The accompanying
notes are an integral part of these condensed consolidated interim financial statements.
The accompanying
notes are an integral part of these condensed consolidated interim financial statements.
The accompanying
notes are an integral part of these condensed consolidated interim financial statements.
The accompanying
notes are an integral part of these condensed consolidated interim financial statements.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
|
1
|
Nature of operations, corporate history, and going concern
|
Nature of operations
DelMar Pharmaceuticals, Inc. (the “Company”)
is a clinical stage drug development company with a focus on the treatment of solid tumor cancers. The Company is currently conducting
two phase 2 clinical trials in the United States and China with its product candidate, VAL-083, as a potential new treatment for
glioblastoma multiforme, the most common and aggressive form of brain cancer. Historical research indicates that VAL-083 is also
active in other solid tumor cancers such as ovarian, lung, pediatric brain cancer, as well as other solid tumors of the central
nervous system. The Company may pursue opportunities in these cancers in the future. In order to accelerate the Company’s
development timelines, it leverages existing preclinical and clinical data from a wide range of sources. The Company
may seek marketing partnerships in order to potentially offset clinical costs and to generate future royalty revenue from approved
indications of its product candidate.
Corporate history
The
Company is a Nevada corporation formed on June 24, 2009 under the name Berry Only, Inc. On January 25, 2013, the Company entered
into and closed an exchange agreement (the “Exchange Agreement”), with Del Mar Pharmaceuticals (BC) Ltd. (“Del
Mar (BC)”), 0959454 B.C. Ltd. (“Callco”), and 0959456 B.C. Ltd. (“Exchangeco”) and the security
holders of Del Mar (BC). Upon completion of the Exchange Agreement, Del Mar (BC) became a wholly-owned subsidiary of the Company
(the “Reverse Acquisition”).
DelMar
Pharmaceuticals, Inc. is the parent company of Del Mar (BC), a British Columbia, Canada corporation incorporated on April 6, 2010,
which is a clinical stage company with a focus on the development of drugs for the treatment of cancer. The Company is also the
parent company to Callco and Exchangeco which are British Columbia, Canada corporations. Callco and Exchangeco were formed to
facilitate the Reverse Acquisition.
References
to the Company refer to the Company and its wholly-owned subsidiaries, Del Mar (BC), Callco and Exchangeco.
Going concern
These condensed consolidated interim financial statements
have been prepared on a going concern basis which assumes that the Company will continue its operations for the foreseeable future
and contemplates the realization of assets and the settlement of liabilities in the normal course of business.
For the three months ended September 30, 2019,
the Company reported a loss of $1,605,871, and a negative cash flow from operations of $2,266,146. The Company had an accumulated
deficit of $62,188,351 and had cash equivalents on hand of $8,060,039 as of September 30, 2019. The Company is in the development
stage and has not generated any revenues to date. The Company does not have the prospect of achieving revenues until such time
that its product candidate is commercialized, or partnered, which may not ever occur. In the near future, the Company will require
additional funding to maintain its clinical trials, research and development projects, and for general operations. These circumstances
indicate substantial doubt exists about the Company’s ability to continue as a going concern within one year from the date
of filing of these condensed consolidated financial statements.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
Consequently,
management is pursuing various financing alternatives to fund the Company’s operations so it can continue as a going concern.
Management plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership
arrangements. The Company may tailor its drug candidate development program based on the amount of funding the Company is able
to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.
These
financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may
be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
|
2
|
Significant accounting policies
|
Reverse stock split
On May 7, 2019, the Company filed a Certificate of
Change with the Secretary of State of Nevada that effected a 1-for-10 (1:10) reverse stock split of its common stock, par value
$0.001 per share, which became effective on May 8, 2019. Pursuant to the Certificate of Change, the Company’s authorized
common stock was decreased in the same proportion as the split resulting in a decrease from 70,000,000 authorized shares of common
stock to 7,000,000 shares authorized. The par value of its common stock was unchanged at $0.001 per share, post-split. All common
shares, warrants, stock options, conversion ratios, and per share information in these condensed consolidated interim financial
statements give retroactive effect to the 1-for-10 reverse stock split. The Company’s authorized and issued preferred stock
was not affected by the split.
