| 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 0.25 shares of common stock equating to a conversion price of $32.00 (the "Conversion
Price") and will automatically convert to common stock at the earlier of 24 hours following regulatory approval of VAL-083
with a minimum closing bid price of $80.00 or five years from the 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, March 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 March 31, 2019, the Company issued 4,735 (2018 – 4,960) shares of common stock and recognized
$23,202 (2018 – $46,626). During the nine months ended March 31, 2019, the Company issued 14,430 (2018 – 14,881) shares
of common stock and recognized $75,477 (2018 – $142,358). These dividends have been recognized as a direct increase in accumulated
deficit. During the nine months ended March 31, 2019, 40,000
Series B Preferred shares were converted to 10,000 shares of common stock. There were no conversions during the three months ended
March 31, 2019 and 2018 or for the nine months ended March 31, 2018. A total of 841,113 (2018 – 881,113) shares of Series
B Preferred Stock are outstanding as of March 31, 2019, such that a total of 210,279 (2018 – 220,279) shares of common stock
are issuable upon conversion of the Series B Preferred Stock as at March 31, 2019. 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
$ $ $ $
Nine months ended March 31, 2019
Balance – June 30, 2018 2,296,667 2,297 43,198,193 8,229,482 (52,441,337 )
Exercise and exchange of warrants 296,667 297 2,920,695 (2,210,697 ) -
Warrants issued for services - - - 36,534 -
Conversion of Series B preferred stock to common stock 10,000 10 279,041 - -
Series B Preferred stock dividend 14,430 14 75,463 - (75,477 )
Shares issued for services 2,269 2 10,267 - -
Stock option expense - - 355,388 - -
Performance stock unit expense - - 183,205 - -
Series A Preferred cash dividend - - - - (6,267 )
Loss for the period - - - - (5,465,486 )
Balance – March 31, 2019 2,620,033 2,620 47,022,252 6,055,319 (57,988,567 )
Three months ended March 31, 2019
Balance – December 31, 2018 2,614,342 2,614 46,851,817 6,046,587 (56,299,291 )
Exercise and exchange of warrants – issue costs - - (16,186 ) - -
Warrants issued for services - - - 8,732 -
Series B Preferred stock dividend 4,735 5 23,197 - (23,202 )
Shares issued for services 956 1 3,512 - -
Stock option expense - - 99,735 - -
Performance stock unit expense - - 60,177 - -
Series A Preferred cash dividend - - - - (2,089 )
Loss for the period - - - - (1,663,985 )
Balance – March 31, 2019 2,620,033 2,620 47,022,252 6,055,319 (57,988,567 )
Shares of common stock Common stock Additional paid-in capital Warrants Accumulated deficit
$ $ $ $
Nine months ended March 31, 2018
Balance – June 30, 2017 1,450,963 1,451 36,678,344 4,570,574 (41,118,433 )
Issuance of shares and warrants 800,000 800 6,191,785 2,752,751 -
Warrants exercised for cash 25,000 25 312,475 - -
Warrants issued for services - - - 155,204 -
Series B Preferred stock dividend 14,881 15 142,343 - (142,358 )
Shares issued for services 407 - 4,821 - -
Stock option expense - - 430,673 - -
Series A Preferred cash dividend - - - - (6,267 )
Loss for the period - - - - (8,761,061 )
Balance – March 31, 2018 2,291,251 2,291 43,760,441 7,478,529 (50,028,119 )
Three months ended March 31, 2018
Balance – December 31, 2017 2,260,884 2,261 43,259,228 7,321,844 (47,046,347 )
Warrants exercised for cash 25,000 25 312,475 - -
Warrants issued for services - - - 156,685 -
Series B Preferred stock dividend 4,960 5 46,621 - (46,626 )
Shares issued for services 407 - 4,821 - -
Stock option expense - - 137,296 - -
Series A Preferred cash dividend - - - - (2,089 )
Loss for the period - - - - (2,933,057 )
Balance – March 31, 2018 2,291,251 2,291 43,760,441 7,478,529 (50,028,119 ) The issued and outstanding common shares at March
31, 2019 include 9,063 (June 30, 2018 – 91,276) 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. Nine months ended March 31, 2018 On September 22, 2017, the Company
completed a registered direct offering (the "2018 Registered Offering") of an aggregate of 800,000 shares of common
stock and warrants to purchase an additional 800,000 shares of common stock at a price of $12.50 per share and related warrant
for gross proceeds of $10.0 million. The warrants have an exercise price of $12.50 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 40,000 shares of common stock
to the placement agent (the "2018 Agent Warrants"). The 2018 Agent Warrants are exercisable at a per share price of
$12.50 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, 780,000 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 169,985 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 122,698 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, 120,000 PSU's have been issued under the 2017 Plan
