Edesa Biotech (EDSA) 10-Q 13 Feb 20 2020 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Dec. 31, 2019	Feb. 13, 2020
Document And Entity Information
Entity Registrant Name	Edesa Biotech, Inc.
Entity Central Index Key	0001540159
Document Type	10-Q
Document Period End Date	Dec. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	true
Entity Small Business	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		8,859,159
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($)	Dec. 31, 2019	Sep. 30, 2019
Current assets:
Cash and cash equivalents	$ 3,827,050	$ 5,030,583
Accounts and other receivable	109,600	217,101
Short-term investments	499,790	0
Deferred share issuance costs	116,611	0
Prepaid expenses and deposits	274,154	397,022
Total current assets	4,827,205	5,644,706
Property, plant and equipment, net	48,309	73,058
Operating lease right-of-use assets	213,848	0
Total assets	5,089,362	5,717,764
Current liabilities:
Accounts payable and accrued liabilities	637,531	461,634
Short-term operating lease liabilities	66,631	0
Total current liabilities	704,162	461,634
Non-current liabilities:
Long-term operating lease liabilities	151,514	0
Total liabilities	855,676	461,634
Shareholders' equity:
Authorized unlimited common and preferred shares without par value issued and outstanding: 7,504,468 common shares	12,005,051	12,005,051
Common shares subscribed	45,000	0
Additional paid-in capital	336,543	327,768
Accumulated other comprehensive loss	(323,960)	(342,074)
Accumulated deficit	(7,828,948)	(6,734,615)
Total shareholders' equity	4,233,686	5,256,130
Total liabilities and shareholders' equity	$ 5,089,362	$ 5,717,764

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	3 Months Ended	12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019
Statement of Financial Position [Abstract]
Capital shares, par value	$ 0	$ 0
Capital shares, authorized	Unlimited	Unlimited
Capital shares, issued	7,504,468	7,504,468
Capital shares, outstanding	7,504,468	7,504,468
Preferred stock shares, issued	0	0
Preferred stock shares, outstanding	0	0

Consolidated Statements of Oper

Consolidated Statements of Operations and Comprehensive Loss - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Revenues:
Product sales	$ 107,800	$ 0
Expenses:
Cost of sales	3,778	0
Research and development	527,998	257,391
General and administrative	681,706	148,350
Total expenses	1,213,482	405,741
Loss from operations	(1,105,682)	(405,741)
Other income (loss):
Interest income	14,192	16,211
Foreign exchange gain (loss)	(2,043)	24,681
Total other income (loss)	12,149	40,892
Loss before income taxes	(1,093,533)	(364,849)
Income tax expense	800	0
Net loss	(1,094,333)	(364,849)
Exchange differences on translation	18,114	17,760
Net loss and comprehensive loss	(1,076,219)	(347,089)
Net Loss and Comprehensive Loss	$ (1,076,219)	$ (347,089)
Weighted average number of common shares	7,504,468	3,239,902
Loss per share - basic and diluted	$ (0.15)	$ (0.11)

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net loss	$ (1,094,333)	$ (364,849)
Adjustments for:
Depreciation	2,403	412
Straight-line operating lease expense	19,439	0
Share-based compensation	8,775	11,434
Change in working capital items:
Accounts and other receivable	108,882	3,109
Deferred share issuance costs	(116,611)	0
Prepaid expenses and other assets	125,874	6,031
Accounts payable and accrued liabilities	175,299	(38,483)
Operating lease liabilities	(19,440)	0
Net cash used in operating activities	(789,712)	(382,346)
Cash flows from investing activities:
Proceeds on sales of property and equipment	22,497	0
Purchase of short-term investments	(499,790)	0
Net cash provided by (used in) investing activities	(477,293)	0
Cash flows from financing activities:
Proceeds from common shares subscribed	45,000	0
Net cash used in financing activities	45,000	0
Effect of exchange rate changes on cash	18,472	19,214
Net change in cash and cash equivalents	(1,203,533)	(363,132)
Cash and cash equivalents, beginning of period or year	5,030,583	3,730,230
Cash and cash equivalents, end of period or year	$ 3,827,050	$ 3,367,098