Amended articles of incorporation
On June 26, 2019, we amended our articles of incorporation
to increase the number of authorized shares of common stock from 7,000,000 to 95,000,000 shares.
Basis of presentation
The condensed consolidated interim financial statements
of the Company have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”)
and are presented in United States dollars. The functional currency of the Company and each of its subsidiaries is the United
States dollar.
The accompanying condensed consolidated interim financial
statements include the accounts of the Company and its wholly-owned subsidiaries, Del Mar BC, Callco, and Exchangeco. All intercompany
balances and transactions have been eliminated in consolidation.
The principal accounting policies applied in the
preparation of these condensed consolidated interim financial statements are set out below and have been consistently applied
to all periods presented.
DelMar
Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
Unaudited interim financial data
The accompanying unaudited condensed consolidated
interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission
for interim financial information. Accordingly, they do not include all of the information and the notes required by U.S. GAAP
for complete financial statements. These unaudited condensed consolidated interim financial statements should be read in conjunction
with the audited financial statements of the Company as at June 30, 2019 included in our Form 10-K. In the opinion of management,
the unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal and recurring
adjustments, necessary for a fair presentation. The results for three months ended September 30, 2019 are not necessarily indicative
of the results to be expected for the fiscal year ending June 30, 2020, or for any other future annual or interim period.
Use of estimates
The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of assets,
liabilities, expenses, contingent assets and contingent liabilities as at the end of, or during, the reporting period. Actual
results could significantly differ from those estimates. Significant areas requiring management to make estimates include the
derivative liability, the valuation of equity instruments issued for services, and clinical trial accruals. Further details of
the nature of these assumptions and conditions may be found in the relevant notes to these condensed consolidated interim financial
statements.
Loss per share
Income or loss per share is calculated based on the
weighted average number of common shares outstanding. For the three-month periods ended September 30, 2019 and 2018 diluted loss
per share does not differ from basic loss per share since the effect of the Company’s warrants, stock options, performance
stock units, and convertible preferred shares is anti-dilutive. As of September 30, 2019, potential common shares of 9,683,596
(2018 – 1,433,353) related to outstanding warrants, 780,000 (2018 – 262,683) relating to stock options, nil (2018
– 120,000) relating to performance stock units, and 162,177 (2018 – 220,279) relating to outstanding Series B convertible
preferred shares were excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive.
Recent accounting pronouncements
From time to time, new accounting pronouncements
are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted
by the Company as of the specified effective date.
Recently adopted
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
ASU 2016-02 — Leases (Topic 842)
The new standard establishes a right-of-use (“ROU”)
model that requires a lessee to record a ROU asset and a lease liability on the consolidated balance sheet for all leases with
terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern
of expense recognition in the consolidated income statement. ASU 2016-02 is effective for annual periods beginning after December
15, 2018, including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition
approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest
comparative period presented in the financial statements, with certain practical expedients available. The adoption of ASU 2016-02
did not have a material impact on the Company’s results of operations or financial results.
ASU 2018-07 — Stock Compensation (Topic
718) Improvements to Nonemployee Shares-based Payment Accounting
The amendments in this update are intended to the
reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees. The ASU expands
the scope of Topic 718, Compensation —Stock Compensation, which currently only includes share-based payments issued
to employees, to also include share-based payments issued to nonemployees for goods and services. The existing guidance on nonemployee
share-based payments is significantly different from current guidance for employee share-based payments. This ASU expands the
scope of the employee share-based payments guidance to include share-based payments issued to nonemployees. By doing so, the FASB
improves the accounting of nonemployee share-based payments issued to acquire goods and services used in its own operations. The
amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim
periods within that fiscal year. The adoption of ASU 2018-07 did not have a material impact on the Company’s results of
operations or financial results.
