What changed in this filing

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Item 1. Financial Statements

2021-02-12 compared with 2020-11-12 · 174 added, 109 removed, 418 unchanged (40% of the section changed)

2 unchanged sentences

Condensed Consolidated Interim Financial Statements

For the three months ended September 30, 2020

For the six months ended December 31, 2020

(expressed in US dollars unless otherwise noted)

Kintara Therapeutics, Inc.

Condensed Consolidated Interim Balance Sheets

Condensed Consolidated Interim Balance Sheet

(In thousands, except par value amounts)

September 30,

Current assets

3 unchanged sentences

Deferred loan costs

Clinical trial deposit

Intangible assets - net

11 unchanged sentences

Issued and outstanding

279 Series A shares at September 30, 2020

279 Series A shares at December 31, 2020

(June 30, 2020 – 279)

649 Series B shares at September 30, 2020

610 Series B shares at December 31, 2020

(June 30, 2020 – 649)

25 Series C shares at September 30, 2020

24 Series C shares at December 31, 2020

(June 30, 2020 – 0)

95,000 shares at September 30, 2020 and June 30, 2020,

95,000 shares at December 31, 2020 and June 30, 2020,

$0.001 par value

24,466 issued at September 30, 2020 (June 30, 2020 –

25,868 issued at December 31, 2020 (June 30, 2020 –

Additional paid-in capital

3 unchanged sentences

Total liabilities and stockholders’ equity

Nature of operations, corporate history, and liquidity risk and management plans (note 1)

Nature of operations, corporate history, going concern

and management plans (note 1)

Subsequent events (note 10)

4 unchanged sentences

Three months ended

September 30,

Six months ended

Research and development

19 unchanged sentences

(In thousands)

For the three months ended September 30, 2020 and 2019

For the three and six months ended December 31, 2020

comprehensive

13 unchanged sentences

Balance - September 30, 2020

Series C Preferred stock share issuance costs

Conversion of Series B Preferred stock

to common stock

Conversion of Series C Preferred stock

to common stock

Exercise of warrants for cash

Warrants issued for services

Exercise of stock options for cash

Stock option expense

Series A Preferred cash dividend

Series B Preferred stock dividend

Loss for the period

Balance - December 31, 2020

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Kintara Therapeutics, Inc.

Condensed Consolidated Interim Statements of Stockholders’ Equity

(In thousands)

For the three and six months ended December 31, 2019

comprehensive

Stockholders'

Balance - June 30, 2019

9 unchanged sentences

Balance - September 30, 2019

Warrants issued for services

Shares issued for services

Stock option expense

Series A Preferred cash dividend

Series B Preferred stock dividend

Loss for the period

Balance - December 31, 2019

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

2 unchanged sentences

(In thousands)

Three months ended

September 30,

Six months ended

Cash flows from operating activities

3 unchanged sentences

In-process research and development

Change in fair value of milestone liability

Amortization of deferred loan costs

11 unchanged sentences

Cash acquired on merger with Adgero

Proceeds on sale of equipment

Net cash provided by investing activities

2 unchanged sentences

Warrants exercised for cash

Stock options exercised for cash

Proceeds from loan

8 unchanged sentences

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2020

December 31, 2020

(expressed in US dollars unless otherwise noted)

Nature of operations, corporate history, and liquidity risk and management plans

Nature of operations, corporate history, and going concern and management plans

Nature of operations

25 unchanged sentences

References to the Company refer to the Company and its wholly-owned subsidiaries.

Liquidity risk and management plans

During the three months ended September 30, 2020, the Company reported a net loss of $19.5 million.

As of September 30, 2020, the Company had $22.6 million of cash and cash equivalents and used $4.1 million of cash in its operating activities during the three months ended September 30, 2020.

Going concern and management plans

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 six months ended December 31, 2020, the Company reported a loss of $24.9 million, and a negative cash flow from operations of $9.5 million.

The Company had an accumulated deficit of $97.8 million and had cash and cash equivalents of $17.2 million as of December 31, 2020.

The Company is in the clinical 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 candidates are commercialized, or partnered, which may not ever occur.

In the future, the Company will require additional funding to maintain its clinical trials, research and development projects, and for general operations.