Consolidated Statements of Chan

Consolidated Statements of Changes in Shareholders' Equity - USD ($)	Common Shares	Common Shares Subscribed	Class A Preferred Shares	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Beginning balance, shares at Sep. 30, 2018	3,239,902
Beginning balance, amount at Sep. 30, 2018	$ 1,111,253	$ 0	$ 5,945,520	$ 219,358	$ (447,733)	$ (3,278,253)	$ 3,550,145
Common shares subscribed		0					0
Preferred return for Class A preferred shares			$ 118,493			(118,493)	0
Effect of reverse acquisition, shares			888,454
Effect of reverse acquisition, amount			$ 4,633,499
Share-based compensation				11,434			11,434
Net loss and comprehensive loss					17,760	(364,849)	(347,089)
Ending balance, shares at Dec. 31, 2018	(3,239,902)		1,007,143
Ending balance, amount at Dec. 31, 2018	$ (1,111,253)	0	$ 6,064,013	230,792	(429,973)	(3,761,595)	3,214,490
Common shares subscribed
Preferred return for Class A preferred shares			$ 196,286
Ending balance, shares at Sep. 30, 2019	7,504,468		0
Ending balance, amount at Sep. 30, 2019	$ 12,005,051	0	$ 0	327,768	(342,768)	(6,734,615)	5,256,130
Common shares subscribed		45,000					45,000
Preferred return for Class A preferred shares
Share-based compensation				8,775			8,775
Net loss and comprehensive loss					18,114	(1,094,333)	(1,076,219)
Ending balance, shares at Dec. 31, 2019	(7,504,468)
Ending balance, amount at Dec. 31, 2019	$ (12,005,051)	$ (45,000)	$ 0	$ 336,543	$ (323,960)	$ (7,828,948)	$ 4,233,686

Nature of Operations

Nature of Operations	3 Months Ended
	Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Nature of Operations	Edesa Biotech, Inc. (the “Company” or “Edesa”) is a biopharmaceutical company focused on acquiring, developing and commercializing clinical stage drugs 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	3 Months Ended
	Dec. 31, 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 and with the instructions to Form 10-Q. 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 consolidated financial statements and related notes contained in the Company’s Annual Transition Report on Form 10-KT for the nine-month period ended September 30, 2019, which were filed with the SEC on December 12, 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 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 three months ended December 31, 2019 are not necessarily indicative of the results that may be expected for other interim periods or the fiscal year ending September 30, 2020. 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. Adoption of recent accounting pronouncements On October 1, 2019, the Company adopted Accounting Standards Codification (ASC) Topic 842 Leases

Short-term Investments

Short-term Investments	3 Months Ended
	Dec. 31, 2019
Short-term Investments [Abstract]
Short-term Investments	Short-term investments consisted of U.S. Treasury Bills at December 31, 2019. U.S. Treasury Bills are carried at amortized cost which approximates fair value and are classified as held-to-maturity investments.

Property and Equipment

Property and Equipment	3 Months Ended
	Dec. 31, 2019
Property, Plant and Equipment [Abstract]
Property and Equipment	Property and equipment, net consisted of the following: December 31, 2019 September 30, 2019 Computer equipment $ 43,058 $ 42,910 Furniture and equipment 8,031 7,932 51,089 50,842 Less: accumulated depreciation (31,693 ) (29,194 ) Depreciable assets, net $ 19,396 $ 21,648 Assets not in service 28,913 51,410 Total property and equipment, net $ 48,309 $ 73,058 Assets not in service represent equipment for sale held on consignment by a third party. Depreciation expense amounted to $2,403 and $412 for the three months ended December 31, 2019 and 2018, respectively.

