| Stockholders' equity | 5 Stockholders'
equity Series B Preferred Stock
Series
B Preferred Stock
2019
Number $
Balance
– June 30, 2019 673,613 4,699,304
Conversion
of Series B Preferred stock to common stock (25,000 ) (174,407 )
Balance
– December 31, 2019 648,613 4,524,897 During the year ended June 30, 2016, the Company
issued an aggregate of 902,238 shares of Series B Preferred Stock at a purchase price of $8.00 per share. Each share of Series
B Preferred Stock is convertible into 0.25 shares of common stock equating to a conversion price of $32.00 (the "Conversion
Price") and will automatically convert to common stock at the earlier of 24 hours following regulatory approval of VAL-083
with a minimum closing bid price of $80.00 or five years from the respective final closing dates. 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. The
Series B Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i)
senior to the Company's common stock and (ii) senior to the Special Voting Preferred Stock and (iii) senior to any other
class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to,
the Series B Preferred Stock. The Series B Preferred Stock shall be pari passu in liquidation to the Company's Series A
Preferred Stock. The liquidation value of the Series B Preferred Stock at December 31, 2019 is the stated value of $5,188,904
(June 30, 2019 - $5,388,904). 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, 2019, the Company issued 3,700 (2018
– 4,735) shares of common stock for an amount of $2,552 (2018 – $16,190) and during the six months ended
December 31, 2019, the Company issued 7,400 (2018 – 9,695) shares of common stock for an amount of $4,598 (2018 –
$52,275). These dividends have been recognized as a direct increase in accumulated deficit. A
total of 648,613 (2018 – 841,113) shares of Series B Preferred Stock are outstanding as of December 31, 2019, such that
a total of 162,177 (2018 – 210,279) shares of common stock are issuable upon conversion of the Series B Preferred Stock
as at December 31, 2019. Converted shares are rounded up to the nearest whole share. Series A Preferred Stock Effective
September 30, 2014, the Company filed a Certificate of Designation of Series A Preferred Stock (the "Series A Certificate
of Designation") with the Secretary of State of Nevada. Pursuant to the Series A Certificate of Designation, the Company
designated 278,530 shares of preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have a stated
value of $1.00 per share (the "Series A Stated Value") and are not convertible into common stock. The holder of the
Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in
arrears. Upon any liquidation of the Company, the holder of the Series A Preferred Stock will be entitled to be paid, out of any
assets of the Company available for distribution to stockholders, the Series A Stated Value of the shares of Series A Preferred
Stock held by such holder, plus any accrued but unpaid dividends thereon, prior to any payments being made with respect to the
common stock. The Series A Preferred Stock is held by Valent (note 3). The
Series A Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i)
senior to the Company's common stock, and (ii) senior to the Company's Special Voting Preferred Stock and (iii) senior
to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with,
or senior to, the Series A Preferred Stock. The Series A Preferred Stock shall be pari passu in liquidation to the Company's
Series B Preferred Stock. The liquidation value of the Series A Preferred stock at December 31, 2019 and June 30, 2019 is the
stated value of $278,530. There was no change to the Series A Preferred stock
for the three or six month periods ended December 31, 2019 or 2018. Common
stock Stock
Issuances Six
months ended December 31, 2019 Underwritten
public offering On
August 16, 2019, the Company closed on the sale of (i) 4,895,000 shares of its common stock, par value $0.001 per share (the "Common
Stock"), (ii) pre-funded warrants ("PFW") to purchase an aggregate of 2,655,000 shares of Common Stock and (iii)
common warrants to purchase an aggregate of 7,762,500 shares of Common Stock ("2020 Investor Warrants"), including
800,000 shares of Common Stock and 2020 Investor Warrants to purchase an aggregate of 1,012,500 shares of Common Stock sold pursuant
to a partial exercise by the underwriters of the underwriters' option to purchase additional securities, in the Company's
underwritten public offering (the "Offering"). Each share of Common Stock or PFW, as applicable, was sold together
with a 2020 Investor Warrant to purchase one share of Common Stock at a combined effective price to the public of $1.00 per share
of Common Stock and accompanying 2020 Investor Warrant. The
net proceeds from the Offering, including from the partial exercise of the underwriters' option to purchase additional securities,
were $6,582,966, after deducting underwriting discounts and commissions, and other offering expenses. The
2020 Investor Warrants are exercisable at $1.00 per share until their expiry on August 16, 2024 and the PFW are exercisable at
$0.01 per share at any time after August 16, 2019. The Company also issued 377,500 warrants to the underwriters of the Offering.