The Company may tailor its drug development programs based on the amount of funding the Company is able to raise in the future.

During the three months ended September 30, 2020, the Company completed a private placement in three closings for aggregate net proceeds of approximately $21.6 million (note 6).

The Company believes that based on its current estimates, the cash and cash equivalents at September 30, 2020 of $22.6 million, as well as cash from the proceeds from stock purchase warrants exercised subsequent to September 30, 2020, will be sufficient to fund its planned operations for at least

the next twelve months from the date these condensed consolidated interim financial statements are issued.

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 interim financial statements.

Consequently, management is pursuing various financing alternatives to fund the Company’s operations so it can continue as a going concern.

However, the coronavirus (“COVID-19”) pandemic has created significant economic uncertainty and volatility in the credit and capital markets.

The ultimate impact of the COVID-19 pandemic on the Company’s ability to raise additional capital in the future is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and any new information which may emerge concerning the severity of the COVID-19 pandemic.

Management plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership arrangements but the ultimate impact of the COVID-19 pandemic on the Company’s ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and any new information which may emerge concerning the severity of the COVID-19 pandemic.

The Company may not be able to raise sufficient additional capital and 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.

Significant accounting policies

13 unchanged sentences

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, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2021, or for any other future annual or interim period.

The results for three and six-months ended December 31, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2021, or for any other future annual or interim period.

Use of estimates

5 unchanged sentences

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, 2020 and 2019 diluted loss per share does not differ from basic loss per share since the effect of the Company’s warrants, stock options, and convertible preferred shares is anti-dilutive.

As of September 30, 2020, potential common shares of 11,858,152 (2019 – 9,683,596) related to outstanding common share warrants, 2,152,701 (2019 – nil) related to outstanding Series C preferred stock warrants, 6,543,569 (2019 – 780,000) related to stock options, 162,177 (2019 – 162,177) relating to outstanding Series B convertible preferred shares, and 21,516,484 (2019 – nil) relating to outstanding Series C convertible preferred shares were excluded from the calculation of net loss per common share.

For the three and six-month periods ended December 31, 2020 and 2019 diluted loss per share does not differ from basic loss per share since the effect of the Company’s warrants, stock options, and convertible preferred shares is anti-dilutive.

As of December 31, 2020, potential common shares of 11,709,568 (2019 – 9,963,596) related to outstanding common share warrants, 2,152,701 (2019 – nil) related to outstanding Series C preferred stock warrants, 6,486,709 (2019 – 778,750) related to stock options, 152,580 (2019 – 162,177) relating

to outstanding Series B convertible preferred shares , and 2 0,348,764 (2019 – nil ) relating to outstanding Series C convertible preferred shares were excluded from the calculation of net loss per common share.

Acquired in-process research and development expense

The Company acquired in-process research and development assets in connection with its Merger with Adgero.

As the acquired in-process research and development assets were deemed to have no current or alternative future use, an expense of $16.1 million was recognized in the condensed consolidated interim statements of operations for the three month period ended September 30, 2020.

Property and equipment

13 unchanged sentences

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, 2020, other than ASU 2020-06 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.

ASU 2020-10 — Codification Improvements

The amendments in this update remove references to various FASB Concepts Statements, situates all disclosure guidance in the appropriate disclosure section of the Codification, and makes other improvements and technical corrections to the Codification.

The amendments in Sections B and C of this amendment are effective for annual periods beginning after December 15, 2020, for public business entities.

For all other entities, the amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022.

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 six-months ended December 31, 2020, other than ASUs 2020-06 and 2020-10, 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.

As described in Note 1, on August 19, 2020, the Company completed its Merger with Adgero in accordance with the terms of the Merger Agreement.

11 unchanged sentences

Also, in conjunction with the Merger, the Company issued 571,951 shares of common stock to the placement agent as a success fee.

The common shares issued to the former Adgero stockholders as well as the success fee shares, have been value at $1.34 per share which was the closing price of the Company’s common stock on August 19, 2020, the date the Merger closed.

The shares of common stock issued to the former Adgero stockholders as well as the success fee shares, have been value at $1.34 per share which was the closing price of the Company’s common stock on August 19, 2020, the date the Merger closed.