Leases

Leases	3 Months Ended
	Dec. 31, 2019
Leases [Abstract]
Leases	Operating leases The Company leases facilities used for executive offices from a related company for a six-year term through December 2022, with an option to renew for an additional two-year term. The option period is not included in the operating lease right-of-use assets and liabilities. The gross amounts of assets and liabilities related to operating leases are as follows: Balance Sheets Caption December 31, 2019 Assets: Operating lease assets Operating lease right-of-use assets $ 213,848 Liabilities: Current: Operating lease liabilities Short-term operating lease liabilities $ 66,631 Long-term: Operating lease liabilities Long-term operating lease liabilities 151,514 Total lease liabilities $ 218,145 The components of lease cost are as follows: Statements of Operations Caption Three Months Ended December 31, 2019 Operating lease cost General and administrative $ 19,440 Lease terms and discount rates are as follows: December 31, 2019 Remaining lease term (months): 36 Estimated incremental borrowing rate: 6.5 % The approximate future minimum lease payments under the operating leases at December 31, 2019 are as follows: Year Ending September 30, 2020 $ 59,136 September 30, 2021 80,457 September 30, 2022 80,993 September 30, 2023 20,248 Total lease payment 240,834 Less imputed interest 22,689 Present value of lease liabilities 218,145 Less current installments 66,631 Long-term lease liabilities excluding current installments $ 151,514 Cash flow information is as follows: Statements of Cash Flows Caption Three Months Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating lease liabilities $ 19,440 The Company also leases facilities through its California subsidiary under three operating leases that expire in June and September 2020. The Company does not intend to exercise options to extend the leases. Future minimum lease payments during the year ending September 30, 2020 are approximately $133,000. Total rent under these leases

Commitments

Commitments	3 Months Ended
	Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments	Research and 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 December 31, 2019 are as follows: Year Ending September 30, 2020 $ 2,150,000 September 30, 2021 43,000 September 30, 2022 4,000 $ 2,197,000 License and 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 December 31, 2019 and September 30, 2019. 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. No license or royalty payments were made to the third party during the three months ended December 31, 2019 and 2018. 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 December 31, 2019 and September 30, 2019. 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. No license or royalty payments were made to the third party during the three months ended December 31, 2019 and 2018. 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. Retirement savings plan 401(k) contributions Executive officers and employees of the California subsidiary are eligible to receive the Company’s non-elective safe harbor employer contribution of 3% of eligible compensation under a 401(k) plan to provide retirement benefits. Employees are 100% vested in employer contributions and in any voluntary employee contributions. Contributions to the 401(k) plan were $1,556 during the three months ended December 31, 2019. There are no 401(k) contributions during the three months ended December 31, 2018 prior to the completion of the reverse acquisition on June 7, 2019.