Not yet adopted
ASU 2017-11 — I. Accounting
for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable
Financial Instruments of Certain Non-public Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception
The amendments in this update are intended
to reduce the complexity associated with the accounting for certain financial instruments with characteristics of liabilities and
equity. Specifically, a down round feature would no longer cause a freestanding equity-linked financial instrument (or an embedded
conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current
earnings. In addition, the indefinite deferral of certain provisions of Topic 480 have been re-characterized to a scope exception.
The re-characterization has no accounting effect. ASU 2017-11 is effective for public business entities for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company has not yet evaluated
the impact of adoption of this ASU on its condensed consolidated interim financial statements and related disclosures.
During the three months ended September
30, 2019, other than ASU 2017-11, there have been no new, or existing recently issued, accounting pronouncements that are of significance,
or potential significance, that impact the Company’s condensed consolidated interim financial statements.
DelMar
Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
|
3
|
Related party transactions
|
The Series A Preferred Stock
is held by Valent Technologies, LLC (“Valent”), an entity owned by Dr. Dennis Brown, the Company’s Chief Scientific
Officer. Therefore, Valent is a related party to the Company. For the three months ended September 30, 2019 and 2018 respectively,
the Company recorded $2,089 related to the dividend payable to Valent on the Series A Preferred Stock (note 5). The dividends
have been recorded as a direct increase in accumulated deficit.
The related party payable balances as of September
30, 2019 and June 30, 2019 consist of compensation costs, directors’ fees, and amounts owing for expense reimbursement to
the Company’s officers and directors.
The Company has issued common stock purchase warrants.
Based on the terms of certain of these warrants the Company determined that the warrants were a derivative liability which is
recognized at fair value at the date of the transaction and re-measured at fair value each reporting period with the changes in
fair value recorded in the condensed consolidated interim statement of operations and comprehensive loss.
The derivative liabilities balance was nil at September
30, 2019 and June 30, 2019. The derivative liabilities balance consisted of the 2,180 Agent Warrants at September 30, 2019 and
2018, and at June 30, 2019.
Changes in the Company’s derivative liability
are summarized as follows:
|
|
Three months ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Opening balance
|
|
|
-
|
|
|
|
1,117
|
|
Change in fair value of warrants
|
|
|
-
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
Closing balance
|
|
|
-
|
|
|
|
1,337
|
|
Less current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Long term portion
|
|
|
-
|
|
|
|
1,337
|
|
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
Preferred stock
|
|
Series B Preferred Stock
|
|
|
|
|
|
|
|
Number of shares
|
|
|
$
|
|
|
|
|
|
|
|
|
Opening balance – June 30, 2019
|
|
|
673,613
|
|
|
|
4,699,304
|
|
Conversion of Series B Preferred stock to common stock
|
|
|
(25,000
|
)
|
|
|
(174,407
|
)
|
|
|
|
|
|
|
|
|
|
Closing balance – September 30, 2019
|
|
|
648,613
|
|
|
|
4,524,897
|
|
There was no change to the Series B Preferred stock for
the three months ended September 30, 2018 nor to the Series A Preferred stock for either of the three months ended September 30,
2019 or 2018.
Series B Preferred Stock
During the year ended June 30, 2016, the Company
issued an aggregate of 902,238 shares of Series B Preferred Stock at a purchase price of at $8.00 per share. Each share of Series
B Preferred Stock is convertible into 0.25 shares of common stock equating to a conversion price of $32.00 (the “Conversion
Price”) and will automatically convert to common stock at the earlier of (i) 24 hours following regulatory approval of VAL-083
with a minimum closing bid price of $80.00 or (ii) five years from the final closing date. The holders of the Series B Preferred
Stock are entitled to an annual cumulative, in arrears, dividend at the rate of 9% payable quarterly. The 9% dividend accrues
quarterly commencing on the date of issue and is payable quarterly on June 30, September 30, December 31, and March 31 of
each year commencing on June 30, 2016. Dividends are payable solely by delivery of shares of common stock, in an amount for each
holder equal to the aggregate dividend payable to such holder with respect to the shares of Series B Preferred Stock held by such
holder divided by the Conversion Price. The Series B Preferred Stock does not contain any repricing features. Each share of Series
B Preferred Stock entitles its holder to vote with the common stock on an as-converted basis.