The Company incurred approximately $1.55 million of legal, consulting and other professional fees related to the Merger, of which approximately $1.1 million had been incurred in the year ended June 30, 2020.

10 unchanged sentences

In-process research and development

The fair value of the IPR&D assets has been expensed as a charge in the condensed consolidated interim statements of operations for the six months ended December 31, 2020 as there is no alternative use for these assets.

Property and equipment include office furniture that was subsequently sold and laboratory equipment that has not yet been put into use.

15 unchanged sentences

The term is based on an estimate of the planned timing of completion of the respective milestones that would result in payment of the milestones.

The fair value of the IPR&D assets is expensed as a charge in the condensed consolidated interim statements of operations for the three months ended September 30, 2020 as there is no alternative use for these assets.

As at December 31, 2020, the Company has reviewed its estimates with respect to the planned timing of completion of the respective milestones and adjusted the liability accordingly.

(in thousands)

Balance – June 30, 2020

Change in fair value estimate

Balance – December 31, 2020

Clinical trial deposit

In October 2020, the Company announced that it had entered into a final agreement with a contract research organization (“CRO”) for the management of the Company’s registration study for glioblastoma multiforme.

Under the agreement, the Company will supply the drug for the study and the CRO will manage all operational aspects of the study including site activation and patient enrollment.

The Company is required to make certain payments under the agreement related to patient enrollment milestones.

For the three and six months ended December 31, 2020, the Company has recognized $750,000 and $1.25 million, respectively, of expenses for this study in relation to study startup and preparation for patient enrollment.

In relation to this study, the Company has made a deposit payment of $2.6 million to the CRO in relation to the commencement of recruitment of patients.

It is anticipated that the deposit will be applied to future invoices, or refunded to the Company, beyond twelve months from December 31, 2020.

The Company can terminate the study at any time.

Upon termination, the Company will be liable for any payments due to the effective date of the termination as well as any non-refundable costs incurred by the CRO prior to the date of termination.

Related party transactions

3 unchanged sentences

The Company now owns all rights and title to VAL-083 and is responsible for the drug’s further development and commercialization.

In accordance with the terms of the Valent Assignment Agreement, Valent is entitled to receive a future royalty on

all revenues derived from the development and commercialization of VAL-083.

In the event that the Company terminates the agreement, the Company may be entitled to recei ve royalties from Valent’s subsequent development of VAL-083 depending on the development milestones the Company has achieved prior to the termination of the Valent Assignment Agreement.

In accordance with the terms of the Valent Assignment Agreement, Valent is entitled to receive a future royalty on all revenues derived from the development and commercialization of VAL-083.

In the event that the Company terminates the agreement, the Company may be entitled to receive royalties from Valent’s subsequent development of VAL-083 depending on the development milestones the Company has achieved prior to the termination of the Valent Assignment Agreement.

On September 30, 2014, the Company entered into an exchange agreement (the “Valent Exchange Agreement”) with Valent and Del Mar (BC).

2 unchanged sentences

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.

For the three months ended September 30, 2020 and 2019 respectively, the Company recorded $2,089 related to the dividend paid to Valent.

For the three-months ended December 31, 2020 and 2019 respectively, the Company recorded $2,089 related to the dividend paid to Valent while for the six-months ended December 31, 2020 and 2019 respectively, the Company recorded $4,178 related to the dividend.

The dividends have been recorded as a direct increase in accumulated deficit.

Related party payables

At September 30, 2020 there is an aggregate amount of $382,004 (June 30, 2020 - $663,865) payable to the Company’s officers and directors for fees, expenses, and accrued liabilities.

At December 31, 2020 there is an aggregate amount of $289,397 (June 30, 2020 - $663,865) payable to the Company’s officers and directors for fees, expenses, and accrued liabilities.

Loan from National Brain Tumor Society and National Foundation for Cancer Research

4 unchanged sentences

Amortization of deferred financing costs

Balance – September 30, 2020

During the period ended September 30, 2020, the Company received a loan of $500,000 from National Brain Tumor Society (“NBTS”) and the National Foundation for Cancer Research to support VAL-083's preparation for participation in the Global Coalition for Adaptive Research's (“GCAR”) sponsored trial, Glioblastoma (“GBM”) Adaptive Global Innovative Learning Environment (“GBM AGILE”) study (the “NBTS Loan”).

