Stockholders' Equity | 7 Stockholders’ equity Preferred stock Series C Preferred Stock Series C Preferred Stock Number of shares $ (in thousands) Balance – June 30, 2020 — — Issuance 25,028 18,286 Issued on exercise of Series C Agent Warrants 33 79 Conversion of Series C Preferred stock to common stock (4,969 ) (3,713 ) Balance – June 30, 2021 20,092 14,652 Conversion of Series C Preferred stock to common stock (1,710 ) (1,256 ) Balance – September 30, 2021 18,382 13,396 In connection with the Merger (note 3), in August 2020, the Company issued 25,028 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) in three separate closings of a private placement (Series C-1, C-2, and C-3). Each share of Series C Preferred Stock was issued at a purchase price of $1,000 per share and is convertible into shares of common stock based on the respective conversion prices which were determined at the closing of each round of the private placement. The conversion prices for the Series C-1 Preferred Stock, Series C-2 Preferred Stock, and the Series C-3 Preferred Stock are $1.16, $1.214, and $1.15, respectively. Subject to ownership limitations, the owners of the Series C Preferred Stock are entitled to receive dividends, payable in shares of common stock at a rate of 10%, 15%, 20% and 25% of the number of shares of common stock issuable upon conversion of the Series C Preferred Stock, on the 12 th th th th The Series C Preferred Stock dividends do not require declaration by the Board of Directors and are accrued annually as of the date the dividend is earned in an amount equal to fair value of the Company’s common stock on the dates the respective dividends are paid. The fair value of the Series C Preferred Stock dividend paid on August 19, 2021, was determined by multiplying the dividends paid of 1,698 by the Company’s closing share price on August 19, 2021, of $1.45 per share for a total fair value of $2,462. Any outstanding shares of Series C Preferred Stock will automatically convert to shares of common stock on August 19, 2024 Total gross proceeds from the private placement were $25,028, or approximately $21,573 in net proceeds after deducting financing costs of $3,455 with respect to agent commissions and expenses, as well as legal and accounting fees. In addition, the Company issued 2,504 Series C Preferred Stock purchase warrants with a fair value of $3,287 to the placement agent (“Series C Agent Warrants”). The Company’s Series C Preferred Stock outstanding, conversion shares, and dividends as of September 30, 2021, are as follows: Series Number Conversion price $ Number of conversion shares (in thousands) Dividend Shares (in thousands) Series 1 15,439 1.16 13,310 9,414 Series 2 898 1.21 740 518 Series 3 2,045 1.15 1,778 1,263 18,382 15,828 11,195 Series C Dividends Dividend Shares (in thousands) 10% - August 19, 2021 (actual) 1,698 15% - August 19, 2022 (estimated) 2,374 20% - August 19, 2023 (estimated) 3,166 25% - August 19, 2024 (estimated) 3,957 11,195 The conversion feature of the Series C Convertible Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series C Convertible Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from inception, the Company immediately recorded a non-cash deemed dividend of $3,181 related to the beneficial conversion feature arising from the issuance of Series C Convertible Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders and net loss per share for the three months ended September 30, 2020 The Series C 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 any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series C Preferred Stock. The Series C Preferred Stock shall be pari passu in liquidation to the Company’s Series A Preferred Stock. The liquidation value of the Series C Preferred Stock at September 30, 2021, is the stated value of $18,382 (June 30, 2021 - $20,092). Series B Preferred Stock During the year ended June 30, 2016, the Company issued 902 shares of In addition, the Company and the Series B Preferred Stock 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. 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 279 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 4). The Series A Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock, and (ii) senior to 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 C Preferred Stock. The liquidation value of the Series A Preferred stock at September 30, 2021 is its stated value of $279 (June 30, 2021 - $279). There was no change to the Series A Preferred stock for the three-months ended September 30, 2021 or 2020. Common stock Stock issuances during the three months ended September 30, 2021 Registered direct financing On September 28, 2021, the Company closed on the sale of (i) 7,200 shares of its common stock, par value $0.001 per share (the “Common Stock”), (ii) pre-funded warrants (“PFW”) to purchase an aggregate of 4,800 shares of Common Stock and (iii) common warrants to purchase an aggregate of 12,000 shares of Common Stock (“2022 Investor Warrants”) in the Company’s registered direct offering (the “Offering”). Each share of Common Stock, or PFW as applicable, was sold together with a 2022 Investor Warrant to purchase one share of Common Stock at a combined effective price of $1.25 per share of Common Stock and accompanying 2022 Investor Warrant. The 2022 Investor Warrants have been valued at $7,023 and have been treated as equity. They have been valued using a Black-Scholes valuation with a risk-free rate of 0.55%, a contractual term of 3.5 years, a volatility of 116.7%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock 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 contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant. The net proceeds from the Offering, were $13,634 after deducting commissions and other offering expenses. The 2022 Investor Warrants are exercisable at $1.25 per share until their expiry on March 28, 2025 and the PFW are exercisable at $0.001 per share at any time after September 28, 2021. The Company also issued 600 agent warrants that are exercisable at $1.5265 per share commencing September 28, 2021, until their expiry on March 28, 2025 (the “2022 Agent Warrants”). The 2022 Agent Warrants have been valued at $333 and have been treated as non-cash issue costs of the Common Stock, 2022 Investor Warrants, and PFW. The 2022 Agent Warrants have been valued using a Black-Scholes valuation with a risk-free rate of 0.55%, a contractual term of 3.5 years, a volatility of 116.7%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock 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 contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant . During the three months ended September 30, 2021, all of the 4,800 PFW were exercised at $0.001 per PFW for proceeds of $4.8. Stock options 2017 Omnibus Incentive Plan As subsequently approved by the Company’s stockholders at an annual meeting of stockholders on April 11, 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. As approved by the Company’s stockholders on June 25, 2021, the number of common shares available under the 2017 Plan was increased to 13,000 shares. Under the 2017 Plan 13,000 shares of Company common stock are currently reserved for issuance, less the number of shares of common stock issued under the Del Mar (BC) 2013 Amended and Restated Stock Option Plan (the “Legacy Plan”), or that are subject to grants of stock options made, or that may be made, under the Legacy Plan, or that have been previously exercised. A total of 129 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 6,680 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 5,997 shares of common stock available at September 30, 2021 for issuance under the 2017 Plan if all such options under the Legacy Plan were exercised, net of stock options previously 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. During the three-months ended September 30, 2021, a total of 435 options to purchase shares of common stock were granted to directors of the Company. The options to purchase shares of common stock of the Company The following table sets forth changes in stock options outstanding under all plans: Number of stock options outstanding (in thousands) Weighted average exercise price Balance – June 30, 2021 6,392 2.26 Granted 435 1.24 Expired (18 ) 13.11 Balance – September 30, 2021 6,809 2.16 The following table summarizes stock options outstanding and exercisable under all plans at September 30, 2021: Exercise price $ Number Outstanding at September 30, 2021 (in thousands) Weighted average remaining contractual life (years) Number exercisable at September 30, 2021 (in thousands) 0.61 816 7.93 747 0.74 250 8.12 83 1.24 435 9.98 — 1.36 300 8.98 100 1.37 75 9.58 — 1.70 4,699 8.96 1,886 6.10 17 7.11 17 8.70 11 6.09 11 9.83 84 6.64 84 10.60 3 6.54 3 11.70 30 1.41 30 15.77 3 0.67 3 20.00 9 0.34 9 21.10 7 5.77 7 29.60 2 3.35 2 37.60 5 4.36 5 41.00 4 5.11 4 42.00 30 1.88 30 44.80 3 4.36 3 49.50 13 5.38 13 53.20 8 4.60 8 61.60 2 1.50 2 92.00 3 1.67 3 6,809 3,050 Included in the number of stock options outstanding are 2.5 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$15.77 per share using the period ending closing exchange rate. Stock options granted during the three months ended September 30, 2021, have been valued using a Black-Scholes pricing model with the following assumptions: September 30, 2021 Dividend rate — % Estimated volatility 93.9 % Risk-free rate 1.55 % Expected term – years 5.3 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 term of the stock options at the valuation date. The expected term 