| Stockholders' equity | 5 Stockholders’ equity Preferred stock Series B Preferred Shares During the year ended June 30, 2016, the Company
issued an aggregate of 902,238 shares of Series B Preferred Stock at a purchase price of at $8.00 per share. Each share of Series
B Preferred Stock is convertible into 2.5 shares of common stock equating to a conversion price of $3.20 (the “Conversion
Price”) and will automatically convert to common stock at the earlier of 24 hours following regulatory approval of VAL-083
with a minimum closing bid price of $8.00 or five years from the final closing date. The holders of the Series B Preferred Stock
are entitled to an annual cumulative, in arrears, dividend at the rate of 9% payable quarterly. The 9% dividend accrues quarterly
commencing on the date of issue and is payable quarterly on June 30, September 30, December 31, and March 31 of each year
commencing on June 30, 2016. Dividends are payable solely by delivery of shares of common stock, in an amount for each holder equal
to the aggregate dividend payable to such holder with respect to the shares of Series B Preferred Stock held by such holder divided
by the Conversion Price. The Series B Preferred Stock does not contain any repricing features. Each share of Series B Preferred
Stock entitles its holder to vote with the common stock on an as-converted basis. In addition, the Company and the holders entered
into a royalty agreement, pursuant to which the Company will pay the holders of the Series B Preferred Stock, in aggregate, a low,
single-digit royalty based on their pro rata ownership of the Series B Preferred Stock on products sold directly by the Company
or sold pursuant to a licensing or partnering arrangement (the “Royalty Agreement”). Upon conversion of a holder’s Series B Preferred
Stock to common stock, such holder shall no longer receive ongoing royalty payments under the Royalty Agreement but will be entitled
to receive any residual royalty payments that have vested. Rights to the royalties shall vest during the first three years following
the applicable closing date, in equal thirds to holders of the Series B Preferred Stock on each of the three vesting dates, upon
which vesting dates such royalty amounts shall become vested royalties. Pursuant to the Series B Preferred Stock dividend,
during the three months ended December 31, 2018, the Company issued 47,352 (2017 – 49,602) shares of common stock and recognized
$16,190 (2017 – $54,066). During the six months ended December 31, 2018, the Company issued 96,954 (2017 – 99,204)
shares of common stock and recognized $52,275 (2017 – $95,732). These dividends have been recognized as a direct increase
in accumulated deficit. During the three and six months ended December 31,
2018, 40,000 Series B Preferred shares were converted to 100,000 shares of common stock. There were no conversions during the three
and six months ended December 31, 2017. A total of 841,113 (2017 – 881,113) shares of Series B Preferred Stock are outstanding
as of December 31, 2018, such that a total of 2,102,792 (2017 – 2,202,792) shares of common stock are issuable upon conversion
of the Series B Preferred Stock as at December 31, 2018. Converted shares are rounded up to the nearest whole share. Series A Preferred Shares Effective September 30, 2014 pursuant to the Company’s
Valent Exchange Agreement (note 3), the Company filed a Certificate of Designation of Series A Preferred Stock (the “Series
A Certificate of Designation”) with the Secretary of State of Nevada. Pursuant to the Series A Certificate of Designation,
the Company designated 278,530 shares of preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have
a stated value of $1.00 per share (the “Series A Stated Value”) and are not convertible into common stock. The holder
of the Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly
in arrears. Upon any liquidation of the Company, the holder of the Series A Preferred Stock will be entitled to be paid, out of
any assets of the Company available for distribution to stockholders, the Series A Stated Value of the shares of Series A Preferred
Stock held by such holder, plus any accrued but unpaid dividends thereon, prior to any payments being made with respect to the
common stock. Common stock
Shares of common stock Common stock Additional paid-in capital Warrants Accumulated deficit
$ $ $ $
Balance – June 30, 2018 22,966,668 22,967 43,177,523 8,229,482 (52,441,337 )
Exercise and exchange of warrants 2,966,666 2,967 2,934,211 (2,210,697 ) -
Warrants issued for services - - - 27,802 -
Conversion of Series B preferred stock to common stock 100,000 100 278,951 - -
Series B Preferred stock dividend 96,954 96 52,179 - (52,275 )
Shares issued for services 13,131 13 6,743 - -
Stock option expense - - 255,653 - -
Performance stock unit expense - - 123,028 - -
Series A Preferred cash dividend - - - - (4,178 )
Loss for the period - - - - (3,801,501 )
Balance – December 31, 2018 26,143,419 26,143 46,828,288 6,046,587 (56,299,291 ) The issued and outstanding common shares at December
31, 2018 include 562,761 (June 30, 2018 – 912,761) shares of common stock on an as-exchanged basis with respect to the shares
of Exchangeco that can be exchanged for shares of common stock of the Company. Six months ended December 31, 2017 On September 22, 2017, the Company
completed a registered direct offering (the “2018 Registered Offering”) of an aggregate of 8,000,000 shares of common
stock and warrants to purchase an additional 8,000,000 shares of common stock at a price of $1.25 per share and related warrant
for gross proceeds of $10.0 million. The warrants have an exercise price of $1.25 per share, are immediately exercisable and have
a term of exercise of five years (the “2018 Investor Warrants”). The Company engaged a placement
agent for the 2018 Registered Offering. Under the Company’s engagement agreement with the placement agent, the Company paid
$800,000 in cash commission and other fees to the placement agent and issued warrants to purchase 400,000 shares of common stock
to the placement agent (the “2018 Agent Warrants”). The 2018 Agent Warrants are exercisable at a per share price of
$1.25 and have a term of exercise of five years. In addition to the cash commission
and other placement agent fees, the Company also incurred additional cash issue costs of $254,664 resulting in net cash proceeds
of $8,945,336. 2017 Omnibus Incentive Plan As approved by the Company’s stockholders at
the annual meeting of stockholders held on April 11, 2018, on July 7, 2017, as amended on February 1, 2018, the Company’s
board of directors approved adoption of the Company’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”). The
board of directors also approved a form of Performance Stock Unit Award Agreement to be used in connection with grants of performance
stock units (“PSUs”) under the 2017 Plan. Under the 2017 Plan, 7,800,000 shares of Company common stock are reserved
for issuance, less the number of shares of common stock issued under the Del Mar (BC) 2013 Amended and Restated Stock Option Plan
(the “Legacy Plan”) or that are subject to grants of stock options made, or that may be made, under the Legacy Plan.