Balance – December 31, 2020

During the six-months ended December 31, 2020, the Company received a loan of $500,000 from National Brain Tumor Society (“NBTS”) and the National Foundation for Cancer Research to support VAL-083's preparation for participation in the Global Coalition for Adaptive Research's (“GCAR”) sponsored trial, Glioblastoma (“GBM”) Adaptive Global Innovative Learning Environment (“GBM AGILE”) study (the “NBTS Loan”).

In relation to the NBTS Loan, the Company issued 125,000 share purchase warrants which are exercisable at a price of $1.09 per common share until June 19, 2025 and had been included in deferred financing costs as at June 30, 2020 (“NBTS Warrants”).

10 unchanged sentences

Balance – June 30, 2020

Balance – September 30, 2020

Conversion of Series C Preferred stock to common

Balance – December 31, 2020

In connection with the Merger (note 3), the Company issued 25,028 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) in three separate closings of a private placement (Series C-1, C-2, and C-3) in August, 2020.

Each share of Series C Preferred Stock was issued at a purchase price of $1,000 per share and is convertible into shares of c ommon s tock based on the respective conversion price s which w ere determined at the closing of each round of the private placemen t.

Subject to ownership limitations, t he owners of the Series C Preferred Stock are entitled to receive dividends, payable in shares of c ommon s tock at a rate of 10%, 15%, 20% and 25% of the number of shares of c ommon s tock issuable upon conversion of the Series C Preferred Stock, on the 12 th , 24 th , 36 th and 48 th month, anniversary of the initial closing of the private placement which occurred on August 19, 2020.

The Series C Preferred S tock dividends do not require declaration by the Board of Directors and are accrued annually as of the date the dividend is earned in an amount equal to the applicable rate of the stated value.

Any outstanding shares of Series C Preferred Stock will automatically convert to shares of c ommon stock on August 19, 2024.

Each share of Series C Preferred Stock was issued at a purchase price of $1,000 per share and is convertible into shares of common stock based on the respective conversion prices which were determined at the closing of each round of the private placement.

Subject to ownership limitations, the owners of the Series C Preferred Stock are entitled to receive dividends, payable in shares of common stock at a rate of 10%, 15%, 20% and 25% of the number of shares of common stock issuable upon conversion of the Series C Preferred Stock, on the 12 th , 24 th , 36 th and 48 th month, anniversary of the initial closing of the private placement which occurred on August 19, 2020.

The Series C Preferred Stock dividends do not require declaration by the Board of Directors and are accrued annually as of the date the dividend is earned in an amount equal to the applicable rate of the stated value.

Any outstanding shares of Series C Preferred Stock will automatically convert to shares of common stock on August 19, 2024.

The conversion prices for the Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series C-3 Preferred Stock are $1.16, $1.214 and $1.15, respectively.

Based on the conversion prices of the three respective classes of the Series C Preferred Stock, the 25,028 shares of Series C Preferred Stock will be convertible into an aggregate of 21,516,484 shares of common stock.

The cumulative dividends to be issued on the 12 th , 24 th , 36 th and 48 th month anniversary of the initial closing of the private placement are 15,061,952.

Based on the conversion prices of the three respective classes of the Series C Preferred Stock, the originally issued 25,028 shares of Series C Preferred Stock were convertible into an aggregate of 21,516,484 shares of common stock.

The cumulative dividends to be issued on the 12 th , 24 th , 36 th and 48 th month anniversary of the initial closing of the private placement for the initially issued 25,028 shares of Series C Preferred Stock were 15,061,952 shares of common stock.

The conversion feature of the Series C Convertible Preferred Stock at the time of issuance was determined to be beneficial on the commitment date.

Because the Series C Convertible Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from inception, the Company immediately recorded a non-cash deemed dividend of $3.18 million related to the beneficial conversion feature arising from the issuance of Series C Convertible Preferred Stock.

related to the beneficial conversion feature arising from the issuance of Series C Convertible Preferred Stock.

This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders and net loss per share.

