Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 14, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Edesa Biotech, Inc. | |
Entity Central Index Key | 0001540159 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Is Entity's Reporting Status Current? | Yes | |
Is Entity Emerging Growth Company? | true | |
Elected Not To Use the Extended Transition Period | true | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 7,504,468 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 |
Condensed Interim Consolidated
Condensed Interim Consolidated Balance Sheets - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 6,363,096 | $ 3,367,098 |
Accounts and other receivable | 345,014 | 7,339 |
Inventory | 77,913 | 0 |
Prepaid expenses and deposits | 337,668 | 16,487 |
Total current assets | 7,123,691 | 3,390,924 |
Property, plant and equipment, net | 88,589 | 7,386 |
Other assets | 15,340 | 0 |
Total assets | 7,227,620 | 3,398,310 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 1,015,004 | 183,820 |
Total current liabilities | 1,015,004 | 183,820 |
Commitments (Note 5) | ||
Shareholders' equity: | ||
Common shares | 12,005,051 | 1,111,253 |
Preferred shares | 0 | 6,064,013 |
Additional paid-in capital | 317,560 | 230,792 |
Accumulated other comprehensive loss | (329,277) | (429,973) |
Accumulated deficit | (5,780,718) | (3,761,595) |
Total shareholders' equity | 6,212,616 | 3,214,490 |
Total liabilities and shareholders' equity | $ 7,227,620 | $ 3,398,310 |
Condensed Interim Consolidate_2
Condensed Interim Consolidated Balance Sheets (Parenthetical) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Statement of Financial Position [Abstract] | ||
Common stock shares, par value | $ 0 | $ 0 |
Common stock shares, authorized | Unlimited | Unlimited |
Common stock shares, issued | 7,504,468 | 3,239,902 |
Common stock shares, outstanding | 7,504,468 | 3,239,902 |
Preferred stock shares, issued | 0 | 1,007,143 |
Preferred stock shares, outstanding | 0 | 1,007,143 |
Condensed Interim Consolidate_3
Condensed Interim Consolidated Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues: | ||||
Product sales and services | $ 500 | $ 0 | $ 500 | $ 0 |
Total revenues | 500 | 0 | 500 | 0 |
Expenses: | ||||
Research and development | 502,927 | 298,223 | 614,629 | 578,268 |
General and administrative | 817,927 | 123,770 | 1,246,999 | 275,020 |
Total expenses | 1,320,854 | 421,993 | 1,861,628 | 853,288 |
Loss from operations | (1,320,354) | (421,993) | (1,861,128) | (853,288) |
Other income (loss): | ||||
Interest income | 15,565 | 16,337 | 31,485 | 32,995 |
Foreign exchange gain (loss) | 8,610 | (6,184) | 4,634 | (6,803) |
Gain on disposition of property and equipment | 2,172 | 0 | 2,172 | 0 |
Total other income (loss) | 26,347 | 10,153 | 38,291 | 26,192 |
Net loss | (1,294,007) | (411,840) | (1,822,837) | (827,096) |
Exchange differences on translation | 27,443 | 19,518 | 100,696 | (362,747) |
Net loss and comprehensive loss | $ (1,266,564) | $ (392,322) | $ (1,722,141) | $ (1,189,843) |
Weighted average number of common shares | 4,317,759 | 3,239,902 | 3,781,808 | 3,239,902 |
Loss per share - basic and diluted | $ (.30) | $ (.13) | $ (.48) | $ (.26) |
Condensed Interim Consolidate_4
Condensed Interim Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (1,822,837) | $ (827,096) |
Adjustments for: | ||
Depreciation | 2,099 | 811 |
Gain on disposition of fixed assets | (2,172) | 0 |
Share-based compensation | 24,866 | 46,680 |
Change in working capital items: | ||
Accounts and other receivable | (116,991) | 3,977 |
Prepaid expenses and other assets | (265,770) | 91,863 |
Accounts payable and accrued liabilities | (1,338,556) | (4,209) |
Net cash used in operating activities | (3,519,361) | (687,974) |
Cash flows from investing activities: | ||
Cash acquired during reverse acquisition | 6,389,322 | 0 |
Purchases of property and equipment | (2,267) | (6,869) |
Proceeds on sales of property and equipment | 18,152 | 0 |
Net cash provided by (used in) investing activities | 6,405,207 | (6,869) |
Effect of exchange rate changes on cash | 110,152 | (367,520) |
Increase (decrease) in cash and cash equivalents during the period | 2,995,998 | (1,062,363) |
Cash and cash equivalents, beginning of period | 3,367,098 | 5,000,122 |
Cash and cash equivalents, end of period | $ 6,363,096 | $ 3,937,759 |
Condensed Interim Consolidate_5
Condensed Interim Consolidated Statements of Changes in Equity - USD ($) | Common Shares | Class A Preferred Shares | Additional Paid-in Capital | Other Comprehensive Loss | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2017 | 3,239,902 | 1,007,143 | ||||
Beginning balance, amount at Dec. 31, 2017 | $ 1,111,253 | $ 5,616,801 | $ 149,448 | $ (101,135) | $ (1,777,827) | $ 4,998,540 |
Preferred return for Class A preferred shares | 215,854 | (215,854) | 0 | |||
Share-based compensation | 46,680 | 46,680 | ||||
Net loss and comprehensive loss | (362,747) | (827,096) | (1,189,843) | |||
Ending balance, shares at Jun. 30, 2018 | 3,239,902 | |||||
Ending balance, amount at Jun. 30, 2018 | $ 1,111,253 | $ 5,832,655 | 196,128 | (463,882) | (2,820,777) | 3,855,377 |
Beginning balance, shares at Dec. 31, 2017 | 3,239,902 | 1,007,143 | ||||