The Series B Preferred Stock shall with respect to distributions
of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock and (ii) senior
to the Special Voting Preferred Stock and (iii) senior to any other class or series of capital stock of the Company hereafter
created which does not expressly rank pari passu with, or senior to, the Series B Preferred Stock. The Series B Preferred Stock
shall be pari passu in liquidation to the Company’s Series A Preferred Stock. The liquidation value of the Series B Preferred
Stock at September 30, 2019 is the stated value of $5,188,904 (June 30, 2019 - $5,388,904).
In addition, the Company and the holders entered
into a royalty agreement, pursuant to which the Company will pay the holders of the Series B Preferred Stock, in aggregate, a
low, single-digit royalty based on their pro rata ownership of the Series B Preferred Stock on products sold directly by the Company
or sold pursuant to a licensing or partnering arrangement (the “Royalty Agreement”).
Upon conversion of a holder’s Series B Preferred
Stock to common stock, such holder shall no longer receive ongoing royalty payments under the Royalty Agreement but will be entitled
to receive any residual royalty payments that have vested. Rights to the royalties shall vest during the first three years following
the applicable closing date, in equal thirds to holders of the Series B Preferred Stock on each of the three vesting dates, upon
which vesting dates such royalty amounts shall become vested royalties.
Pursuant to the Series B Preferred Stock dividend,
during the three months ended September 30, 2019, the Company issued 3,700 (2018 – 4,960) shares of common stock and recognized
$2,046 (2018 – $36,085) as a direct increase in accumulated deficit.
A total of 648,613 (2018 – 881,113) shares
of Series B Preferred Stock are outstanding as of September 30, 2019, such that a total of 162,177 (2018 – 220,280) shares
of common stock are issuable upon conversion of the Series B Preferred Stock as at September 30, 2019. Converted shares are rounded
up to the nearest whole share.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
Series A Preferred Stock
Effective September 30, 2014, the Company filed a Certificate
of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State
of Nevada. Pursuant to the Series A Certificate of Designation, the Company designated 278,530 shares of preferred stock as Series
A Preferred Stock. The shares of Series A Preferred Stock have a stated value of $1.00 per share (the “Series A Stated Value”)
and are not convertible into common stock. The holder of the Series A Preferred Stock is entitled to dividends at the rate of
3% of the Series A Stated Value per year, payable quarterly in arrears. Upon any liquidation of the Company, the holder of the
Series A Preferred Stock will be entitled to be paid, out of any assets of the Company available for distribution to stockholders,
the Series A Stated Value of the shares of Series A Preferred Stock held by such holder, plus any accrued but unpaid dividends
thereon, prior to any payments being made with respect to the common stock. The Series A Preferred Stock is held by Valent (note
3).
The Series A Preferred Stock shall
with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s
common stock, and (ii) senior to the Company’s Special Voting Preferred Stock and (iii) senior to any other class or series
of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series A Preferred
Stock. The Series A Preferred Stock shall be pari passu in liquidation to the Company’s Series B Preferred Stock. The liquidation
value of the Series A Preferred stock at September 30, 2019 and June 30, 209 is the stated value of $278,530.
Common stock
Stock Issuances
Three months ended September 30, 2019
Underwritten public offering
On August 16, 2019, the Company closed on the sale
of (i) 4,895,000 shares of its common stock, par value $0.001 per share (the “Common Stock”), (ii) pre-funded warrants
(“PFW”) to purchase an aggregate of 2,655,000 shares of Common Stock and (iii) common warrants to purchase an aggregate
of 7,762,500 shares of Common Stock (“2020 Investor Warrants”), including 800,000 shares of Common Stock and 2020
Investor Warrants to purchase an aggregate of 1,012,500 shares of Common Stock sold pursuant to a partial exercise by the underwriters
of the underwriters’ option to purchase additional securities, in the Company’s underwritten public offering (the
“Offering”). Each share of Common Stock or PFW, as applicable, was sold together with a 2020 Investor Warrant to purchase
one share of Common Stock at a combined effective price to the public of $1.00 per share of Common Stock and accompanying 2020
Investor Warrant.
