. No decision on this motion has yet been rendered.

From time to time, we may be subject to other various ongoing or threatened legal actions and proceedings, including those that arise in the ~~motion. May 20, 2019,~~ordinary course of business, which may include employment matters and breach of contract disputes. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. Other than the ~~court ordered that we be permitted to take discovery with respect to jurisdiction in Minnesota, which~~PRA matter noted above, we are ~~conducting now. After additional briefing, the motion to transfer will be decided by the Delaware court.~~not currently engaged in or aware of any threatened legal actions.

AsAlthough this Item 1A is inapplicable to us as a smaller reporting company, we ~~are not required to provide disclosure pursuant to this item.~~hereby disclose the following additional and revised risk factors, which were also updated in a Current Report on Form 8-K as filed with the SEC on August 5, 2020:

The recent and ongoing COVID-19 pandemic could significantly disrupt our clinical trials and, therefore, our receipt of necessary regulatory approvals could be delayed or prevented.

The COVID-19 pandemic is having a severe effect on the clinical trials of many drug candidates. Some trials have been merely delayed, while others have been cancelled. The extent to which the COVID-19 pandemic may impact our ongoing and planned clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration and geographic reach of the outbreak, the severity of COVID-19, and the effectiveness of actions to contain and treat COVID-19. To date, the COVID-19 pandemic has caused significant delays in the enrollment of participants. The continued spread of COVID-19 could cause us to experience additional disruptions that could severely impact our business and clinical trials, including:

As a result, the expected timeline for data readouts of our clinical trials and certain regulatory filings may be negatively impacted, which would adversely affect our ability to initiate required phase III studies, obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses and have a material adverse effect on our financial results.

We have conducted and may in the future conduct clinical trials for our product candidate outside the United States, and the FDA may not accept data from such trials.

We have conducted and may in the future conduct clinical trials for our product candidate outside the United States. For example, we conducted our ReMEDy Phase II clinical trial in Australia. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of such study data by the FDA is subject to certain conditions, and there can be no assurance that the FDA will accept data from the clinical trial we conducted in Australia or clinical trials we may conduct outside the United States in the future. For example, the clinical trial must be conducted in accordance with good clinical practices (GCP) requirements, and the FDA must be able to validate the data from the clinical trial through an onsite inspection if it deems such inspection necessary. In addition, when studies are conducted only at sites outside the United States, the FDA generally does not provide advance comment on the clinical protocols for the studies, and therefore there is an additional potential risk that the FDA could determine that the study design or protocol for a non-U.S. clinical trial was inadequate, which would likely require us to conduct additional clinical trials.

If the FDA does not accept data from the clinical trial we conducted in Australia, it would likely result in the need for additional clinical trials, which would be costly and time-consuming and delay aspects of our business plan, including the development and commercial launch of our DM199 product candidate. In addition, the conduct of clinical trials outside the United States also exposes us to additional risks, including risks associated with the following:

We did not sell any unregistered equity securities of our company during the quarter ended ~~September~~June 30, ~~2019.~~2020.

We did not purchase any common shares or other equity securities of our company during the quarter ended ~~September~~June 30, ~~2019.~~2020.

On December 11, 2018, the SEC declared effective our registration statement on Form S-1 (File No. 333-228313), as amended, filed in connection with our initial public offering in the United States. Pursuant to the registration statement, we issued and sold an aggregate of 4,100,000 common shares in the initial public offering at a price to the public of $4.00 per share. As a result of the offering, we received gross proceeds of approximately $16.4 million, resulting in net proceeds to us of approximately $14.7 million, after deduction of underwriters’ discounts and commissions and offering expenses. None of the expenses associated with the initial public offering were paid to directors, officers, persons owning ten percent or more of any class of equity securities, or to their associates, or to our affiliates. Craig-Hallum Capital Group LLC acted as the sole managing underwriter for the offering.