Beginning balance, amount at Dec. 31, 2017 | $ 1,111,253 | $ 5,616,801 | 149,448 | (101,135) | (1,777,827) | 4,998,540 |
Preferred return for Class A preferred shares | $ 447,212 | |||||
Effect of reverse acquisition, shares | ||||||
Effect of reverse acquisition, amount | ||||||
Ending balance, shares at Dec. 31, 2018 | 3,239,902 | 1,007,143 | ||||
Ending balance, amount at Dec. 31, 2018 | $ 1,111,253 | $ 6,064,013 | 230,792 | (429,973) | (3,761,595) | 3,214,490 |
Beginning balance, shares at Mar. 31, 2018 | 3,239,902 | |||||
Beginning balance, amount at Mar. 31, 2018 | $ 1,111,253 | 5,724,132 | 172,659 | (483,400) | (2,300,414) | 4,224,230 |
Preferred return for Class A preferred shares | 108,523 | (108,523) | 0 | |||
Share-based compensation | 23,469 | 23,469 | ||||
Net loss and comprehensive loss | 19,518 | (411,840) | (392,322) | |||
Ending balance, shares at Jun. 30, 2018 | 3,239,902 | |||||
Ending balance, amount at Jun. 30, 2018 | $ 1,111,253 | $ 5,832,655 | 196,128 | (463,882) | (2,820,777) | 3,855,377 |
Beginning balance, shares at Dec. 31, 2018 | 3,239,902 | 1,007,143 | ||||
Beginning balance, amount at Dec. 31, 2018 | $ 1,111,253 | $ 6,064,013 | 230,792 | (429,973) | (3,761,595) | 3,214,490 |
Preferred return for Class A preferred shares | $ 196,286 | (196,286) | 0 | |||
Effect of reverse acquisition, shares | 4,264,566 | (1,007,143) | ||||
Effect of reverse acquisition, amount | $ 10,893,798 | $ (6,260,299) | 61,902 | 4,695,401 | ||
Share-based compensation | 24,866 | 24,866 | ||||
Net loss and comprehensive loss | 100,696 | (1,822,837) | (1,722,141) | |||
Ending balance, shares at Jun. 30, 2019 | 7,504,468 | 0 | ||||
Ending balance, amount at Jun. 30, 2019 | $ 12,005,051 | $ 0 | 317,560 | (329,277) | (5,780,718) | 6,212,616 |
Beginning balance, shares at Mar. 31, 2019 | 3,239,902 | |||||
Beginning balance, amount at Mar. 31, 2019 | $ 1,111,253 | 6,176,993 | 24,238 | (356,720) | (4,403,405) | 2,772,359 |
Preferred return for Class A preferred shares | 83,306 | (83,306) | 0 | |||
Effect of reverse acquisition, shares | 4,264,566 | |||||
Effect of reverse acquisition, amount | $ 10,893,798 | $ (6,260,299) | 61,902 | 4,695,401 | ||
Share-based compensation | 11,420 | 11,420 | ||||
Net loss and comprehensive loss | 27,443 | (1,294,007) | (1,266,564) | |||
Ending balance, shares at Jun. 30, 2019 | 7,504,468 | 0 | ||||
Ending balance, amount at Jun. 30, 2019 | $ 12,005,051 | $ 0 | $ 317,560 | $ (329,277) | $ (5,780,718) | $ 6,212,616 |
Nature of Operations
Nature of Operations | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Edesa Biotech, Inc. (the “Company”, “Edesa”, “we”, “us” or “our”) is a biopharmaceutical company focused on the development of innovative therapeutics for dermatological and gastrointestinal indications with clear unmet medical needs. The Company is organized under the laws of British Columbia, Canada and is headquartered in Markham, Ontario. In June 2019, the Company changed its name from Stellar Biotechnologies, Inc. to Edesa Biotech, Inc. following a reverse acquisition with Edesa Biotech Research, Inc., formerly known as Edesa Biotech Inc., a company organized under the laws of the province of Ontario. At the closing of the transaction, which occurred on June 7, 2019, the Company acquired the entire issued share capital of Edesa Biotech Research, Inc., with Edesa Biotech Research, Inc., becoming a wholly-owned subsidiary of the Company. Also, on June 7, 2019, in connection with and following the completion of the reverse acquisition, the Company effected a 1- for-6 reverse split of its common shares. The Company’s common shares trade on The Nasdaq Capital Market in the United States under the symbol “EDSA”. |
Basis of Preparation
Basis of Preparation | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Preparation | The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information. They do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. GAAP for complete financial statements. These condensed interim consolidated financial statements should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2018, which were filed on Form 8-K/A with the SEC on August 14, 2019. The accompanying condensed interim consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, Edesa Biotech Research, Inc., an Ontario corporation, and Stellar Biotechnologies, Inc., a California corporation in the U.S. All significant intercompany balances and transactions have been eliminated in consolidation. All adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included in the interim periods. Operating results for the six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for other interim periods or the fiscal year ending September 30, 2019. The condensed interim consolidated financial data at December 31, 2018 is derived from Edesa Biotech Research, Inc.’s audited financial statements for the year ended December 31, 2018. Upon the completion of the reverse acquisition, Edesa Biotech Research, Inc. changed its fiscal year end from December 31 to September 30 to align with the Company’s fiscal year end. The preparation of the unaudited condensed interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed interim consolidated financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Functional and reporting currencies The condensed interim consolidated financial statements of the Company are presented in U.S. dollars, unless otherwise stated, which is the Company’s and its wholly-owned subsidiary’s, Stellar Biotechnologies, Inc., functional currency. The functional currency of the Company’s wholly-owned subsidiary, Edesa Biotech Research, Inc., as determined by management, is Canadian dollars. Future accounting pronouncements In February 2016, the FASB issued new guidance, ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. Additional qualitative and quantitative disclosures are also required by the new guidance. Topic 842 is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company will adopt the new standard on October 1, 2019 and use the effective date as its date of initial application. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. The Company is in the process of determining the impact of the new standard. |
Inventory
Inventory | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | Inventory includes finished products that are complete and available for sale. At June 30, 2019, the Company recorded finished goods inventory at the lower of cost or market, with market not in excess of net realizable value. At December 31, 2018, the Company did not carry any inventory. |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and equipment, net consisted of the following: June 30, December 31, 2019 2018 Computer equipment $ 38,504 $ 4,828 Furniture and equipment 7,996 5,578 46,500 10,406 Less: accumulated depreciation (27,911 ) (3,020 ) Depreciable assets, net $ 18,589 $ 7,386 Assets not in service $ 70,000 $ - Total property and equipment, net $ 88,589 $ 7,386 Assets not in service represent equipment for sale held on consignment by a third party. Depreciation expense amounted to approximately $2,500 and $1,000 for the six months ended June 30, 2019 and 2018, respectively, and approximately $1,600 and $400 for the three months ended June 30, 2019 and 2018, respectively. During the three months and six months ended June 30, 2019, the Company disposed of a Company-owned vehicle and recorded gain from disposition of property and equipment of approximately $2,200. No disposition of property and equipment was recorded for the three months and six months ended June 30, 2018. |
Commitments
Commitments | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments | Operating leases The Company leases facilities used for executive offices from a related company for a six-year term, with options to renew for another two-year term. The Company leases buildings and facilities used by its California subsidiary under two sublease agreements. In June 2015, the Company exercised its option to extend these sublease agreements for an additional five-year term beginning in October and November 2015. The Company negotiated an option to extend the leases for two additional five-year terms. The Company leases facilities used for offices and laboratories by its California subsidiary and pays a portion of the common area maintenance. In July 2018, the Company extended this lease for a two-year term, with options to renew for three successive two-year terms. Aggregate future minimum lease payments at June 30, 2019 are as follows: Year Ending September 30, 2019 $ 66,000 September 30, 2020 245,000 September 30, 2021 86,000 September 30, 2022 81,000 September 30, 2023 20,000 $ 798,000 Total rent Related party commitments On August 14, 2002, through its California subsidiary, the Company entered into a patent royalty agreement with a director of the Company, whereby he would receive royalty payments in exchange for assignment of his patent rights to the Company. The royalty is 5% of gross receipts from products using this invention in excess of $500,000 annually. The Company’s current operations utilize this invention. Other royalty commitments In 2016, through its Ontario subsidiary, the Company entered into a license agreement with a third party to obtain exclusive rights to certain know-how, patents and data relating to a pharmaceutical product. The Company will use the exclusive rights to develop the product for therapeutic, prophylactic and diagnostic uses in topical dermal applications and anorectal applications. No intangible assets have been recognized under the license agreement with the third party as of June 30, 2019 and December 31, 2018. Payments to the third party are included in the statement of operations and comprehensive loss as research and development expenditures. Under the license agreement, the Company is committed to payments of various amounts to the third party upon meeting certain milestones outlined in the license agreement, up to an aggregate amount of $18.6 million. Upon divestiture of substantially all of the assets of the Company, the Company shall pay the third party a percentage of the valuation of the licensed technology sold as determined by an external objective expert. The Company also has a commitment to pay the third party a royalty based on net sales of the product in countries where the Company, or