1 unchanged sentence

The Series C Preferred Stock shall be pari passu in liquidation to the Company’s Series A and Series B Preferred Stock.

The liquidation value of the Series C Preferred Stock at September 30, 2020 is the stated value of $25,028,000.

Total gross proceeds from the private placement were $25 million, or $21.6 million in net proceeds after deducting financing costs of $3.4 million with respect to agent commissions and expenses, as well as legal and accounting fees.

The liquidation value of the Series C Preferred Stock at December 31, 2020 is the stated value of $23,670,000.

Total gross proceeds from the private placement were $25 million, or approximately $21.6 million in net proceeds after deducting financing costs of $3.4 million with respect to agent commissions and expenses, as well as legal and accounting fees.

Of the total financing costs, $84,944 was deferred as of June 30, 2020.

In addition, the Company issued warrants to purchase 2,504 shares of Series C Stock to the placement agent (“2020 Agent Warrants”) that are convertible into an aggregate 2,152,701 shares of common stock.

A total of 25,028 (June 30, 2020 – Nil) shares of Series C Preferred Stock are outstanding as of September 30, 2020, such that a total of 21,516,484 (June 30, 2020 – Nil) shares of common stock are issuable upon conversion of the Series C Preferred Stock as at September 30, 2020.

In addition, the Company issued warrants to purchase 2,504 shares of Series C Stock to the placement agent (“Series C Agent Warrants”) that are convertible into an aggregate 2,152,701 shares of common stock.

A total of 23,670 (June 30, 2020 – Nil) shares of Series C Preferred Stock are outstanding as of December 31, 2020, such that a total of 20,348,764 (June 30, 2020 – Nil) shares of common stock are issuable upon conversion of the Series C Preferred Stock as at December 31, 2020.

Converted shares are rounded up to the nearest whole share.

Series B Preferred Stock

(in thousands)

Balance – June 30, 2020

Conversion of Series B Preferred stock to common

Balance – December 31, 2020

During the year ended June 30, 2016, the Company issued an aggregate of 902,238 shares of Series B Preferred Stock at a purchase price of $8.00 per share.

Each share of Series B Preferred Stock is convertible into 0.25 shares of common stock equating to a conversion price of $32.00 (the “Conversion Price”) and will automatically convert to common stock at the earlier of 24 hours following regulatory approval of VAL-083 with a minimum closing bid price of $80.00, or five years from the respective final closing dates.

Therefore, all of the Series B Preferred stock will convert to common stock on April 29, 2021.

The holders of the Series B Preferred Stock are entitled to an annual cumulative, in arrears, dividend at the rate of 9% payable quarterly.

5 unchanged sentences

The Series B Preferred Stock shall be pari passu in liquidation to the Company’s Series A and Series C Preferred Stock.

The liquidation value of the Series B Preferred Stock at September 30, 2020 is the stated value of $5.2 million (June 30, 2020 - $5.2 million).

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 t he Company or sold pursuant to a licensing or partnering arrangement (the “Royalty Agreement”).

The liquidation value of the Series B Preferred Stock at December 31, 2020 is the stated value of $4.9 million (June 30, 2020 - $5.2 million).

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, 2020, the Company issued 3,700 (2019 – 3,700) shares of common stock and recognized $5,180 (2019 – $2,046) as a direct increase in accumulated deficit.

During the three months ended September 30, 2020 there were no conversions (2019 - 25,000) of Series B Preferred Stock for nil (2019 – 6,250) shares of common stock.

A total of 648,613 (June 30, 2020 – 648,613) shares of Series B Preferred Stock are outstanding as of September 30, 2020, such that a total of 162,177 (June 30, 2020 – 162,177) shares of common stock are issuable upon conversion of the Series B Preferred Stock as at September 30, 2020.

Pursuant to the Series B Preferred Stock dividend, during the three-months ended December 31, 2020, the Company issued 3,479 (2019 – 3,700) shares of common stock and recognized $4,453 (2019 – $2,552) and during the six-months ended December 31,

2020, the Company issued 7,179 (2019 – 7,400 ) shares of common stock and recognized $ 9,633 (2019 – $ 4,598 ).

These dividends have been recognized as a direct increase in accumulated deficit.