Capital Shares

Capital Shares	3 Months Ended
	Dec. 31, 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: Number of Warrants (#) Weighted Average Exercise Price Balance – December 31, 2018 - $ - Effect of reverse acquisition 362,430 31.60 Black-Scholes value payout (313,516 ) 33.01 Balance – September 30, 2019 and December 31, 2019 48,914 $ 11.19 The weighted average contractual life remaining on the outstanding warrants at December 31, 2019 is 46 months. The following table summarizes information about the warrants outstanding at December 31, 2019: Number of Warrants (#) Exercise Prices Expiry Dates 28,124 $ 15.90 May 2023 20,790 4.81 June 2024 48,914 Share Options The Company adopted an Equity Incentive Compensation Plan in 2019 (the 2019 Plan) administered by the Board of Directors, which amended and restated the 2017 Incentive Compensation Plan (the 2017 Plan). Options, restricted shares and restricted share units are eligible for grant under the 2019 Plan. The number of shares available for issuance under the 2019 Plan is 1,153,147, including shares available for the exercise of outstanding options under the 2017 Plan The Company's 2019 Plan allows options to be granted to directors, officers, employees and certain external consultants and advisers. Under the 2019 Plan, the option term is not to exceed 10 years and the exercise price of each option is determined by the independent members of the Board of Directors. Options have been granted under the Incentive Plan allowing the holders to purchase common shares of the Company as follows: Number of Options (#) Weighted Average Exercise Price Balance – December 31, 2018 315,123 $ 1.65 Effect of reverse acquisition 7,787 124.80 Expired (3,265 ) 125.75 Balance – September 30, 2019 319,645 $ 3.39 Expired (119 ) 80.66 Balance – December 31, 2019 319,526 $ 3.40 The Company granted share options subsequent to December 31, 2019 as described in Note 12 Subsequent events. The weighted average contractual life remaining on the outstanding options at December 31, 2019 is 93 months. The following table summarizes information about the options under the Incentive Plan outstanding and exercisable at December 31, 2019: Number of Options (#) Exercisable at December 31, 2019 (#) Range of Exercise Prices Expiry Dates 315,123 264,520 C$ 2.16 Aug 2027-Dec 2028 214 214 C$ 243.60 May 2020 214 214 C$ 638.40 Nov 2021 3,499 3,499 $ 35.28 - 93.24 Sep 2023-Mar 2025 238 238 $ 304.08 Dec 2022 238 238 $ 768.60 Nov 2020 319,526 268,923 The fair value of options granted during the three months ended December 31, 2018 was estimated using the Black-Scholes Option Pricing Model using the following assumptions: Risk free interest rate 1.98 % Expected life (years) 4 Expected share price volatility 79.46 % Expected dividend yield 0 % No share options were granted during the three months ended December 31, 2019. The Company recorded $8,775 and $11,434 of share-based compensation expenses for the three months ended December 31, 2019 and 2018 respectively. As of December 31, 2019, the Company had approximately $21,000 of unrecognized share-based compensation expense, which is expected to be recognized over a period of 24 months. Issued and outstanding common shares: Number of Common Shares (#) Common Shares Balance – December 31, 2018 3,239,902 $ 1,111,253 Conversion of preferred shares upon reverse acquisition 3,376,112 $ 6,260,299 Share consideration transferred upon reverse acquisition 888,454 4,633,499 Balance – September 30, 2019 and December 31, 2019 7,504,468 $ 12,005,051 Common shares subscribed: The Company received proceeds and common share subscription agreements prior to December 31, 2019 related to the registered direct offering of common shares that closed on January 8, 2020 as described in Note 12 Subsequent events. Common Shares Subscribed Balance – December 31, 2018 and September 30, 2019 $ - Common shares subscribed 45,000 Balance – December 31, 2019 $ 45,000 Issued and outstanding preferred shares: Class A Preferred Shares (#) Class A Preferred Shares 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 – September 30, 2019 and December 31, 2019 - $ - 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. Prior to conversion, the Class A preferred shares had the following features. The Class A preferred shares were 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 had 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 Class A preferred shares also contained an 8% preferred return that accrues daily and compounds annually and was payable in shares upon conversion. The Company 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.