The net proceeds from the Offering, including from
the partial exercise of the underwriters’ option to purchase additional securities, were $6,582,966, after deducting underwriting
discounts and commissions, and other offering expenses.
The 2020 Investor Warrants are exercisable at $1.00
per share until their expiry on August 16, 2024 and the PFW are exercisable at $0.01 per share at any time after August 16, 2019.
The Company also issued 377,500 warrants to the underwriters of the Offering (the “2020 Underwriter Warrants”). The
2020 Underwriter Warrants are exercisable at $1.15 per share commencing February 10, 2020 until their expiry on August 14, 2022.
The Company granted the underwriters
a 45-day option, ending September 28, 2019, to purchase up to an additional 1,012,500 shares of Common Stock and/or 2020 Investor
Warrants to purchase up to 1,012,500 shares of Common Stock, at the public offering price. On August 15, 2019, the underwriters
partially exercised this option by purchasing 800,000 shares of Common Stock and 2020 Investor Warrants to purchase an aggregate
of 1,012,500 shares of Common Stock.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
During the three months ended September 30, 2019,
all of the 2,655,000 PFW were exercised at $0.01 per PFW for proceeds of $26,550.
2017 Omnibus Incentive Plan
As approved by the Company’s stockholders at
the annual meeting of stockholders held on April 11, 2018, on July 7, 2017, as amended on February 1, 2018, the Company’s
board of directors approved adoption of the Company’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”).
The board of directors also approved a form of Performance Stock Unit Award Agreement to be used in connection with grants of
performance stock units (“PSUs”) under the 2017 Plan. Under the 2017 Plan, 780,000 shares of Company common stock
are reserved for issuance, less the number of shares of common stock issued under the Del Mar (BC) 2013 Amended and Restated Stock
Option Plan (the “Legacy Plan”) or that are subject to grants of stock options made, or that may be made, under the
Legacy Plan. A total of 165,485 shares of common stock have been issued under the Legacy Plan and/or are subject to outstanding
stock options granted under the Legacy Plan, and a total of 614,515 shares of common stock have been issued under the 2017 Plan
and/or are subject to outstanding stock options granted under the 2017 Plan leaving no shares of common stock available at September
30, 2019 for issuance under the 2017 Plan if all such options under the Legacy Plan were exercised.
The maximum number of shares of Company common stock
with respect to which any one participant may be granted awards during any calendar year is 8% of the Company’s fully diluted
shares of common stock on the date of grant (excluding the number of shares of common stock issued under the 2017 Plan and/or
the Legacy Plan or subject to outstanding awards granted under the 2017 Plan and/or the Legacy Plan). No award will be granted
under the 2017 Plan on or after July 7, 2027, but awards granted prior to that date may extend beyond that date.
During the three months ended September 30, 2019,
and subject to approval by the Company’s stockholders, the Company’s board of directors approved an increase in the
number of shares of common stock available to be issued under the 2017 Plan by 1,500,000. The increase brings the total number
of shares available under the 2017 Plan to 2,280,000.
During the three months ended September 30, 2019,
the Company also granted 1,041,016 stock options to officers and directors of the Company. The total grant date aggregate fair
value of the stock options was $505,385. Of the total stock options granted of 1,041,016, 491,817 were granted under the existing
2017 Plan limit and 549,199 will be exercisable subject to approval by the Company’s stockholders of the 2017 Plan share
increase. All of these stock options granted to officers and directors have an exercise price of $0.61 and expire on September
5, 2029. Of the 1,041,016 stock options granted, 375,000 vest pro rata monthly over one year from the date of grant and 666,016
vest as to one-sixth on the six month anniversary of the grant date with the remaining five-sixths vesting pro rate monthly over
30 months commencing on the seven month anniversary of the grant date.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
Stock Options
The following table sets forth the aggregate
stock options outstanding under all plans as of September 30, 2019:
|
|
Number of
stock
options
outstanding
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
Balance – June 30, 2019
|
|
|
288,183
|
|
|
|
22.31
|
|
Granted
|
|
|
491,817
|
|
|
|
0.61
|
|
|
|
|
|
|
|
|
|
|
Balance – September 30, 2019
|
|
|
780,000
|
|
|
|
8.63
|
|
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
The following table summarizes stock options outstanding and
exercisable under all plans at September 30, 2019:
Exercise price
$
|
|
Number
Outstanding at
September 30,
2019
|
|
|
Weighted
average
remaining
contractual
life (years)
|
|
|
Number
exercisable at
September 30,
2019
|
|
|
|
|
|
|
|
|
|
|
|
0.61
|
|
|
491,817
|
|
|
|
9.93
|
|
|
|
-
|
|
6.10
|
|
|
30,000
|
|
|
|
9.11
|
|
|
|
19,443
|
|
7.00
|
|
|
5,451
|
|
|
|
8.73
|
|
|
|
2,271
|
|
8.70
|
|
|
12,000
|
|
|
|
8.09
|
|
|
|
12,000
|
|
9.83
|
|
|
83,647
|
|
|
|
8.64
|
|
|
|
37,176
|
|
10.60
|
|
|
3,600
|
|
|
|
8.54
|
|
|
|
1,800
|
|
11.70
|
|
|
30,000
|
|
|
|
3.41
|
|
|
|
30,000
|
|
15.10
|
|
|
2,500
|
|
|
|
2.67
|
|
|
|
2,500
|
|
20.00
|
|
|
13,125
|
|
|
|
2.02
|
|
|
|
13,125
|
|
21.10
|
|
|
14,400
|
|
|
|
7.77
|
|
|
|
9,600
|
|
29.60
|
|
|
4,500
|
|
|
|
5.35
|
|
|
|
4,500
|
|
37.60
|
|
|
4,500
|
|
|
|
6.36
|
|
|
|
4,500
|
|
40.00
|
|
|
1,250
|
|
|
|
-
|
|
|
|
1,250
|
|
41.00
|
|
|
4,000
|
|
|
|
7.11
|
|
|
|
3,778
|
|
42.00
|
|
|
41,250
|
|
|
|
3.31
|
|
|
|
41,250
|
|
44.80
|
|
|
3,000
|
|
|
|
6.36
|
|
|
|
3,000
|
|
49.50
|
|
|
22,460
|
|
|
|
4.82
|
|
|
|
20,641
|
|
53.20
|
|
|
8,000
|
|
|
|
6.60
|
|
|
|
8,000
|
|
61.60
|
|
|
1,500
|
|
|
|
3.50
|
|
|
|
1,500
|
|
92.00
|
|
|
3,000
|
|
|
|
3.67
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
780,000
|
|
|
|
|
|
|
|
219,334
|
|
The above table excludes 549,199 granted stock options
that are exercisable subject to approval by the Company’s stockholders of the share reserve increase under the 2017 Plan.
These options are exercisable at $0.61 per share until September 5, 2029.
There are 560,666 unvested stock options at September
30, 2019.
Included in the number of stock options outstanding
are 2,500 stock options granted at an exercise price of CA $20.00. The exercise price of these options shown in the above table
have been converted to US $15.10 using the period ending closing exchange rate. Stock options issued during the three months ended
September 30, 2019 have been valued using a Black-Scholes pricing model with the following assumptions:
|
|
September 30,
2019
|
|
|
|
Dividend rate
|
|
0%
|
Volatility
|
|
99% to 102%
|
Risk-free rate
|
|
1.50%
|
Term - years
|
|
5.5 to 6.5
|
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
The estimated volatility of the Company’s common
stock at the date of issuance of the stock options is based on the historical volatility of the Company. The risk-free interest
rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the stock
options at the valuation date. The expected life of the stock options has been estimated using the plain vanilla method.