an affiliate, directly commercializes the product and a percentage of sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the product. In 2016, also through its Ontario subsidiary, the Company entered into an exclusive license agreement with another third party to obtain exclusive rights to certain know-how, patents and data relating to a pharmaceutical product. No intangible assets have been recognized under the license agreement as of June 30, 2019 and December 31, 2018. No fees were paid as of June 30, 2019 and December 31, 2018. Under the license agreement, the Company is committed to payments of up to a total of $18.5 million upon meeting certain milestones outlined in the license agreement. The Company also has a commitment to pay a royalty based on net sales of the product in the countries where the Company directly commercializes the product and a percentage of sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the product. Other commitments The Company contracted research organizations who perform clinical trials for the Company’s on-going clinical studies and other service providers. Aggregate future contractual payments to those service organizations at June 30, 2019 are as follows: Year Ending September 30, 2019 $ 609,000 September 30, 2020 1,704,000 September 30, 2021 20,000 September 30, 2022 7,000 September 30, 2023 2,000 $ 2,342,000 |
Capital Shares
Capital Shares | 6 Months Ended |
Jun. 30, 2019 | |
Stockholders' Equity Note [Abstract] | |
Capital Shares | Reverse Share Split On June 7, 2019, the Company effected a reverse split of the Company's common shares at a ratio of 1-for-6. As a result of the reverse split, every six shares of the issued and outstanding common shares, without par value, consolidated into one newly issued outstanding common share, without par value, after fractional rounding. All shares and exercise prices are presented on a post-split basis in these condensed interim consolidated financial statements. Black-Scholes option valuation model The Company uses the Black-Scholes option valuation model to determine the fair value of share-based compensation for share options and compensation warrants granted. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company has used historical volatility to estimate the volatility of the share price. Changes in the subjective input assumptions can materially affect the fair value estimates, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s warrants and share options. Warrants A summary of the Company’s warrants activity is as follows: Weighted Number of Average Warrants Exercise Price Balance – December 31, 2018 and 2017 - $ - Effect of reverse acquisition 362,430 31.60 Black-Scholes value payout (265,899 ) 35.52 Balance – June 30, 2019 96,531 $ 15.05 The weighted average contractual life remaining on the outstanding warrants at June 30, 2019 is 53 months. The following table summarizes information about the warrants outstanding at June 30, 2019: Number of Warrants Exercise Prices Expiry Dates 38,433 15.90 May 2023 37,308 19.88 May 2023 20,790 4.81 June 2024 96,531 Share Options The Company adopted an incentive compensation plan in 2017 (the “Incentive Plan”), which is administered by the Board of Directors. The number of shares remaining available for issuance under the Incentive Plan is 31,293. Option holders under the Edesa Share Option Plan received substitute options under the Incentive Plan upon completion of the reverse acquisition. The Company's Incentive Plan allows options to be granted to directors, officers, employees and certain external consultants and advisers. Under the Incentive Plan, the option term is not to exceed 10 years and the exercise price of each option is determined by the Board of Directors. Options have been granted under the Incentive Plan allowing the holders to purchase common shares of the Company as follows: Weighted Number of Average Options Exercise Price Balance – December 31, 2017 289,203 $ 1.65 Granted 25,920 1.65 Balance – December 31, 2018 315,123 $ 1.65 Effect of reverse acquisition 7,787 124.80 Expired (1,056 ) 77.21 Balance – June 30, 2019 321,854 $ 4.38 The weighted average contractual life remaining on the outstanding options is 97 months. The following table summarizes information about the options under the Incentive Plan outstanding and exercisable at June 30, 2019: Exercisable at Range of Number of Options June 30, 2019 Exercise Prices Expiry Dates 315,123 225,459 C$ 2.16 Aug 2027-Dec 2028 24 24 C$ 4.81 Jun 2021 536 536 C$ 105.00 - 243.60 Aug 2019-May 2020 304 304 C$ 373.80 - 638.40 Nov 2021-Jun 2022 5,126 5,126 $ 7.50 - 93.24 Sep 2023-Mar 2026 276 276 $ 304.08 Dec 2022 465 465 $ 768.60 Nov 2020 321,854 232,190 No share options were granted during the six months ended June 30, 2019 and 2018. The Company recorded approximately $25,000 and $47,000 of share-based compensation expenses for the six months ended June 30, 2019 and 2018 respectively, and approximately $11,000 and $23,000 for the three months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, the Company had approximately $34,000 of unrecognized share-based compensation expense, which is expected to be recognized over a