Financial Instruments

Financial Instruments	3 Months Ended
	Dec. 31, 2019
Fair Value Disclosures [Abstract]
Financial Instruments	(a) Fair values The Company uses the fair value measurement framework for valuing financial assets and liabilities measured on a recurring basis in situations where other accounting pronouncements either permit or require fair value measurements. Fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company follows the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value: ● Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. ● Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets and liabilities in markets that are not active. ● Level 3 - Unobservable inputs for the asset or liability that are supported by little or no market activity. The carrying value of certain financial instruments such as cash and cash equivalents, accounts and other receivable, accounts payable and accrued liabilities approximates fair value due to the short-term nature of such instruments. Short-term investments in U.S. Treasury Bills are recorded at amortized cost, which approximates fair value using level 1 inputs. (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 and cash equivalents and accounts and other receivable. The Company manages this risk by maintaining bank accounts with Canadian Chartered Banks, U.S. banks believed to be credit worthy and U.S. Treasury Bills. The Company’s cash is not subject to any external restrictions. The Company assesses the collectability of accounts receivable through a review of the current aging, as well as an analysis of historical collection rates, general economic conditions and credit status of customers. Credit risk for HST refunds receivable is not considered significant since amounts are due from the Canada Revenue Agency. (c) Foreign exchange risk The Company and its subsidiary have 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. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks. At December 31, 2019, the Company and its Canadian subsidiary had assets of C$2.0 million and the U.S. dollar was equal to 1.3017 Canadian dollars. Based on the exposure at December 31, 2019, a 10% annual change in the Canadian/U.S. exchange rate would impact the Company’s loss and other comprehensive loss by approximately $151,000. (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	3 Months Ended
	Dec. 31, 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	3 Months Ended
	Dec. 31, 2019
Earnings Per Share, Basic [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	3 Months Ended
	Dec. 31, 2019
Related Party Transactions [Abstract]
Related Party Transactions	During the periods presented, the Company incurred the following related party transactions: ● During the three months ended December 31, 2019 and 2018, the Company incurred rent expense of $19,440 and $19,804 from a related company, 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 three months ended December 31, 2019 and 2018. Included in accounts payable and accrued liabilities at December 31, 2019 was royalty payable of $23,457 to that director for products sales by the California subsidiary during 2019.

Subsequent Events

Subsequent Events	3 Months Ended
	Dec. 31, 2019
Subsequent Events [Abstract]
Subsequent Events	Registered direct offering On January 8, 2020, the Company closed a registered direct offering of 1,354,691 common shares, no par value (the Common Shares) and concurrent private placement of Class A Purchase Warrants to purchase an aggregate of up to 1,016,036 Common Shares and Class B Purchase Warrants to purchase an aggregate of up to 677,358 Common Shares. Net proceeds were $3.92 million, after deducting placement agent fees and other offering expenses. The Class A Purchase Warrants will be exercisable on or after July 8, 2020, at an exercise price of $4.80 per share and will expire on July 8, 2023 . The Class B Purchase Warrants will be exercisable on or after July 8, 2020, at an exercise price of $4.00 per share and will expire on the November 8, 2020. In connection with the offering, the Company also issued warrants to purchase an aggregate of 12,364 common shares to certain affiliated designees of the placement agent as part of the placement agent’s compensation. The placement agent warrants will be exercisable on or after July 6, 2020, at an exercise price of $3.20 per share, and will expire January 6, 2025. Share options On February 12, 2020, the independent directors of the Board of Directors granted a total of 352,365 options to directors, officers and employees of the Company pursuant to the 2019 Equity Incentive Compensation Plan. The options have a term of 10 years with 33% vesting on the grant date, with a pro rata amount of the balance vesting monthly for the next 36 months and an exercise price equal to the Nasdaq closing price on the grant date.

Property and Equipment (Tables)

Property and Equipment (Tables)	3 Months Ended
	Dec. 31, 2019
Property, Plant and Equipment [Abstract]
Property and equipment	December 31, 2019 September 30, 2019 Computer equipment $ 43,058 $ 42,910 Furniture and equipment 8,031 7,932 51,089 50,842 Less: accumulated depreciation (31,693 ) (29,194 ) Depreciable assets, net $ 19,396 $ 21,648 Assets not in service 28,913 51,410 Total property and equipment, net $ 48,309 $ 73,058

Leases (Tables)

Leases (Tables)	3 Months Ended
	Dec. 31, 2019
Leases [Abstract]
Lease assets and liabilities	Balance Sheets Caption December 31, 2019 Assets: Operating lease assets Operating lease right-of-use assets $ 213,848 Liabilities: Current: Operating lease liabilities Short-term operating lease liabilities $ 66,631 Long-term: Operating lease liabilities Long-term operating lease liabilities 151,514 Total lease liabilities $ 218,145
Lease cost components	Statements of Operations Caption Three Months Ended December 31, 2019 Operating lease cost General and administrative $ 19,440
Lease terms and discount rates	December 31, 2019 Remaining lease term (months): 36 Estimated incremental borrowing rate: 6.5 %
Future minimum lease payments	Year Ending September 30, 2020 $ 59,136 September 30, 2021 80,457 September 30, 2022 80,993 September 30, 2023 20,248 Total lease payment 240,834 Less imputed interest 22,689 Present value of lease liabilities 218,145 Less current installments 66,631 Long-term lease liabilities excluding current installments $ 151,514
Cash paid-lease liabilities	Statements of Cash Flows Caption Three Months Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating lease liabilities $ 19,440