A total of 1,699,850 shares of common stock have been issued under the Legacy Plan and/or are subject to outstanding stock options
granted under the Legacy Plan, and a total of 1,226,979 shares of common stock have been issued under the 2017 Plan and/or are
subject to outstanding stock options granted under the 2017 Plan. In addition, 1,200,000 PSU’s have been issued under the
2017 Plan leaving a potential 3,673,171 shares of common stock available for issuance under the 2017 Plan if all such options under
the Legacy Plan were exercised and no new grants are made under the Legacy Plan. The maximum number of shares of Company common
stock with respect to which any one participant may be granted awards during any calendar year is 8% of the Company’s fully
diluted shares of common stock on the date of grant (excluding the number of shares of common stock issued under the 2017 Plan
and/or the Legacy Plan or subject to outstanding awards granted under the 2017 Plan and/or the Legacy Plan). No award will be granted
under the 2017 Plan on or after July 7, 2027, but awards granted prior to that date may extend beyond that date. Performance stock units The Company’s board of directors has granted
PSUs under the 2017 Plan to the Company’s directors. The awards represent the right to receive shares of the Company’s
common stock upon vesting of the PSU based on targets approved by the Company’s board of directors related to the Company’s
fully diluted market capitalization. The PSUs vest at various fully diluted market capitalization levels with full vesting occurring
upon the later of one year from the grant date and the Company achieving a fully diluted market capitalization of at least $500
million for five consecutive business days. The PSUs expire on July 7, 2022. There are 1,200,000 PSUs outstanding as of December
31, 2018 and June 30, 2018. The Company has recognized $61,514 (2017 - $0) and
$123,028 (2017 - $0) in expense related to the PSUs during the three and six months ended December 31, 2018, respectively, with
all of it being recognized as general and administrative expense. As at December 31, 2018 there was $403,113 (2017 - $0) in unrecognized
compensation expense that will be recognized over the next 2.71 years. The PSUs have been valued using the following
assumptions:
Dividend rate 0 %
Volatility 79.0 to 82.5 %
Risk-free rate 2.56% to 2.71 %
Term – 1.67 to 3.24 Stock Options The following table sets forth the stock options outstanding
under all plans as of December 31, 2018:
Number of Weighted
Balance – June 30, 2018 2,626,829 2.43
Granted 300,000 0.61
Balance – December 31, 2018 2,926,829 2.24 The following table summarizes stock options currently
outstanding and exercisable at December 31, 2018 under all plans:
Exercise price $ Number Weighted average (years) Number
0.61 300,000 9.85 16,665
0.70 54,514 9.48 -
0.87 120,000 9.84 120,000
0.98 836,465 9.39 162,646
1.06 36,000 9.28 -
1.17 300,000 4.16 275,000
1.47 25,000 3.42 25,000
2.00 131,250 2.77 131,250
2.11 159,000 7.76 75,000
2.96 45,000 6.09 45,000
3.20 30,000 0.42 30,000
3.76 45,000 7.11 42,492
4.00 12,500 0.75 12,500
4.10 40,000 7.86 27,775
4.20 412,500 4.06 412,500
4.48 30,000 7.11 28,331
4.95 224,600 5.56 173,657
5.32 80,000 7.35 68,890
6.16 15,000 4.25 15,000
9.20 30,000 4.42 30,000
2,926,829 1,691,706 Included in the number of stock options outstanding
are 25,000 stock options granted at an exercise price of CA $2.00. The exercise prices shown in the above table have been converted
to US $1.47 using the period ending closing exchange rate. Certain stock options have been granted to non-employees and will be
revalued at each reporting date until they have fully vested. The stock options granted, and those being re-valued, have been valued
using a Black-Scholes pricing model using the following assumptions:
December 31, 2018
Dividend rate 0 %
Volatility 71.8% to 75.9 %
Risk-free rate 2.7%
to 3.2 %
Term - years 0.1
to 2.0 The Company has recognized the following amounts
as stock option expense for the periods noted:
Three months ended December 31, Six months ended December 31,
2018 $ 2017 $ 2018 $ 2017 $
Research and development 23,127 126,375 51,577 121,401
General and administrative 99,624 102,132 204,076 171,976