period of 30 months. Issued and outstanding common shares: Number of Common Common Shares (#) Shares Balance – December 31, 2018 and 2017 3,239,902 $ 1,111,253 Effect of reverse acquisition 4,264,566 10,893,798 Balance – June 30, 2019 7,504,468 $ 12,005,051 Issued and outstanding preferred shares: Class A Preferred Class A Preferred Shares (#) Shares Balance – December 31, 2017 1,007,143 $ 5,616,801 Preferred return on Class A preferred shares - 447,212 Balance – December 31, 2018 1,007,143 $ 6,064,013 Preferred return on Class A preferred shares - 196,286 Conversion upon reverse acquisition (1,007,143 ) (6,260,299 ) Balance – June 30, 2019 - $ - The Class A preferred shares are voting and convertible into common shares at the option of the holder at any time. Upon the occurrence of a liquidation event, as defined in the resolutions of the shareholders dated August 28, 2017, the Class A preferred shares have a liquidation amount preference over the rights of holders of common shares or any class of shares ranking junior to Class A preferred shares. The liquidation amount is equal to the original issue price of each Class A preferred shares plus 8% of the Class A preferred share price of C$7 per share, accruing daily and compounding annually, on each Class A preferred share. All Class A preferred shares can be converted automatically, without the payment of any additional consideration, into such number of common shares on a 1:1 basis at the election of the holders of not less than 66 2/3% of the then outstanding Class A preferred shares. All Class A preferred shares can be converted automatically, without the payment of any additional consideration, into such number of common shares: ● upon the closing of an offering pursuant to a receipted prospectus under the Securities Act (Ontario), as amended, or similar document filed under other applicable securities laws in Canada or the United States, covering the offer and sale of common shares for the account of the Company to the public in which: o the common shares are listed on the Toronto Stock Exchange, the New York Stock Exchange or The NASDAQ Global Market or another exchange; and o the aggregate net proceeds from such offering to the Company total not less than C$20 million; and o the offering is completed at a price per common share which is not less than three times the Class A Original Issue Price, subject to appropriate adjustment for any recapitalization event; or ● upon a liquidation event where the price per share is at least three times the Class A Original Issue Price of C$7.00 The Company has evaluated the convertible preferred shares and the embedded conversion option. The embedded conversion option does not meet the criteria for bifurcation and has therefore been classified to equity under ASC 815. The Class A preferred shares also contain an 8% preferred return that accrues daily and compounds annually and is payable in shares upon conversion. Following the completion of the reverse acquisition on June 7, 2019, all the outstanding Class A preferred shares and accumulated accrued preferred return were fully converted to 3,376,112 common shares based on the fair market value upon conversion. |
Financial Instruments
Financial Instruments | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Financial Instruments | (a) Fair values The Company follows ASC topic 820, “Fair Value Measurements” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC topic 820 apply to other accounting pronouncements that require or permit fair value measurements. ASC topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date; and establishes a three level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are defined as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs for assets or liabilities. The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. (i) The Company calculates expected volatility based on historical volatility of the Company’s peer group that is publicly traded for options. An increase/decrease in the volatility would have resulted in an increase/decrease in the fair value of the options. The carrying values of cash, other receivable, accounts payable and accrued liabilities approximates their fair values because of the short-term nature of these instruments. (b) Interest rate and credit risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in interest rates. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a significant change in market interest rates, relative to interest rates on cash and cash equivalents due to the short-term nature of these balances. The Company is also exposed to credit risk at period end from the carrying value of its cash. The Company manages this risk by maintaining bank accounts with U.S. and Canadian Chartered Banks and U.S. Treasury Bills. The Company’s cash is not subject to any external restrictions. (c) Foreign exchange risk The Company’s subsidiary has balances in Canadian dollars that give rise to exposure to foreign exchange (“FX”) risk relating to the impact of translating certain non-U.S. dollar balance sheet accounts as these statements are presented in U.S. dollars. A strengthening U.S. dollar will lead to a FX loss while a weakening U.S. dollar will lead to a FX gain. For each Canadian dollar balance of $1.0 million, a +/- 10% movement in the Canadian currency held by the Company versus the U.S. dollar would affect the Company’s loss and other comprehensive loss by $0.1 million. The Company’s subsidiary had assets of C$3.1 million at June 30, 2019 (December 31, 2018 - C$4.6 million). (d) Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty raising liquid funds to meet commitments as they fall due. In meeting its liquidity requirements, the Company closely monitors its forecasted cash requirements with expected cash drawdown. |