Commitments (Tables)

Commitments (Tables)	3 Months Ended
	Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Future contractual payments	Year Ending September 30, 2020 $ 2,150,000 September 30, 2021 43,000 September 30, 2022 4,000 $ 2,197,000

Capital Shares (Tables)

Capital Shares (Tables)	3 Months Ended
	Dec. 31, 2019
Stockholders' Equity Note [Abstract]
Warrant activity	Number of Warrants (#) Weighted Average Exercise Price Balance – December 31, 2018 - $ - Effect of reverse acquisition 362,430 31.60 Black-Scholes value payout (313,516 ) 33.01 Balance – September 30, 2019 and December 31, 2019 48,914 $ 11.19
Warrants outstanding	Number of Warrants (#) Exercise Prices Expiry Dates 28,124 $ 15.90 May 2023 20,790 4.81 June 2024 48,914
Stock option activity	Number of Options (#) Weighted Average Exercise Price Balance – December 31, 2018 315,123 $ 1.65 Effect of reverse acquisition 7,787 124.80 Expired (3,265 ) 125.75 Balance – September 30, 2019 319,645 $ 3.39 Expired (119 ) 80.66 Balance – December 31, 2019 319,526 $ 3.40
Stock options outstanding	Number of Options (#) Exercisable at December 31, 2019 (#) Range of Exercise Prices Expiry Dates 315,123 264,520 C$ 2.16 Aug 2027-Dec 2028 214 214 C$ 243.60 May 2020 214 214 C$ 638.40 Nov 2021 3,499 3,499 $ 35.28 - 93.24 Sep 2023-Mar 2025 238 238 $ 304.08 Dec 2022 238 238 $ 768.60 Nov 2020 319,526 268,923
Fair value of options granted assumptions	Risk free interest rate 1.98 % Expected life (years) 4 Expected share price volatility 79.46 % Expected dividend yield 0 %
Issued and outstanding common and preferred shares	Number of Common Shares (#) Common Shares Balance – December 31, 2018 3,239,902 $ 1,111,253 Conversion of preferred shares upon reverse acquisition 3,376,112 $ 6,260,299 Share consideration transferred upon reverse acquisition 888,454 4,633,499 Balance – September 30, 2019 and December 31, 2019 7,504,468 $ 12,005,051 Common shares subscribed: Common Shares Subscribed Balance – December 31, 2018 and September 30, 2019 $ - Common shares subscribed 45,000 Balance – December 31, 2019 $ 45,000 Issued and outstanding preferred shares: Class A Preferred Shares (#) Class A Preferred Shares 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 – September 30, 2019 and December 31, 2019 - $ -

Nature of Operations (Details N

Nature of Operations (Details Narrative) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Net loss	$ (1,094,333)	$ (364,849)
Cash and cash equivalents	3,827,050	3,367,098	$ 5,030,583	$ 3,730,230
Shareholders' equity	4,233,686	$ 3,214,490	5,256,130	$ 3,550,145
Accumulated deficit	$ (7,828,948)		$ (6,734,615)

Property and Equipment (Details

Property and Equipment (Details) - USD ($)	Dec. 31, 2019	Sep. 30, 2019
Property and equipment, gross	$ 51,089	$ 50,842
Less: accumulated depreciation	(31,693)	(29,194)
Total property and equipment, net	48,309	73,058
Computer Equipment
Property and equipment, gross	43,058	42,910
Furniture and Equipment
Property and equipment, gross	8,031	7,932
Depreciable Assets, Net
Total property and equipment, net	19,396	21,648
Assets Not in Service
Total property and equipment, net	$ 28,913	$ 51,410