122,751 228,507 255,653 293,377 All of the stock option expense for the periods ended
December 31, 2018 and 2017 has been recognized as additional paid in capital. The aggregate intrinsic value of stock options outstanding
at December 31, 2018 was $0 (2017 - $26,400) and the aggregate intrinsic value of stock options exercisable at December 31, 2018
was $0 (2017 - $2,200). As of December 31, 2018, there was $332,988 in unrecognized compensation expense that will be recognized
over the next 2.86 years. No stock options granted under any plan have been exercised to December 31, 2018. Upon the exercise of
stock options new shares will be issued. A summary of the Company’s unvested stock options
under all plans is presented below:
Number of Weighted $ Weighted $
Unvested at June 30, 2018 1,381,599 1.44 0.76
Granted 300,000 0.61 0.26
Vested (446,476 ) 1.51 0.81
Unvested at December 31, 2018 1,235,123 1.21 0.62 Warrants Certain of the Company’s warrants have
been recognized as a derivative liability (note 4). The following table summarizes changes in the Company’s outstanding
warrants as of December 31, 2018:
Description Number
Balance – June 30, 2018 14,281,275
Exercised for cash (i) (1,975,000 )
Cashless exchange (i) (2,975,000 )
Issued for services (ii) 140,000
Forfeited (iii) (24,000 )
Expired (iv) (43,750 )
Balance - December 31, 2018 9,403,525
i) On November 25, 2018, the Company entered into Warrant Exercise and Exchange Agreements
(the “Warrant Exercise Agreements”) with certain holders (the “Exercising Holders”) of the 2018 Investor
Warrants. Pursuant to the Warrant Exercise Agreements, in order to induce the Exercising Holders to exercise the 2018 Investor
Warrants for cash, the Company agreed to reduce the exercise price from $1.25 to $0.40 per share. Pursuant to the Warrant Exercise
Agreements, the Exercising Holders exercised their 2018 Investor Warrants with respect to an aggregate of 1,975,000 shares of common
stock underlying such 2018 Investor Warrants (the “Exercised Shares”). The Company received net proceeds of $726,481,
comprising aggregate gross proceeds of $790,000 net of expenses of $63,519, from the exercise of the 2018 Investor Warrants. In
addition, in order to further induce the Exercising Holders to exercise the 2018 Investor Warrants, the Warrant Exercise Agreements
also provided for the issuance of one share of common stock to the Exercising Holders in exchange for every three shares of common
stock underlying the 2018 Investor Warrants held by the Exercising Holders that are not being exercised for cash pursuant to the
Warrant Exercise Agreements, if any. On November 26, 2018, the Company issued an aggregate of 991,666 shares of common stock in
exchange for 2,975,000 2018 Investor Warrants, resulting in a 1,983,334 reduction in the Company’s total shares of common
stock outstanding on a fully-diluted basis. ii) All of the warrants issued for services are exercisable at $0.90 with 120,000 expiring on September 15, 2023 and 20,000 expiring
on October 11, 2021. Of the total, 120,000 vest pro rata monthly over twelve months commencing September 15, 2018 and 20,000 are
fully vested as of November 11, 2018.
iii) Warrants issued for services exercisable at $1.17 were forfeited upon termination of the underlying agreement.
iv) Warrants issued for services exercisable at $7.04 expired September 12, 2018. The following table summarizes the Company’s
outstanding warrants as of December 31, 2018:
Description Number Exercise price $ Expiry date
2018 Investor 2,800,000 1.25 September 22, 2022
2017 Investor 2,076,924 3.50 April 19, 2022
2015 Investor 979,003 3.00 July 31, 2020
2013 Investor – Amended 778,504 3.14 March 31, 2019
2013 Placement Agent 1,262,500 3.14 June 30, 2019
Issued for services 265,000 3.00 July 1, 2020 to February 1, 2021
Issued for services 60,000 1.78 January 25, 2023
Issued for services 336,000 1.17 February 27, 2023
Issued for services 120,000 0.90 September 15, 2023
Issued for services 41,400 5.93 February 27, 2020
Issued for services 20,000 0.90 October 11, 2021
2018 Agent 400,000 1.25 September 20, 2022
2017 Agent 138,462 4.06 April 12, 2022
2016 Agent 103,964 4.00 May 12, 2021
2015 Agent 21,768 3.00 July 15, 2020
9,403,525 2.48 |