Segmented Information
Segmented Information | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Segmented Information | The Company's operations comprise a single reportable segment engaged in the research and development, manufacturing and commercialization of innovative pharmaceutical products. As the operations comprise a single reportable segment, amounts disclosed in the financial statements for loss for the period, depreciation and total assets also represent segmented amounts. |
Loss per Share
Loss per Share | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Loss per Share | The Company had securities outstanding which could potentially dilute basic EPS in the future but were excluded from the computation of diluted loss per share in the periods presented, as their effect would have been anti-dilutive. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | During the periods presented, the Company incurred the following related party transactions: ● During the six months ended June 30, 2019 and 2018, the Company incurred rent expense of approximately $38,000 and $40,000 from a related company, respectively, and approximately $19,000 and $20,000 for the three months ended June 30, 2019 and 2018, respectively . These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by both parties. ● No royalty expenses to a director related to products sales by the California subsidiary were incurred during the six months ended June 30, 2019 and 2018. Included in accounts payable and accrued liabilities at June 30, 2019 was royalty payable of approximately $3,000 to that director for products sales by the California subsidiary prior to the completion of the reverse acquisition. |
Comparative Figures
Comparative Figures | 6 Months Ended |
Jun. 30, 2019 | |
Comparative Figures | |
Comparative Figures | Certain reclassifications have been made to the prior year’s financial statements to enhance comparability with the current year’s financial statements. |
Business Combination
Business Combination | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Business Combination | On June 7, 2019, the Edesa Biotech Research, Inc., formerly known as Edesa Biotech Inc., a company organized under the laws of the province of Ontario, Canada (“Edesa”), completed its business combination with Stellar Biotechnologies, Inc. a company organized under the laws of British Columbia, Canada (“Stellar”), in accordance with the terms of the Share Exchange Agreement, dated March 7, 2019 (the “Exchange Agreement”), by and among Stellar, Edesa and the shareholders of Edesa (the “Edesa Shareholders”). At the closing of the transaction (the “Closing”), Stellar acquired the entire issued share capital of Edesa, with Edesa becoming a wholly-owned subsidiary of Stellar (the “Exchange”). The Edesa Shareholders exchanged their shares for 88% of the outstanding shares of Stellar on a fully diluted basis. Edesa is considered the accounting acquirer of Stellar. Edesa entered into the Exchange primarily to provide greater liquidity to its shareholders, broaden its investment base, increase its profile, and facilitate the process of raising capital as the Company contemplates pursuing new growth opportunities including acquisition of new clinical assets. The June 7, 2019 fair value of consideration transferred is calculated as follows: Fair value of 888,454 share consideration to be transferred, net of liquidity discount $ 4,633,499 Excess fair value of replacement warrants 61,902 Total acquisition date fair value of consideration transferred $ 4,695,401 The major classes of assets acquired and liabilities assumed on June 7, 2019 are as follows: Cash and cash equivalents $ 6,389,322 Other current assets 418,837 Non-current assets 42,045 Current liabilities (2,154,803 ) Net assets of Stellar $ 4,695,401 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | June 30, December 31, 2019 2018 Computer equipment $ 38,504 $ 4,828 Furniture and equipment 7,996 5,578 46,500 10,406 Less: accumulated depreciation (27,911 ) (3,020 ) Depreciable assets, net $ 18,589 $ 7,386 Assets not in service $ 70,000 $ - Total property and equipment, net $ 88,589 $ 7,386 |
Commitments (Tables)
Commitments (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum lease payments | Year Ending September 30, 2019 $ 66,000 September 30, 2020 245,000 September 30, 2021 86,000 September 30, 2022 81,000 September 30, 2023 20,000 $ 498,000 |
Future contractual payments | Year Ending September 30, 2019 $ 609,000 September 30, 2020 1,704,000 September 30, 2021 20,000 September 30, 2022 7,000 September 30, 2023 2,000 $ 2,342,000 |