The underwriter warrants are exercisable at $1.15 per share commencing February 10, 2020 until their expiry on August 14, 2022. During
the six months ended December 31, 2019, all of the 2,655,000 PFW were exercised at $0.01 per PFW for proceeds of
$26,550. 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 164,235 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 614,515 shares of common stock
have been issued under the 2017 Plan and/or are subject to outstanding stock options granted under the 2017 Plan leaving 1,250
shares of common stock available at December 31, 2019 for issuance under the 2017 Plan if all such options under the Legacy Plan
were exercised. 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. During
the six months ended December 31, 2019, and subject to approval by the Company's stockholders, the Company's
board of directors approved an increase in the number of shares of common stock available to be issued under the 2017 Plan by
1,500,000. The increase brings the total number of shares available under the 2017 Plan to 2,280,000. During
the six months ended December 31, 2019, the Company granted 1,041,016 stock options to officers and directors of the Company.
The total grant date aggregate fair value of the stock options was $505,385. Of the total stock options granted during the
six months ended December 31, 2019, 491,817 were granted under the existing 2017 Plan limit and 549,199 will be
exercisable subject to approval by the Company's stockholders of the 2017 Plan share increase. All of these stock
options granted to officers and directors have an exercise price of $0.61 and expire on September 5, 2029. Of the 1,041,016
stock options granted, 375,000 vest pro rata monthly over one year from the date of grant and 666,016 vest as to one-sixth on
the six month anniversary of the grant date with the remaining five-sixths vesting pro rate monthly over 30 months commencing
on the seven-month anniversary of the grant date. In
addition, during the six months ended December 31, 2019, the Company granted 250,000 stock options to an officer of the
Company, subject to stockholder approval of the share increase to the 2017 Plan. The options have an exercise price of $0.735
and expire November 12, 2029. The options vest upon the achievement of certain clinical development milestones. Stock
Options The
following table sets forth the aggregate stock options outstanding under all plans as of December 31, 2019:
Number
of Weighted
Balance
– June 30, 2019 288,183 22.31
Granted 491,817 0.61
Expired (1,250 ) (40.00 )
Balance
– December 31, 2019 778,750 8.58 The
following table summarizes stock options outstanding and exercisable under all plans at December 31, 2019:
Exercise
price Number
Weighted
Number
0.61 491,817 9.68 93,750
6.10 30,000 8.85 23,611
7.00 5,451 8.48 2,726
8.70 12,000 7.84 12,000
9.83 83,647 8.39 44,147
10.60 3,600 8.28 2,100
11.70 30,000 3.16 30,000
15.36 2,500 2.42 2,500
20.00 13,125 1.77 13,125
21.10 14,400 7.52 10,800
29.60 4,500 5.09 4,500
37.60 4,500 6.11 4,500
41.00 4,000 6.86 4,000
42.00 41,250 3.06 41,250
44.80 3,000 6.11 3,000
49.50 22,460 4.56 21,733
53.20 8,000 6.35 8,000
61.60 1,500 3.25 1,500
92.00 3,000 3.42 3,000
778,750 326,242 The
above table excludes 799,199 granted stock options that are exercisable subject to approval by the Company's stockholders
of the share reserve increase under the 2017 Plan. Of these options, 549,199 are exercisable at $0.61 per share until September
5, 2029 and 250,000 are exercisable at $0.735 until November 12, 2029. Included
in the number of stock options outstanding are 2,500 stock options granted at an exercise price of CA $20.00. The exercise
price of these options shown in the above table have been converted to US $15.36 using the period ending closing exchange
rate. Stock options issued during the six months ended December 31, 2019 have been valued using a Black-Scholes pricing
model with the following assumptions:
December 31,
Dividend
rate 0 %
Volatility 99%
to 102 %
Risk-free
rate 1.50 %
Term
– years 5.5
to 6.5 The
estimated volatility of the Company's common stock at the date of issuance of the stock options is based on the historical
volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity
similar to the expected remaining life of the stock options at the valuation date. The expected life of the stock options has been estimated using the plain vanilla method. The
Company has recognized the following amounts as stock option expense for the periods noted:
Three
months ended Six
months ended
2019 2018 2019 2018
Research
and development 24,151 23,127 32,304 51,577
General
and administrative 135,701 99,624 178,533 204,076
159,852 122,751 210,837 255,653 All
of the stock option expense for the periods ended December 31, 2019 and 2018 has been recognized as additional paid in capital.