As of ~~September~~June 30, ~~2019,~~2020, we have used approximately ~~$7.2~~$12.9 million of the proceeds from our initial public offering to fund clinical development of DM199, to conduct research activities and for working capital and general corporate purposes. No payments were made by us to directors, officers or persons owning ten percent or more of our common shares or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and bonuses and to non-employee directors as compensation for board and board committee service. There has been no material change in the planned use of proceeds from our initial public offering from that described in the final prospectus, dated December 6, 2018, filed with the SEC on December 10, 2018 pursuant to Rule 424(b)(4) under the Securities ~~Act.~~Act of 1933, as amended.

The following exhibits are being filed or furnished with this quarterly report on Form 10-Q:

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Description		Page

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		1

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1513
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2219
Item 4.	Controls and Procedures	2219

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	2320
Item 1A.	Risk Factors	2320
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23 21
Item 3.	Defaults Upon Senior Securities	2422
Item 4.	Mine Safety Disclosures	2422
Item 5.	Other Information	2422
Item 6.	Exhibits	2423

SIGNATURE PAGE		2524

	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
	(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,741		$	16,823		$	4,955		$	3,883
Marketable securities		5,002			—			6,844			3,995
Amounts receivable		664			780			319			823
Prepaid expenses and other assets								235			47
Deposits	��	310			—			46			88
Prepaid expenses and other assets		89			369
Total current assets		10,806			17,972			12,399			8,836

Non-current assets:
Operating lease right-of-use asset		165			—			127			153
Property and equipment, net		68			96			55			64
Deposits		—			271
Total non-current assets		233			367			182			217

Total assets	$	11,039		$	18,339		$	12,581		$	9,053

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	312		$	483		$	552		$	182
Accrued liabilities		837			808			609			1,076
Finance lease obligation		5			5			6			6
Operating lease obligation		51			—			50			54
Total current liabilities		1,205			1,296			1,217			1,318

Non-current liabilities:
Finance lease obligation, non-current		14			18			10			13
Operating lease obligation, non-current		120			—			82			105
Total non-current liabilities		134			18			92			118

Shareholders’ equity:
Common shares, no par value; unlimited authorized; 12,006,874 and 11,956,874 shares issued and outstanding, as of September 30, 2019 and December 31, 2018, respectively		—			—
Additional paid-in capital		63,831			62,993
Common shares, no par value; unlimited authorized; 14,139,074 and 12,006,874 shares issued and outstanding, as of June 30, 2020 and December 31, 2019, respectively								—			—
Paid-in capital								72,759			64,232
Accumulated other comprehensive income		6			—			29			2
Accumulated deficit		(54,137	)		(45,968	)		(61,516	)		(56,617	)
Total shareholders’ equity		9,700			17,025			11,272			7,617
Total liabilities and shareholders’ equity	$	11,039		$	18,339		$	12,581		$	9,053

			Fair Value Measurements as of September 30, 2019 Using Inputs Considered as						Fair Value Measurements Using Inputs Considered as of:
	Fair Value		Level 1		Level 2		Level 3		June 30, 2020								December 31, 2019
									Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Government securities									$	4,841	$	—	$	4,841	$	—	$	1,998	$	—	$	1,998	$	—
Bank certificates of deposit										2,003		—		2,003		—		—		—		—		—
Commercial paper and corporate bonds	$	2,000	$	—	$	2,000	$	—		—		—		—		—		1,997		—		1,997		—
Government securities		3,002		—		3,002		—
Total marketable securities	$	5,002	$	—	$	5,002	$	—
Total									$	6,844	$	—	$	6,844	$	—	$	3,995	$	—	$	3,995	$	—

	September 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Research and development incentives	$	600	$	622	$	264	$	793
Sales-based taxes receivable		39		134		37		13
Other		25		24		18		17
Total amounts receivable	$	664	$	780	$	319	$	823

	September 30, 2019		December 31, 2018
Advances to vendors - current	$	310	$	—

Advances to vendors – non current	$	—	$	271

	Nine Months Ended September 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Cash flows from operating activities:
Net loss	$	(8,169	)	$	(3,772	)	$	(4,899	)	$	(5,721	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		763			555			829			312
Amortization of discount on marketable securities		(68	)		—			(23	)		(53	)
Non-cash lease expense		36			—			26			24
Depreciation		16			10			11			11
Change in fair value of warrant liability		—			39
Changes in operating assets and liabilities:
Amounts receivable		116			(963	)		504			(332	)
Prepaid expenses		280			(99	)		(188	)		171
Deposits		(39	)		—			42			—
Accounts payable		(171	)		(264	)		370			(221	)
Accrued liabilities		(1	)		698			(494	)		(196	)
Net cash used in operating activities		(7,237	)		(3,796	)		(3,822	)		(6,005	)