Property and Equipment (Detai_2

Property and Equipment (Details Narrative) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 2,403	$ 412

Leases (Details)

Leases (Details) - USD ($)	Dec. 31, 2019	Sep. 30, 2019
Assets:
Operating lease right-of-use assets	$ 213,848	$ 0
Current:
Short-term operating lease liabilities	66,631	0
Long-term:
Long-term operating lease liabilities	151,514	$ 0
Total lease liabilities	$ 218,415

Leases (Details 1)

Leases (Details 1)	3 Months Ended
	Dec. 31, 2019USD ($)
General and Administrative Expense
Operating lease cost	$ 19,440

Leases (Details 2)

Leases (Details 2)	Dec. 31, 2019
Leases [Abstract]
Remaining lease term (months)	3 years
Estimated incremental borrowing rate	6.50%

Leases (Details 3)

Leases (Details 3) - USD ($)	Dec. 31, 2019	Sep. 30, 2019
Year Ending September 30,
2020	$ 59,136
2021	80,457
2022	80,993
2023	20,248
Total	240,834
Less imputed interest	22,689
Present value of lease liabilities	218,415
Less current installments	66,631	$ 0
Long-term lease liabilities excluding current installments	$ 151,514	$ 0

Leases (Details 4)

Leases (Details 4) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	$ 19,439	$ 0

Commitments (Details)

Commitments (Details)	Dec. 31, 2019USD ($)
Year Ending September 30,
2020	$ 2,150,000
2021	43,000
2022	4,000
Total	$ 2,197,000

Commitments (Details Narrative)

Commitments (Details Narrative) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Contributions to 401K plan	$ 1,556	$ 0

Capital Shares (Details)

Capital Shares (Details) - $ / shares	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Stockholders' Equity Note [Abstract]
Number of warrants, beginning balance	48,914	0
Effect of reverse acquisition	0	362,430
Black-Scholes value payout	0	(313,516)
Number of warrants, ending balance	48,914	48,914
Weighted average exercise price, beginning balance	$ 11.19	$ 0
Effect of reverse acquisition	0	31.60
Black-Scholes value payout	0	33.01
Weighted average exercise price, ending balance	$ 11.19	$ 11.19

Capital Shares (Details 1)

Capital Shares (Details 1) - $ / shares	3 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Number of warrants	48,914	48,914	48,914	0
Exercise price	$ 11.19	$ 11.19	$ 11.19	$ 0
Warrant 1
Number of warrants	28,124
Exercise price	$ 15.90
Expiry date	May 2023
Warrant 2
Number of warrants	20,790
Exercise price	$ 4.81
Expiry date	June 2024

Capital Shares (Details 2)

Capital Shares (Details 2) - $ / shares	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Stockholders' Equity Note [Abstract]
Number of options, beginning balance	319,645	315,123
Number of options granted	0	0
Number of options effect of reverse acquisition	0	7,787
Number of options expired	(119)	(3,265)
Number of options, ending balance	319,526	319,645
Weighted average exercise price, beginning balance	$ 3.39	$ 1.65
Weighted average exercise price granted	0	0
Weighted average exercise price effect of reverse acquisition	0	124.80
Weighted average exercise price expired	80.66	125.75
Weighted average exercise price, ending balance	$ 3.40	$ 80.07

Capital Shares (Details 3)