The Company has recognized the following amounts
as stock option expense for the periods noted:
|
|
Three months ended
September 30,
|
|
|
|
2019
$
|
|
|
2018
$
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
8,153
|
|
|
|
28,450
|
|
General and administrative
|
|
|
42,832
|
|
|
|
104,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,985
|
|
|
|
132,902
|
|
All of the stock option expense for the periods ended
September 30, 2019 and 2018 has been recognized as additional paid in capital. The aggregate intrinsic value of stock options
outstanding at September 30, 2019 was $0 (2018 - $1,499) and the aggregate intrinsic value of stock options exercisable at September
30, 2019 was also $0 (2018 - $0). As of September 30, 2019, there was $352,104 in unrecognized compensation expense that will
be recognized over the next 2.93 years. No stock options granted under the Company’s equity plans have been exercised to
September 30, 2019. Upon the exercise of stock options new shares will be issued.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
Warrants
Certain of the Company’s warrants have been
recognized as a derivative liability (note 4). The following table summarizes changes in the Company’s outstanding warrants
as of September 30, 2019:
Description
|
|
Number
|
|
|
|
|
|
Balance – June 30, 2019
|
|
|
1,543,596
|
|
|
|
|
|
|
2020 Investor Warrants issued in underwritten offering
|
|
|
7,762,500
|
|
PFW issued in underwritten offering
|
|
|
2,655,000
|
|
2020 Underwriter Warrants issued in underwritten offering
|
|
|
377,500
|
|
Exercise of PFW
|
|
|
(2,655,000
|
)
|
|
|
|
|
|
Balance - September 30, 2019
|
|
|
9,683,596
|
|
The following table summarizes the Company’s
outstanding warrants as of September 30, 2019:
Description
|
|
Number
|
|
|
Exercise
price $
|
|
|
Expiry date
|
|
|
|
|
|
|
|
|
|
2020 Investor
|
|
|
7,762,500
|
|
|
|
1.00
|
|
|
August 16, 2024
|
2019 Investor
|
|
|
760,500
|
|
|
|
3.10
|
|
|
June 5, 2024
|
2018 Investor
|
|
|
280,000
|
|
|
|
12.50
|
|
|
September 22, 2022
|
2017 Investor
|
|
|
207,721
|
|
|
|
35.00
|
|
|
April 19, 2022
|
2015 Investor
|
|
|
97,905
|
|
|
|
30.00
|
|
|
July 31, 2020
|
Issued for services
|
|
|
26,500
|
|
|
|
30.00
|
|
|
July 1, 2020 to February 1, 2021
|
Issued for services
|
|
|
6,000
|
|
|
|
17.80
|
|
|
January 25, 2023
|
Issued for services
|
|
|
33,600
|
|
|
|
11.70
|
|
|
February 27, 2023
|
Issued for services
|
|
|
12,000
|
|
|
|
9.00
|
|
|
September 15, 2023
|
Issued for services
|
|
|
4,140
|
|
|
|
59.30
|
|
|
February 27, 2020
|
Issued for services
|
|
|
2,000
|
|
|
|
9.00
|
|
|
October 11, 2021
|
2020 Underwriter
|
|
|
377,500
|
|
|
|
1.15
|
|
|
August 14, 2022
|
2019 Agent
|
|
|
46,800
|
|
|
|
3.875
|
|
|
June 3, 2024
|
2018 Agent
|
|
|
40,000
|
|
|
|
12.50
|
|
|
September 20, 2022
|
2017 Agent
|
|
|
13,848
|
|
|
|
40.60
|
|
|
April 12, 2022
|
2016 Agent
|
|
|
10,402
|
|
|
|
40.00
|
|
|
May 12, 2021
|
2015 Agent
|
|
|
2,180
|
|
|
|
30.00
|
|
|
July 15, 2020
|
|
|
|
9,683,596
|
|
|
|
|
|
|
|
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
The Company has financial instruments that are measured
at fair value. To determine the fair value, we use the fair value hierarchy for inputs used in measuring fair value that maximizes
the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used
when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed based
on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market
participants would use to value an asset or liability. The three levels of inputs that may be used to measure fair value are as
follows:
|
●
|
Level one -
inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities;
|
|
●
|
Level two -
inputs are inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly such as interest rates, foreign
exchange rates, and yield curves that are observable at commonly quoted intervals; and
|
|
●
|
Level three -
unobservable inputs developed using estimates and assumptions, which are developed by
the reporting entity and reflect those assumptions that a market participant would use.