leaving a potential 367,317 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 120,000 PSUs outstanding as of March 31,
2019 and June 30, 2018. The Company has recognized $60,177 (2018 - $0) and
$183,205 (2018 - $0) in expense related to the PSUs during the three and nine months ended March 31, 2019, respectively, with all
of it being recognized as general and administrative expense. As at March 31, 2019 there was $342,936 (2018 - $0) in unrecognized
compensation expense that will be recognized over the next 2.47 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 March 31, 2019:
Number of Weighted
Balance – June 30, 2018 262,683 24.27
Granted 30,000 6.10
Balance – March 31, 2019 292,683 22.40 The following table summarizes stock options currently
outstanding and exercisable at March 31, 2019 under all plans:
Exercise price Number Weighted Number
6.10 30,000 9.60 6,666
7.00 5,451 9.23 -
8.70 12,000 8.59 12,000
9.83 83,647 9.14 23,235
10.60 3,600 9.03 1,200
11.70 30,000 3.91 30,000
14.98 2,500 3.17 2,500
20.00 13,125 2.52 13,125
21.10 15,900 7.51 8,700
29.60 4,500 5.84 4,500
32.00 3,000 0.17 3,000
37.60 4,500 6.86 4,500
40.00 1,250 0.50 1,250
41.00 4,000 7.61 3,111
42.00 41,250 3.81 41,250
44.80 3,000 6.86 3,000
49.50 22,460 5.31 18,458
53.20 8,000 7.10 7,555
61.60 1,500 4.00 1,500
92.00 3,000 4.17 3,000
292,683 188,550 Included in the number of stock options outstanding
are 2,500 stock options granted at an exercise price of CA $20.00. The exercise prices shown in the above table have been converted
to US $14.98 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:
March 31,
Dividend rate 0 %
Volatility 70.6% to 79.1 %
Risk-free rate 2.1% to 3.2 %
Term - years 0.1 to 3.0 The Company has recognized the following amounts as
stock option expense for the periods noted:
Three months ended Nine months ended
2019 2018 2019 2018
Research and development 12,889 9,145 64,466 130,546
General and administrative 86,846 128,151 290,922 300,127
99,735 137,296 355,388 430,673 All of the stock option expense for the periods ended
March 31, 2019 and 2018 has been recognized as additional paid in capital. The aggregate intrinsic value of stock options outstanding
at March 31, 2019 was $0 (2018 - $8,400) and the aggregate intrinsic value of stock options exercisable at March 31, 2019 was $0
(2018 - $2,800). As of March 31, 2019, there was $234,974 in unrecognized compensation expense that will be recognized over the
next 2.61 years. No stock options granted under any plan have been exercised to March 31, 2019. 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 138,160 14.39 7.63
Granted 30,000 6.10 2.56
Vested (64,027 ) 14.82 7.88
Unvested at March 31, 2019 104,133 11.62 5.95 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 March 31, 2019:
Description Number
Balance – June 30, 2018 1,428,128
Exercised for cash (i) (197,500 )
Cashless exchange (i) (297,500 )
Issued for services (ii) 14,000
Forfeited (iii) (2,400 )
Expired (iv) (82,225 )
Balance - March 31, 2019 862,503
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 $12.50 to $4.00 per share. Pursuant to the Warrant Exercise
Agreements, the Exercising Holders exercised their 2018 Investor Warrants with respect to an aggregate of 197,500 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 99,167 shares of common stock in
exchange for 297,500 2018 Investor Warrants, resulting in a 198,333 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 $9.00 with 12,000 expiring on September 15, 2023 and 2,000 expiring
on October 11, 2021. Of the total, 12,000 vest pro rata monthly over twelve months commencing September 15, 2018 and 2,000 are
fully vested as of November 11, 2018.
iii) Warrants issued for services exercisable at $11.70 were forfeited upon termination of the underlying agreement.
iv) Warrants issued for services exercisable at $70.40 expired September 12, 2018. In addition, warrants exercisable at $31.40
expired March 31, 2019. The following table summarizes the Company's
outstanding warrants as of March 31, 2019:
Description Number Exercise Expiry date
2018 Investor 280,000 12.50 September 22, 2022
2017 Investor 207,693 35.00 April 19, 2022
2015 Investor 97,900 30.00 July 31, 2020
2013 Placement Agent 126,250 31.40 June 30, 2019
Issued for services 26,500 30.00 July 1, 2020 to February 1, 2021
Issued for services 6,000 17.80 January 25, 2023
Issued for services 33,600 11.70 February 27, 2023
Issued for services 12,000 9.00 September 15, 2023
Issued for services 4,140 59.30 February 27, 2020
Issued for services 2,000 9.00 October 11, 2021
2018 Agent 40,000 12.50 September 20, 2022
2017 Agent 13,846 40.60 April 12, 2022
2016 Agent 10,396 40.00 May 12, 2021
2015 Agent 2,178 30.00 July 15, 2020
862,503 24.80 |