Capital Shares (Details 3)	3 Months Ended
	Dec. 31, 2019$ / sharesshares	Dec. 31, 2019$ / sharesshares	Sep. 30, 2019$ / sharesshares	Dec. 31, 2018$ / sharesshares	Sep. 30, 2018$ / sharesshares
Options outstanding	319,526	319,526	319,645	319,645	315,123
Options exercisable	268,923	268,923
Range of exercise prices | $ / shares	$ 3.40		$ 3.39	$ 80.07	$ 1.65
Stock Option 1
Options outstanding	315,123	315,123
Options exercisable	264,520	264,520
Range of exercise prices | $ / shares		$ 2.16
Expiry dates	Aug 2027-Dec 2028
Stock Option 2
Options outstanding	214	214
Options exercisable	214	214
Range of exercise prices | $ / shares		$ 243.60
Expiry dates	May 2020
Stock Option 3
Options outstanding	214	214
Options exercisable	214	214
Range of exercise prices | $ / shares		$ 638.40
Expiry dates	Nov 2021
Stock Option 4
Options outstanding	3,499	3,499
Options exercisable	3,499	3,499
Expiry dates	Sep 2023-Mar 2025
Stock Option 4 | Minumum
Range of exercise prices | $ / shares	$ 35.28
Stock Option 4 | Maxumum
Range of exercise prices | $ / shares	$ 93.24
Stock Option 5
Options outstanding	238	238
Options exercisable	238	238
Range of exercise prices | $ / shares	$ 304.08
Expiry dates	Dec 2022
Stock Option 6
Options outstanding	238	238
Options exercisable	238	238
Range of exercise prices | $ / shares	$ 768.60
Expiry dates	Nov 2020

Capital Shares (Details 4)

Capital Shares (Details 4)	3 Months Ended
	Dec. 31, 2018
Stockholders' Equity Note [Abstract]
Risk free interest rate	1.98%
Expected life (years)	4 years
Expected share price volatility	79.46%
Expected dividend yield	0.00%

Capital Shares (Details 5)

Capital Shares (Details 5) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Sep. 30, 2019
Beginning balance, amount	$ 5,256,130	$ 3,550,145	$ 3,214,490
Preferred return for Class A preferred shares, amount		0
Common shares subscribed	45,000	0
Ending balance, amount	$ (4,233,686)	$ (3,214,490)	$ (5,256,130)
Common Shares
Beginning balance, shares	7,504,468	3,239,902	(3,239,902)
Beginning balance, amount	$ 12,005,051	$ 1,111,253	$ (1,111,253)
Conversion of preferred shares upon reverse acquisition, shares			3,376,112
Conversion of preferred shares upon reverse acquisition, amount			$ 6,260,299
Share consideration transferred upon reverse acquisition, shares			888,454
Share consideration transferred upon reverse acquisition, amount			$ 4,633,499
Ending balance, shares	7,504,468	3,239,902	(7,504,468)
Ending balance, amount	$ 12,005,051	$ 1,111,253	$ (12,005,051)
Common Shares Subscribed
Beginning balance, amount	0	0	0
Common shares subscribed	45,000	0
Ending balance, amount	$ 45,000	0	$ 0
Class A Preferred Shares
Beginning balance, shares	0		1,007,143
Beginning balance, amount	$ 0	5,945,520	$ 6,064,013
Preferred return on Class A preferred shares, shares			0
Preferred return for Class A preferred shares, amount		$ 118,493	$ 196,286
Conversion of preferred shares upon reverse acquisition, shares			(1,007,143)
Conversion of preferred shares upon reverse acquisition, amount			$ (6,260,299)
Ending balance, shares		(1,007,143)	0
Ending balance, amount	$ 0	$ (6,064,013)	$ 0

Capital Shares (Details Narrati

Capital Shares (Details Narrative) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Stockholders' Equity Note [Abstract]
Weighted average contractual life remaining on outstanding warrants	3 years 9 months 29 days
Shares remaining under 2019 Plan	1,153,147
Weighted average contractual life remaining on outstanding options	7 years 9 months
Share-based compensation	$ 8,775	$ 11,434
Unrecognized share-based compensation	$ 21,000
Unrecognized share-based compensation recognition period	2 years

Related Party Transactions (Det

Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Sep. 30, 2019
Related Party Transactions [Abstract]
Rent expense	$ 19,440	$ 19,804
Rent payable	0		$ 0
Royalty expenses	0	$ 0
Royalty payable	$ 23,457		$ 0