Capital Shares (Tables)
Capital Shares (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Stockholders' Equity Note [Abstract] | |
Warrant activity | Weighted Number of Average Warrants Exercise Price Balance – December 31, 2018 and 2017 - $ - Effect of reverse acquisition 362,430 31.60 Black-Scholes value payout (265,899 ) 35.52 Balance – June 30, 2019 96,531 $ 15.05 |
Warrants outstanding | Number of Warrants Exercise Prices Expiry Dates 38,433 15.90 May 2023 37,308 19.88 May 2023 20,790 4.81 June 2024 96,531 |
Stock option activity | Weighted Number of Average Options Exercise Price Balance – December 31, 2017 289,203 $ 1.65 Granted 25,920 1.65 Balance – December 31, 2018 315,123 $ 1.65 Effect of reverse acquisition 7,787 124.80 Expired (1,056 ) 77.21 Balance – June 30, 2019 321,854 $ 4.38 |
Stock options outstanding | Exercisable at Range of Number of Options June 30, 2019 Exercise Prices Expiry Dates 315,123 225,459 C$ 2.16 Aug 2027-Dec 2028 24 24 C$ 4.81 Jun 2021 536 536 C$ 105.00 - 243.60 Aug 2019-May 2020 304 304 C$ 373.80 - 638.40 Nov 2021-Jun 2022 5,126 5,126 $ 7.50 - 93.24 Sep 2023-Mar 2026 276 276 $ 304.08 Dec 2022 465 465 $ 768.60 Nov 2020 321,854 232,190 |
Issued and outstanding common and preferred shares | Issued and outstanding common shares: Number of Common Common Shares (#) Shares Balance – December 31, 2018 and 2017 3,239,902 $ 1,111,253 Effect of reverse acquisition 4,264,566 10,893,798 Balance – June 30, 2019 7,504,468 $ 12,005,051 Issued and outstanding preferred shares: Class A Preferred Class A Preferred Shares (#) Shares Balance – December 31, 2017 1,007,143 $ 5,616,801 Preferred return on Class A preferred shares - 447,212 Balance – December 31, 2018 1,007,143 $ 6,064,013 Preferred return on Class A preferred shares - 196,286 Conversion upon reverse acquisition (1,007,143 ) (6,260,299 ) Balance – June 30, 2019 - $ - |
Business Combination (Tables)
Business Combination (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Consideration transferred | Fair value of 888,454 share consideration to be transferred, net of liquidity discount $ 4,633,499 Excess fair value of replacement warrants 61,902 Total acquisition date fair value of consideration transferred $ 4,695,401 |
Assets acquired and liabilites assumed | Cash and cash equivalents $ 6,389,322 Other current assets 418,837 Non-current assets 42,045 Current liabilities (2,154,803 ) Net assets of Stellar $ 4,695,401 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 46,500 | $ 10,406 |
Less: accumulated depreciation | (27,911) | (3,020) |
Total property and equipment, net | 88,589 | 7,386 |
Computer Equipment | ||
Property and equipment, gross | 38,504 | 4,828 |
Furniture and Equipment | ||
Property and equipment, gross | 7,996 | 5,578 |
Depreciable Assets, Net | ||
Total property and equipment, net | 18,589 | 7,386 |
Assets Not in Service | ||
Total property and equipment, net | $ 70,000 | $ 0 |
Property and Equipment (Detai_2
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 1,600 | $ 400 | $ 2,500 | $ 1,000 |
Gain on disposition of property and equipment | $ 2,172 | $ 0 | $ 2,172 | $ 0 |
Commitments (Details)
Commitments (Details) | Jun. 30, 2019USD ($) |
Year Ending September 30, | |
2019 | $ 66,000 |
2020 | 245,000 |
2021 | 86,000 |
2022 | 81,000 |
2023 | 20,000 |
Total | $ 498,000 |
Commitments (Details 1)
Commitments (Details 1) | Jun. 30, 2019USD ($) |
Year Ending September 30, | |
2019 | $ 80,000 |
2020 | 301,000 |
2021 | 143,000 |
2022 | 138,000 |
2023 | 35,000 |
Total | $ 697,000 |
Commitments (Details Narrative)
Commitments (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Rent expense | $ 34,000 | $ 20,000 | $ 54,000 | $ 40,000 |
Capital Shares (Details)
Capital Shares (Details) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Stockholders' Equity Note [Abstract] | ||
Number of warrants, beginning balance | 0 | 0 |
Effect of reverse acquisition | 362,430 | |
Black-Scholes value payout | (265,899) | |
Number of warrants, ending balance | 96,531 | 0 |
Weighted average exercise price, beginning balance | $ .00 | $ .00 |
Effect of reverse acquisition | 31.60 | |
Black-Scholes value payout | 35.52 | |
Weighted average exercise price, ending balance | $ 15.05 | $ .00 |
Capital Shares (Details 1)
Capital Shares (Details 1) - $ / shares | 6 Months Ended | ||
Jun. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Number of warrants | 96,531 | 0 | 0 |
Exercise price | $ 15.05 | $ .00 | $ .00 |
Warrant 1 | |||
Number of warrants | 38,433 | ||
Exercise price | $ 15.90 | ||
Expiry date | May 2023 | ||
Warrant 2 | |||
Number of warrants | 37,308 | ||
Exercise price | $ 19.88 | ||
Expiry date | May 2023 | ||
Warrant 3 | |||
Number of warrants | 20,790 | ||
Exercise price | $ 4.81 | ||
Expiry date | June 2024 |
Capital Shares (Details 2)
Capital Shares (Details 2) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Stockholders' Equity Note [Abstract] | ||
Number of options, beginning balance | 315,123 | 289,203 |
Number of options granted | 25,920 | |
Number of options effect of reverse acquisition | 7,787 | |
Number of options expired | (1,056) | |
Number of options, ending balance | 321,854 | 315,123 |