A total of 610,238 (June 30, 2020 – 648,613) shares of Series B Preferred Stock are outstanding as of December 31, 2020, such that a total of 152,580 (June 30, 2020 – 162,177) shares of common stock are issuable upon conversion of the Series B Preferred Stock as at December 31, 2020.

Converted shares are rounded up to the nearest whole share.

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The Series A Preferred Stock shall be pari passu in liquidation to the Company’s Series B and Series C Preferred Stock.

The liquidation value of the Series A Preferred stock at September 30, 2020 and June 30, 2020 was $278,530.

There was no change to the Series A Preferred stock for the three months ended September 30, 2020 or 2019.

The liquidation value of the Series A Preferred stock at December 31, 2020 and June 30, 2020 was $278,530.

There was no change to the Series A Preferred stock for the three or six-months ended December 31, 2020 or 2019.

Stock Issuances

Three months ended September 30, 2019

Six months ended December 31, 2019

Underwritten public offering

3 unchanged sentences

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

The Company also issued 377,500 warrants to the underwriters of the Offering.

The underwriter warrants are exercisable at $1.15 per share commencing February 10, 2020 until their expiry on August 14, 2022.

During the 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.

During the six months ended December 31, 2019, all of the 2,655,000 PFW were exercised at $0.01 per PFW for proceeds of $26,550.

Shares issued for services

During the three months ended September 30, 2020, the Company issued Nil (2019 – 6,925) shares of common stock for services resulting in the recognition of $Nil (2019 – $4,843) in expense.

All of the shares issued for services for the three months ended September 30, 2019 have been recognized as research and development expense.

During the six months ended December 31, 2020, the Company issued $nil (2019 – 11,672) shares of common stock for services resulting in the recognition of $nil (2019 – $8,187) in expense.

All of the shares issued for services for the three and six-months ended December 31, 2019 have been recognized as research and development expense.

2017 Omnibus Incentive Plan

The Company’s Board of Directors has approved adoption of the Company’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”) that has also been approved by the Company’s stockholders.

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.

In addition, the Board of Directors 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, 6,700,000 shares of Company common stock are currently reserved for issuance, less the number of shares of common stock issued under the Del Mar (BC) 2013 Amended and Restated Stock Option Plan (the “Legacy Plan”) or that are subject to grants of stock options made, or that may be made, under the Legacy Plan.

As of September 30, 2020, a total of 164,235 shares of common stock are currently outstanding under the Legacy Plan and/or are subject to outstanding stock options granted under the Legacy Plan, and a total of 6,379,334 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 156,431 shares of common stock available at September 30, 2020 for issuance under the 2017 Plan if all such options under the Legacy Plan were exercised.

As of December 31, 2020, a total of 142,375 shares of common stock are outstanding under the Legacy Plan and/or are subject to outstanding stock options granted under the Legacy Plan, and a total of 6,344,334 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 178,291 (after deducting accumulated stock option exercises of 35,000) shares of common stock available at December 31, 2020 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, 2020, a total of 222,584 stock options issued to directors of the Company were amended such that the period to exercise vested stock options from the date of termination of continuous service with the Company was extended from 90 days to one year.

No award will be granted under the 2017 Plan on, or after, July 7, 2027.

During the six-months ended December 31, 2020, a total of 222,584 stock options issued to directors of the Company were amended such that the period to exercise vested stock options from the date of termination of continuous service with the Company was extended from 90 days to one year.

Of the total of 222,584, 66,850 had their expiry increased from September 26, 2020 to June 26, 2021 and 155,734 had their expiry increased from November 19, 2020 to August 19, 2021.

2 unchanged sentences

A total compensation expense of $319,376 will be recognized over the amended vesting period for the 250,000 stock options.

During the three months ended September 30, 2020, a total of 4,758,687 stock options were granted to executive officers and directors of the Company.

Also, during the six months ended December 31, 2020, the Board of Directors approved the acceleration of vesting of 279,675 stock options to purchase shares of the Company’s common stock previously granted on September 5, 2019 to an executive officer of the Company resulting in accelerated expense of $53,455.

The exercise price of the stock options is $0.61 per share.

During the six-months ended December 31, 2020, a total of 4,758,687 stock options were granted to executive officers and directors of the Company.