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 (in thousands) : Three months ended September 30, 2021 $ 2020 $ Research and development 244 91 General and administrative 567 314 811 405 All of the stock option expense for the periods ended September 30, 2021, and 2020 has been recognized as additional paid in capital. The aggregate intrinsic value of stock options outstanding at September 30, 2021 was $235 (2020 - $977) and the aggregate intrinsic value of stock options exercisable at September 30, 2021 was $197 (2020 - $447). As of September 30, 2021, there was $2,597 in unrecognized compensation expense that will be recognized over the next 2.58 years. The following table sets forth changes in unvested stock options under all plans: Number of Options (in thousands) Weighted average exercise price $ Unvested at June 30, 2021 3,860 1.60 Granted 435 1.24 Vested (536 ) 1.62 Unvested at September 30, 2021 3,759 1.56 The aggregate intrinsic value of unvested stock options at September 30, 2021 was $38 (2020 - $531). The unvested stock options have a remaining weighted average contractual term of 9.03 years (2020 – 9.83). Common stock warrants The following table sets forth changes in outstanding common stock warrants: Number of Warrants (in thousands) Weighted average exercise price $ Balance – June 30, 2021 6,974 3.34 Issuance of 2022 Investor Warrants 12,000 1.25 Issuance of PFW 4,800 0.001 Issuance of 2022 Agent Warrants 600 1.5625 Exercise of PFW (4,800 ) 0.001 Exercise of 2020 Investor Warrants (69 ) 1.00 Expiry of Adgero replacement warrants (353 ) 3.18 Balance – September 30, 2021 19,152 1.99 The following table summarizes the Company’s outstanding common stock warrants as of September 30, 2021: Description of warrants Number (in thousands) Exercise price $ Expiry date 2022 Investor warrants 12,000 1.25 March 28, 2025 2020 Investor warrants 3,264 1.00 August 16, 2024 2019 Investor warrants 760 3.10 June 5, 2024 2018 Investor warrants 280 12.50 September 22, 2022 2017 Investor warrants 208 35.00 April 19, 2022 NBTS Warrants 125 1.09 June 19, 2025 Warrants issued for services 6 17.80 January 25, 2023 Warrants issued for services 34 11.70 February 27, 2023 Warrants issued for services 14 9.00 September 15, 2023 Warrants issued for services 280 0.75 October 11, 2023 Warrants issued for services 125 0.64 November 18, 2023 Warrants issued for services 280 1.49 January 20, 2024 Warrants issued for services 50 1.49 September 22, 2023 Warrants issued for services 50 1.82 November 13, 2023 Warrants issued for services 100 1.47 January 20, 2024 Warrants issued for services 70 2.75 February 17, 2024 Warrants issued for services 50 2.38 February 25, 2024 2022 Agent warrants 600 1.56 March 28, 2025 2019 Agent warrants 47 3.88 June 3, 2024 2018 Agent warrants 40 12.50 September 20, 2022 2017 Agent warrants 14 40.60 April 12, 2022 Adgero Warrants 755 3.18 January 17, 2022 19,152 Series C Preferred Stock warrants In connection with the Series C Preferred Stock private placement, the Company issued 2,504 Series C Agent Warrants. The Series C Agent Warrants have an exercise price of $1,000 per share, provide for a cashless exercise feature, and are exercisable for a period of four years from August 19, 2020. The Series C Preferred Stock issuable upon exercise of the Series C Agent Warrants is convertible into shares of common stock in the same manner as each respective underlying series of outstanding Series C Preferred Stock and will be entitled to the same dividend rights as each respective series. The Series C Agent Warrants were valued at a total of $3,287 using a binomial pricing model with a risk-free interest rate of 0.27%, a term of 4.0 years, and a volatility of 95.2% to 95.8%. The estimated volatility of the Company’s common stock at the date of measurement is based on the historical volatility of the Company’s common stock. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the instrument at the valuation date. The expected term has been estimated using the contractual term of the warrant. The following table sets forth changes in outstanding Series C Agent Warrants: Balance June 30, 2021 Number of Warrants Issued Number of Warrants Exercised Balance, September 30, 2021 Conversion price $ Issuance of Preferred Series C-1 Agent Warrants 1,929 — — 1,929 1.16 Issuance of Preferred Series C-2 Agent Warrants 219 — — 219 1.21 Issuance of Preferred Series C-3 Agent Warrants 296 — — 296 1.15 2,444 — — 2,444 The following table summarizes the Company’s outstanding Series C Agent Warrants as of September 30, 2021: Series C Agent Warrants Number Conversion price $ Number of conversion shares (in thousands) Cumulative common stock dividends (in thousands) Series 1 1,929 1.16 1,663 1,164 Series 2 219 1.21 180 126 Series 3 296 1.15 257 180 2,444 2,100 1,470 |