Cash flows from investing activities:
Purchase of marketable securities		(10,928	)		—			(8,799	)		(10,928	)
Maturities of marketable securities		6,000			—			6,000			3,000
Purchase of property and equipment								(2	)		—
Disposition of property and equipment, net		12			—			—			12
Purchase of property and equipment		—			(63	)
Net cash used in investing activities		(4,916	)		(63	)		(2,801	)		(7,916	)

Cash flows from financing activities:
Proceeds from issuance of common shares, net of offering costs								7,682			—
Proceeds from the exercise of stock options		75			43			16			75
Principal payments on finance lease obligations		(4	)		—			(3	)		(3	)
Proceeds from issuance of common shares and warrants, net of offering costs		—			5,840
Proceeds from the exercise of common share purchase warrants		—			521
Net cash provided by financing activities		71			6,404			7,695			72

Net increase (decrease) in cash and cash equivalents		(12,082	)		2,545			1,072			(13,849	)
Cash and cash equivalents at beginning of period		16,823			1,353			3,883			16,823
Cash and cash equivalents at end of period	$	4,741		$	3,898		$	4,955		$	2,974

	June 30, 2020		December 31, 2019
Accrued clinical study costs	$	166	$	433
Accrued compensation		232		419
Accrued research and other professional fees		188		172
Accrued taxes and other liabilities		23		52
Total accrued liabilities	$	609	$	1,076

2019	$	16
2020		66
2021		68
2022		46
Total lease payments	$	196
Less interest portion		(25	)
Present value of lease obligation	$	171

	September 30, 2019		December 31, 2018
Accrued compensation and related	$	299	$	417
Accrued clinical study costs		327		292
Accrued research and other professional fees		179		65
Accrued taxes and other liabilities		32		34
Total accrued liabilities	$	837	$	808

	Shares Underlying Options Outstanding			Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value		Shares Underlying Options Outstanding			Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Balances at December 31, 2018		639,359		$	5.95	$	—
Balances at December 31, 2019									1,220,359		$	5.26	$	—
Granted		675,825			4.56				267,332			4.75
Exercised		(50,000	)		1.50				(7,200	)		2.21
Expired/cancelled		(7,186	)		5.37				(66,505	)		5.04
Forfeited		(6,105	)		6.03				—			—
Balances at September 30, 2019		1,251,893		$	5.38	$	—
Balances at June 30, 2020									1,413,988		$	5.19	$	3,191

			Outstanding, Vested and Expected to Vest						Options Vested and Exercisable						Outstanding, Vested and Expected to Vest						Options Vested and Exercisable
Per Share Exercise Price	Per Share Exercise Price		Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Options Exercisable		Weighted Average Remaining Contractual Life (Years)		Per Share Exercise Price		Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Options Exercisable		Weighted Average Remaining Contractual Life (Years)

$2.00	-	$2.99		132,900		6.2	$	2.29		132,067		6.2	-	$2.99		125,700		5.5	$	2.24		125,700		5.5
$3.00	-	$3.99		122,905		7.2		3.91		115,093		7.2	-	$3.99		98,572		6.5		3.81		98,572		6.5
$4.00	-	$4.99		764,971		9.5		4.60		161,193		8.9	-	$4.99		951,791		9.0		4.56		399,541		8.5
$7.00	-	$26.00		231,117		7.4		10.51		125,067		6.4
$5.00													-	$10.00		187,775		7.4		7.35		112,009		7.6
$10.01													-	$34.00		50,150		2.4		17.81		50,150		2.4
				1,251,893		8.5	$	5.38		533,420		7.3				1,413,988		8.1	$	5.19		785,972		7.3

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Operating expenses:
Research and development	$	1,617	$	1,210	$	6,098	$	3,071	$	1,629	$	1,874	$	3,010	$	4,481
General and administrative		1,044		777		2,725		2,073		1,079		867		2,102		1,681

Total other income, net		225		157		683		946		243		280		231		458

Liquidity and Capital Resources	September 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Cash and cash equivalents	$	4,741	$	16,823
Marketable securities		5,002		—
Cash, cash equivalents and marketable securities					$	11,799	$	7,878
Total assets		11,039		18,339		12,581		9,053
Total current liabilities		1,205		1,296		1,217		1,318
Total shareholders’ equity		9,700		17,025		11,272		7,617
Working capital		9,601		16,676		11,182		7,518

	Nine Months Ended September 30,						Six Months Ended June 30,
Cash Flow Data	2019			2018			2020			2019
Cash flow provided by (used in):
Operating activities	$	(7,237	)	$	(3,796	)	$	(3,822	)	$	(6,005	)
Investing activities		(4,916	)		(63	)		(2,801	)		(7,916	)
Financing activities		71			6,404			7,695			72
Net increase (decrease) in cash	$	(12,082	)	$	2,545
Net increase (decrease) in cash and cash equivalents							$	1,072		$	(13,849	)

	●	additional delays or difficulties in enrolling and/or retaining participants in our clinical trials;
	●	delays or difficulties in the initiation of additional clinical sites in the event that the current clinical sites are unable to recruit sufficient participants or at an acceptable rate;
	●	delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including interruption in shipping that may affect the transport of clinical trial materials;
	●	changes in local regulations as part of a response to the COVID-19 pandemic, which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;
	●	inability of participants to comply with clinical trial protocols, impede participant movement or interrupt healthcare services;
	●	interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others, or interruption of clinical trial subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data;
	●	risk that participants enrolled in our clinical trials will contract COVID-19 while the clinical trial is ongoing, which could result in participants dropping out of the trial, missing scheduled doses or follow-up visits or failing to follow protocol or otherwise impact the results of the clinical trial, including by increasing the number of observed adverse events;
	●	delays in receiving authorizations from local regulatory authorities to initiate our planned clinical trials;
	●	delays in necessary interactions with local regulatory authorities, ethics committees, and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and
	●	limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people.

	●	foreign regulatory requirements that could burden or limit our ability to conduct our clinical trials;
	●	administrative burdens of conducting clinical trials under multiple foreign regulatory schemes;
	●	foreign exchange fluctuations;
	●	compliance with foreign manufacturing, customs, shipment, and storage requirements;
	●	cultural differences in medical practice and clinical research; and
	●	diminished protection of intellectual property in some countries.

Exhibit No.	Description	Manner of Filing
3.1	Notice of Articles of DiaMedica Therapeutics Inc. dated May 31, 2019	Incorporated by reference to Exhibit 3.1 to DiaMedica’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 4, 2019 (File No. 001-36291)
3.2	Articles of DiaMedica Therapeutics Inc. dated May 31, 2019	Incorporated by reference to Exhibit 3.2 to DiaMedica’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 4, 2019 (File No. 001-36291)
~~4.1~~	~~Specimen Certificate representing Voting Common Shares of DiaMedica Therapeutics Inc.~~10.1	~~Incorporated by reference to Exhibit 4.2 to DiaMedica’s Current Report on~~ Form ~~8-K as filed with~~of Deferred Stock Unit Award Agreement under the ~~Securities and Exchange Commission on June 4,~~DiaMedica Therapeutics Inc. 2019 ~~(File No. 001-36291)~~Omnibus Incentive Plan	Filed herewith
31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101	Financial statements from the quarterly report on Form 10-Q of DiaMedica Therapeutics Inc. for the quarter ended ~~September~~June 30, ~~2019,~~2020, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) Condensed Consolidated Statements of Shareholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements.	Filed herewith

	DIAMEDICA THERAPEUTICS INC.

Date: ~~November 13, 2019~~August 11, 2020	/s/ Rick Pauls
	Rick Pauls President and Chief Executive Officer
	(Principal Executive Officer)

Date: ~~November 13, 2019~~August 11, 2020	/s/ Scott Kellen
	Scott Kellen Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)