Weighted average exercise price, beginning balance | $ 1.65 | $ 1.65 |
Weighted average exercise price granted | 1.65 | |
Weighted average exercise price effect of reverse acquisition | 124.80 | |
Weighted average exercise price expired | 77.21 | |
Weighted average exercise price, ending balance | $ 4.38 | $ 1.65 |
Capital Shares (Details 3)
Capital Shares (Details 3) | 6 Months Ended | |||
Jun. 30, 2019$ / sharesshares | Jun. 30, 2019$ / sharesshares | Dec. 31, 2018$ / sharesshares | Dec. 31, 2017$ / sharesshares | |
Options outstanding | 321,854 | 321,854 | 315,123 | 289,203 |
Options exercisable | 232,190 | 232,190 | ||
Range of exercise prices | $ / shares | $ 4.38 | $ 1.65 | $ 1.65 | |
Stock Option 1 | ||||
Options outstanding | 315,123 | 315,123 | ||
Options exercisable | 225,459 | 225,459 | ||
Range of exercise prices | $ / shares | $ 2.16 | |||
Expiry dates | Aug 2027-Dec 2028 | |||
Stock Option 2 | ||||
Options outstanding | 24 | 24 | ||
Options exercisable | 24 | 24 | ||
Range of exercise prices | $ / shares | $ 4.81 | |||
Expiry dates | Jun 2021 | |||
Stock Option 3 | ||||
Options outstanding | 536 | 536 | ||
Options exercisable | 536 | 536 | ||
Expiry dates | Aug 2019-May 2020 | |||
Stock Option 3 | Minumum | ||||
Range of exercise prices | $ / shares | $ 105 | |||
Stock Option 3 | Maxumum | ||||
Range of exercise prices | $ / shares | $ 243.60 | |||
Stock Option 4 | ||||
Options outstanding | 304 | 304 | ||
Options exercisable | 304 | 304 | ||
Expiry dates | Nov 2021-Jun 2022 | |||
Stock Option 4 | Minumum | ||||
Range of exercise prices | $ / shares | $ 373.80 | |||
Stock Option 4 | Maxumum | ||||
Range of exercise prices | $ / shares | $ 638.40 | |||
Stock Option 5 | ||||
Options outstanding | 5,126 | 5,126 | ||
Options exercisable | 5,126 | 5,126 | ||
Expiry dates | Sep 2023-Mar 2026 | |||
Stock Option 5 | Minumum | ||||
Range of exercise prices | $ / shares | $ 7.50 | |||
Stock Option 5 | Maxumum | ||||
Range of exercise prices | $ / shares | $ 93.24 | |||
Stock Option 6 | ||||
Options outstanding | 276 | 276 | ||
Options exercisable | 276 | 276 | ||
Range of exercise prices | $ / shares | $ 304.08 | |||
Expiry dates | Dec 2022 | |||
Stock Option 7 | ||||
Options outstanding | 465 | 465 | ||
Options exercisable | 465 | 465 | ||
Range of exercise prices | $ / shares | $ 768.60 | |||
Expiry dates | Nov 2020 |
Capital Shares (Details 4)
Capital Shares (Details 4) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Beginning balance, amount | $ 3,214,490 | ||||
Effect of reverse acquisition, amount | $ 4,695,401 | 4,695,401 | |||
Preferred return for Class A preferred shares, amount | 0 | $ 0 | 0 | $ 0 | |
Ending balance, amount | $ 6,212,616 | $ 6,212,616 | $ 3,214,490 | ||
Common Shares | |||||
Beginning balance, shares | 3,239,902 | 3,239,902 | 3,239,902 | 3,239,902 | 3,239,902 |
Beginning balance, amount | $ 1,111,253 | $ 1,111,253 | $ 1,111,253 | ||
Effect of reverse acquisition, shares | 4,264,566 | 4,264,566 | |||
Effect of reverse acquisition, amount | $ 10,893,798 | $ 10,893,798 | |||
Ending balance, shares | 7,504,468 | 3,239,902 | 7,504,468 | 3,239,902 | 3,239,902 |
Ending balance, amount | $ 12,005,051 | $ 12,005,051 | $ 1,111,253 | ||
Class A Preferred Shares | |||||
Beginning balance, shares | 1,007,143 | 1,007,143 | 1,007,143 | ||
Beginning balance, amount | $ 6,064,013 | $ 5,616,801 | $ 5,616,801 | ||
Effect of reverse acquisition, shares | (1,007,143) | ||||
Effect of reverse acquisition, amount | (6,260,299) | $ (6,260,299) | |||
Preferred return on Class A preferred shares, shares | 0 | 0 | |||
Preferred return for Class A preferred shares, amount | $ 83,306 | $ 108,523 | $ 196,286 | $ 215,854 | $ 447,212 |
Ending balance, shares | 0 | 0 | 1,007,143 | ||
Ending balance, amount | $ 0 | $ 0 | $ 6,064,013 |
Capital Shares (Details Narrati
Capital Shares (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Stockholders' Equity Note [Abstract] | ||||
Shares remaining under incentive plan | 31,293 | 31,293 | ||
Weighted average contractual life remaining on outstanding options | 97 months | |||
Share-based compensation | $ 11,000 | $ 23,000 | $ 24,866 | $ 46,680 |
Unrecognized share-based compensation | $ 34,000 | $ 34,000 | ||
Unrecognized share-based compensation recognition period | 30 months |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Related Party Transactions [Abstract] | ||||
Rent expense | $ 19,000 | $ 20,000 | $ 38,000 | $ 40,000 |
Business Combination (Details)
Business Combination (Details) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Business Combinations [Abstract] | |
Fair value of 888,454 share consideration to be transferred, net of liquidity discount | $ 4,633,499 |
Excess fair value of replacement warrants | 61,902 |
Total acquisition date fair value of consideration transferred | $ 4,695,401 |
Business Combination (Details 1
Business Combination (Details 1) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Business Combinations [Abstract] | |
Cash and cash equivalents | $ 6,389,322 |
Other current assets | 418,837 |
Noncurrent assets | 42,045 |
Current liabilities | (2,154,803) |
Estimated fair value of share consideration to be transferred | $ 4,695,401 |