|
Assets and liabilities are classified based on the
lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may
result in a reclassification of levels for certain securities within the fair value hierarchy.
The Company’s financial instruments consist
of cash and cash equivalents, other receivables, accounts payable, related party payables and derivative liability. The carrying
values of cash and cash equivalents, other receivables, accounts payable and related party payables approximate their fair values
due to the immediate or short-term maturity of these financial instruments.
Derivative liability
The Company accounts for certain warrants under the
authoritative guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a company’s
own stock, on the understanding that in compliance with applicable securities laws, the warrants require the issuance of securities
upon exercise and do not sufficiently preclude an implied right to net cash settlement. The Company classifies these warrants
on its balance sheet as a derivative liability which is fair valued at each reporting period subsequent to the initial issuance.
The Company has used a Black-Scholes Option Pricing Model (based on a closed-form model that uses a fixed equation) to estimate
the fair value of the warrants which is equivalent to the fair value of the warrants calculated using the Binomial-Lattice Pricing
Model. Determining the appropriate fair-value model and calculating the fair value of warrants requires considerable judgment.
Any change in the estimates (specifically probabilities and volatility) used may cause the value to be higher or lower than that
reported. The estimated volatility of the Company’s common stock at the date of issuance, and at each subsequent reporting
period, is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government
for bonds with a maturity similar to the expected remaining life of the warrants at the valuation date. The expected life of the
warrants is assumed to be equivalent to their remaining contractual term.
DelMar Pharmaceuticals, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
(expressed in US dollars unless otherwise noted)
|
a)
|
Fair value of derivative liability
|
The derivative is not traded in an active market
and the fair value is determined using valuation techniques. The Company uses judgment to select a variety of methods to make
assumptions that are based on specific management plans and market conditions at the end of each reporting period. The Company
uses a fair value estimate to determine the fair value of the derivative liability. The carrying value of the derivative liability
would be higher, or lower, as management estimates around specific probabilities change. The estimates may be significantly different
from those amounts ultimately recorded in the consolidated financial statements because of the use of judgment and the inherent
uncertainty in estimating the fair value of these instruments that are not quoted in an active market. All changes in the fair
value are recorded in the consolidated statement of operations and comprehensive loss each reporting period. This is considered
to be a Level 3 financial instrument as volatility is considered a Level 3 input.
The fair value of derivative liabilities at September
30, 2019 and June 30, 2019 was $0.
|
7
|
Supplementary statement of cash flows
information
|
|
|
Three months ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Series B Preferred share common stock dividend (note 5)
|
|
|
2,046
|
|
|
|
36,085
|
|
Income taxes paid
|
|
|
-
|
|
|
|
-
|
|
Interest paid
|
|
|
-
|
|
|
|
-
|
|
The Company has evaluated its
subsequent events from September 30, 2019 through the date these condensed consolidated financial statements were issued and has
determined that there are no subsequent events requiring disclosure in these condensed consolidated financial statements other
than the items noted below.
Subsequent to September 30, 2019,
the Company issued 1,280 shares of common stock for services. In addition, 1,250 stock options at an exercise price of $40.00 expired
unexercised on October 1, 2019. The Company also granted 250,000 stock options to an officer of the Company, subject to stockholder
approval of the share increase to the 2017 Plan. The options have an exercise price of $0.735 and expire November 12, 2029. The
options vest upon the achievement of certain clinical development milestones.