The aggregate intrinsic value of stock options outstanding at December 31, 2019 was $39,198 (2018 - $0) and the aggregate intrinsic
value of stock options exercisable at December 31, 2019 was $7,472 (2018 - $0). As of December 31, 2019, there was $192,252 in
unrecognized compensation expense that will be recognized over the next 2.43 years. No stock options granted under the Company's
equity plans have been exercised during the six months ended December 31, 2019. Upon the exercise of stock options new shares will be issued. The
following table sets forth unvested stock options under all plans at December 31, 2019:
Number
of Weighted
Weighted
Unvested
at June 30, 2019 84,990 11.35 5.82
Granted 491,817 0.61 0.41
Vested (124,299 ) 3.60 1.90
Unvested
at December 31, 2019 452,508 1.81 1.01 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, 2019:
Description Number
Balance – June 30, 2019 1,543,596
2020 Investor Warrants issued in underwritten offering 7,762,500
PFW issued in underwritten offering 2,655,000
2020 Underwriter Warrants 377,500
Exercise of PFW (2,655,000 )
Warrants issued for services (i) 280,000
Balance - December 31, 2019 9,963,596
(i) The Company issued 280,000 warrants for services during the six months ended December 31, 2019. The warrants are exercisable
at $0.75 per share until November 18, 2023 and they vest pro rata monthly commencing December 18, 2019. The total fair value of
the warrants issued was $132,519 with $34,672 being recognized during the six months ended December 31, 2019. The
following table summarizes the Company's outstanding warrants as of December 31, 2019:
Description Number Exercise Expiry date
2020 Investor Warrants 7,762,500 1.00 August 16, 2024
2019 Investor Warrants 760,500 3.10 June 5, 2024
2018 Investor Warrants 280,000 12.50 September 22, 2022
2017 Investor Warrants 207,721 35.00 April 19, 2022
2015 Investor Warrants 97,905 30.00 July 31, 2020
Warrants issued for services 280,000 0.75 November 18, 2023
Warrants issued for services 26,500 30.00 July 1, 2020 to February 1, 2021
Warrants issued for services 6,000 17.80 January 25, 2023
Warrants issued for services 33,600 11.70 February 27, 2023
Warrants issued for services 12,000 9.00 September 15, 2023
Warrants issued for services 4,140 59.30 February 27, 2020
Warrants issued for services 2,000 9.00 October 11, 2021
2020 Underwriter Warrants 377,500 1.15 August 14, 2022
2019 Agent Warrants 46,800 3.875 June 3, 2024
2018 Agent Warrants 40,000 12.50 September 20, 2022
2017 Agent Warrants 13,848 40.60 April 12, 2022
2016 Agent Warrants 10,402 40.00 May 12, 2021
2015 Agent Warrants 2,180 30.00 July 15, 2020
9,963,596 |