Of these, 4,698,687 have an exercise price of $1.70 per share and 60,000 have an exercise price of $1.355 per share.

7 unchanged sentences

Balance – June 30, 2020

Balance – September 30, 2020

The following table summarizes stock options outstanding and exercisable under all plans at September 30, 2020:

Balance – December 31, 2020

The following table summarizes stock options outstanding and exercisable under all plans at December 31, 2020:

Exercise price

Outstanding at

September 30, 2020

December 31, 2020

(in thousands)

2 unchanged sentences

exercisable at

September 30, 2020

December 31, 2020

(in thousands)

1 unchanged sentence

The exercise price of these options shown in the above table have been converted to US$15.70 using the period ending closing exchange rate.

Stock options granted during the three months ended September 30, 2020 have been valued using a Black-Scholes pricing model with the following assumptions:

September 30,

Stock options granted during the six months ended December 31, 2020 have been valued using a Black-Scholes pricing model with the following assumptions:

Dividend rate

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Three months ended

September 30,

Six months ended

Research and development

General and administrative

All of the stock option expense for the periods ended September 30, 2020 and 2019 has been recognized as additional paid in capital.

The aggregate intrinsic value of stock options outstanding at September 30, 2020 was $977,465 (2019 - $0) and the aggregate

intrinsic value of stock options exercisable at September 30, 2020 was $ 446,950 ( 2019 - $ 0 ).

As of September 30, 2020, there was $ 7,802,208 in unrecognized compensation expense that will be reco gnized over the next 3.0 years.

No stock options granted under the Company’s equity plans have been exercised during the three months ended September 30, 2020.

Upon the exercise of stock options new shares will be issued.

All of the stock option expense for the periods ended December 31, 2020 and 2019 has been recognized as additional paid in capital.

The aggregate intrinsic value of stock options outstanding at December 31, 2020 was $789,343 (2019 - $39,198) and the aggregate intrinsic value of stock options exercisable at December 31, 2020 was $571,657 (2019 - $7,472).

As of December 31, 2020, there was $5.7 million in unrecognized compensation expense that will be recognized over the next 2.75 years.

The following table sets forth changes in unvested stock options under all plans:

1 unchanged sentence

Unvested at June 30, 2020

Unvested at September 30, 2020

The aggregate intrinsic value of unvested stock options at September 30, 2020 was $530,516 (2019 - $0).

Unvested at December 31, 2020

The aggregate intrinsic value of unvested stock options at December 31, 2020 was $217,686 (2019 - $31,726).

The unvested stock options have a remaining weighted average contractual term of 9.64 (2019 – 9.52) years.

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Expiry of warrants (iii)

Balance – September 30, 2020

Balance – December 31, 2020

A total of 1,179,707 2020 Investor Warrants were exercised at $1.00 per share.

2 unchanged sentences

All of the expired warrants were exercisable at $30 per share.

The following table summarizes the Company’s outstanding common stock warrants as of September 30, 2020:

The following table summarizes the Company’s outstanding common stock warrants as of December 3 1 , 2020:

Description of warrants

10 unchanged sentences

Warrants issued for services

December 1, 2020 to

February 1, 2021

11 unchanged sentences

September 22, 2023

Warrants issued for services

November 13, 2023

2020 Underwriter Warrants

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Series C Preferred Stock Warrants

In connection with the Series C Preferred Stock private placement, the Company issued 2,504 Series C Stock purchase warrants (the “Series C Warrants”).

The Series C Warrants have an exercise price of $1,000 per share, provide for a cashless exercise feature, and are exercisable for a period of four years from August 19, 2020.

The Series C Preferred Stock issuable upon exercise of the Series C Warrants is convertible into shares of common stock in the same manner as each respective series of outstanding Series C Stock, and will be entitled to the same dividend rights as each respective series.

The 2020 Agent Warrants were valued at a total of approximately $3.3 million using a binomial pricing model with a risk-free interest rate of 0.27%, a term of 4.0 years, and a volatility of 95.2% to 95.8%.

In connection with the Series C Preferred Stock private placement, the Company issued 2,504 Series C Agent Warrants.

The Series C Agent Warrants have an exercise price of $1,000 per share, provide for a cashless exercise feature, and are exercisable for a period of four years from August 19, 2020.

The Series C Preferred Stock issuable upon exercise of the Series C Agent Warrants is convertible into shares of common stock in the same manner as each respective underlying series of outstanding Series C Preferred Stock, and will be entitled to the same dividend rights as each respective series.

The Series C Agent Warrants were valued at a total of approximately $3.3 million using a binomial pricing model with a risk-free interest rate of 0.27%, a term of 4.0 years, and a volatility of 95.2% to 95.8%.

The estimated volatility of the Company’s common stock at the date of measurement is based on the historical volatility of the Company’s common stock.

1 unchanged sentence

The expected term has been estimated using the contractual term of the warrant.

The following table sets forth changes in outstanding Series C Warrants:

The following table sets forth changes in outstanding Series C Agent Warrants:

Balance – June 30, 2020

Issuance of Preferred Series C-1 Warrants

Issuance of Preferred Series C-2 Warrants

Issuance of Preferred Series C-3 Warrants

Balance – September 30, 2020

The following table summarizes the Company’s outstanding Series C Warrants as of September 30, 2020:

Description of warrants

Issuance of Preferred Series C-1 Agent Warrants

Issuance of Preferred Series C-2 Agent Warrants

Issuance of Preferred Series C-3 Agent Warrants

Balance – December 31, 2020

The following table summarizes the Company’s outstanding Series C Agent Warrants as of December 31, 2020:

Series C Agent Warrants

Supplementary statement of cash flows information

The Company incurred the following non-cash investing and financing transactions (in thousands):

September 30,

Series B Preferred Stock common stock dividend

15 unchanged sentences

Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

As at December 31, 2020, the Company’s milestone payment liability was measured using level 3 inputs (note 3).

December 31, 2020

Milestone payment liability

The Company’s financial instruments consist of cash and cash equivalents, other receivables, accounts payable, related party payables and loan payable.

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.

The fair value of the loan payable is equal to its principal and accrued interest of $508,466 as at September 30, 2020.

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.

The fair value of the loan payable is equal to its principal and accrued interest of $ 5 1 6 ,027 as at December 3 1 , 2020 .

Subsequent events

Warrant exercises

Subsequent to September 30, 2020, 161,084 warrants were exercised at $1.00 per share for gross proceeds of $161,084.

Stock option exercises

Subsequent to September 30, 2020, 35,000 stock options were exercised at $0.61 per share for gross proceeds of $21,350.

Stock option amendments

On November 11, 2020, the Board of Directors approved the acceleration of vesting of 279,675 stock options to purchase shares of the Company’s common stock previously granted on September 5, 2019 to an executive officer of the Company.

The exercise price of the stock options is $0.61 per share

The Company has evaluated its subsequent events from September 30, 2020 through the date these condensed consolidated interim financial statements were issued and has determined that there are no subsequent events requiring disclosure in these condensed consolidated interim financial statements other than the items noted below.

Subsequent to December 31, 2020, 2,276,814 stock purchase warrants were exercised at $1.00 per share for gross cash proceeds of $2,276,814.

In addition, 471,283 warrants were exercised on a cashless basis for 257,979 shares of common stock.

The Company also issued 100,000 stock purchase warrants for services at an exercise price of $1.47 per share and 12,500 warrants issued for services at an exercise price of $30.00 per share expired.

Series C Preferred Stock

Subsequent to December 31, 2020, 1,515 shares of Series C-1 Preferred Stock were converted into 1,306,041 shares of common stock, 912 shares of Series C-2 Preferred Stock were converted into 751,239 shares of common stock, and 150 shares of Series C-3 Preferred Stock were converted into 130,436 shares of common stock.

Series B Preferred Stock

Subsequent to December 31, 2020, 6,250 shares of Series B Preferred Stock were converted into 1,563 shares of common stock.

Stock options

Subsequent to December 31, 2020, 33,750 stock options were exercised at $0.61 per share for gross proceeds of $20,588.

The Company has evaluated its subsequent events from December 31, 2020 through the date these condensed consolidated interim financial statements were issued and has determined that there are no subsequent events requiring disclosure in these condensed consolidated interim financial statements other than the items noted below.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements