Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.21.2
Stockholders' Equity
3 Months Ended
Sep. 30, 2021
Equity [Abstract]  
Stockholders' Equity

7

Stockholders’ equity

Preferred stock

Series C Preferred Stock

 

 

 

Series C Preferred Stock

 

 

 

Number

of shares

 

 

$

(in thousands)

 

Balance – June 30, 2020

 

 

 

 

 

 

Issuance

 

 

25,028

 

 

 

18,286

 

Issued on exercise of Series C Agent Warrants

 

 

33

 

 

 

79

 

Conversion of Series C Preferred stock to common stock

 

 

(4,969

)

 

 

(3,713

)

Balance – June 30, 2021

 

 

20,092

 

 

 

14,652

 

Conversion of Series C Preferred stock to common stock

 

 

(1,710

)

 

 

(1,256

)

Balance – September 30, 2021

 

 

18,382

 

 

 

13,396

 

 

In connection with the Merger (note 3), in August 2020, the Company issued 25,028 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) in three separate closings of a private placement (Series C-1, C-2, and C-3).  Each share of Series C Preferred Stock was issued at a purchase price of $1,000 per share and is convertible into shares of common stock based on the respective conversion prices which were determined at the closing of each round of the private placement. The conversion prices for the Series C-1 Preferred Stock, Series C-2 Preferred Stock, and the Series C-3 Preferred Stock are $1.16, $1.214, and $1.15, respectively. Subject to ownership limitations, the owners of the Series C Preferred Stock are entitled to receive dividends, payable in shares of common stock at a rate of 10%, 15%, 20% and 25% of the number of shares of common stock issuable upon conversion of the Series C Preferred Stock, on the 12th, 24th, 36th and 48th 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 fair value of the Company’s common stock on the dates the respective dividends are paid. The fair value of the Series C Preferred Stock dividend paid on August 19, 2021, was determined by multiplying the dividends paid of 1,698 by the Company’s closing share price on August 19, 2021, of $1.45 per share for a total fair value of $2,462. Any outstanding shares of Series C Preferred Stock will automatically convert to shares of common stock on August 19, 2024.  

Total gross proceeds from the private placement were $25,028, or approximately $21,573 in net proceeds after deducting financing costs of $3,455 with respect to agent commissions and expenses, as well as legal and accounting fees.  In addition, the Company issued 2,504 Series C Preferred Stock purchase warrants with a fair value of $3,287 to the placement agent (“Series C Agent Warrants”).      

The Company’s Series C Preferred Stock outstanding, conversion shares, and dividends as of September 30, 2021, are as follows:

 

Series

 

Number

 

 

Conversion

price

$

 

 

Number of

conversion

shares

(in

thousands)

 

 

Dividend Shares (in thousands)

 

Series 1

 

 

15,439

 

 

 

1.16

 

 

 

13,310

 

 

 

9,414

 

Series 2

 

 

898

 

 

 

1.21

 

 

 

740

 

 

 

518

 

Series 3

 

 

2,045

 

 

 

1.15

 

 

 

1,778

 

 

 

1,263

 

 

 

 

18,382

 

 

 

 

 

 

 

15,828

 

 

 

11,195

 

 

 

Series C Dividends

 

Dividend Shares

(in thousands)

 

10% - August 19, 2021 (actual)

 

 

1,698

 

15% - August 19, 2022 (estimated)

 

 

2,374

 

20% - August 19, 2023 (estimated)

 

 

3,166

 

25% - August 19, 2024 (estimated)

 

 

3,957

 

 

 

 

11,195

 

 

The conversion feature of the Series C Convertible Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series C Convertible Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from inception, the Company immediately recorded a non-cash deemed dividend of $3,181 related to the beneficial conversion feature arising from the issuance of Series C Convertible Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders and net loss per share for the three months ended September 30, 2020.

The Series C Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock and (ii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series C Preferred Stock. The Series C Preferred Stock shall be pari passu in liquidation to the Company’s Series A Preferred Stock. The liquidation value of the Series C Preferred Stock at September 30, 2021, is the stated value of $18,382 (June 30, 2021 - $20,092).

Series B Preferred Stock

 

During the year ended June 30, 2016, the Company issued 902 shares of Series B Preferred Stock. The remaining balance of 601 shares of Series B Preferred Stock were fully converted to 150 shares of common stock on April 29, 2021. The holders of the Series B Preferred Stock were entitled to an annual cumulative, in arrears, dividend at the rate of 9% payable quarterly. The 9% dividend accrued quarterly commencing on the date of issue and was payable quarterly on September 30, December 31, March 31, and June 30 of each year commencing on June 30, 2016. Dividends were 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. Pursuant to the Series B Preferred Stock dividend, during the three-months ended September 30, 2021, the Company issued nil (2020 – 4) shares of common stock and recognized $nil (2020 - $5) as an increase in accumulated deficit.

In addition, the Company and the Series B Preferred Stock holders entered into a royalty agreement, pursuant to which the Company will pay the holders of the Series B Preferred Stock, in aggregate, a low, single-digit royalty based on their pro rata ownership of the Series B Preferred Stock on products sold directly by the Company or sold pursuant to a licensing or partnering arrangement.

Series A Preferred Stock

Effective September 30, 2014, the Company filed a Certificate of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of Nevada. Pursuant to the Series A Certificate of Designation, the Company designated 279 shares of preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have a stated value of $1.00 per share (the “Series A Stated Value”) and are not convertible into common stock. The holder of the Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in arrears. Upon any liquidation of the Company, the holder of the Series A Preferred Stock will be entitled to be paid, out of any assets of the Company available for distribution to stockholders, the Series A Stated Value of the shares of Series A Preferred Stock held by such holder, plus any accrued but unpaid dividends thereon, prior to any payments being made with respect to the common stock. The Series A Preferred Stock is held by Valent (note 4).

The Series A Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock, and (ii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series A Preferred Stock. The Series A Preferred Stock shall be pari passu in liquidation to the Company’s Series C Preferred Stock. The liquidation value of the Series A Preferred stock at September 30, 2021 is its stated value of $279 (June 30, 2021 - $279).

There was no change to the Series A Preferred stock for the three-months ended September 30, 2021 or 2020.

Common stock

Stock issuances during the three months ended September 30, 2021

Registered direct financing

On September 28, 2021, the Company closed on the sale of (i) 7,200 shares of its common stock, par value $0.001 per share (the “Common Stock”), (ii) pre-funded warrants (“PFW”) to purchase an aggregate of 4,800 shares of Common Stock and (iii) common warrants to purchase an aggregate of 12,000 shares of Common Stock (“2022 Investor Warrants”) in the Company’s registered direct offering (the “Offering”). Each share of Common Stock, or PFW as applicable, was sold together with a 2022 Investor Warrant to purchase one share of Common Stock at a combined effective price of $1.25 per share of Common Stock and accompanying 2022 Investor Warrant.  The 2022 Investor Warrants have been valued at $7,023 and have been treated as equity. They have been valued using a Black-Scholes valuation with a risk-free rate of 0.55%, a contractual term of 3.5 years, a volatility of 116.7%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant.

The net proceeds from the Offering, were $13,634 after deducting commissions and other offering expenses.

The 2022 Investor Warrants are exercisable at $1.25 per share until their expiry on March 28, 2025 and the PFW are exercisable at $0.001 per share at any time after September 28, 2021. The Company also issued 600 agent warrants that are exercisable at $1.5265 per share commencing September 28, 2021, until their expiry on March 28, 2025 (the “2022 Agent Warrants”). The 2022 Agent Warrants have been valued at $333 and have been treated as non-cash issue costs of the Common Stock, 2022 Investor Warrants, and PFW. The 2022 Agent Warrants have been valued using a Black-Scholes valuation with a risk-free rate of 0.55%, a contractual term of 3.5 years, a volatility of 116.7%, and a dividend rate of 0%. The estimated volatility of the Company’s common stock is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the contractual life of the instrument at the valuation date. The term is based on the contractual term of the warrant.

During the three months ended September 30, 2021, all of the 4,800 PFW were exercised at $0.001 per PFW for proceeds of $4.8.

Stock options

2017 Omnibus Incentive Plan

As subsequently approved by the Company’s stockholders at an annual meeting of stockholders on April 11, 2018, the Company’s board of directors approved adoption of the Company’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”). The board of directors also approved a form of Performance Stock Unit Award Agreement to be used in connection with grants of performance stock units (“PSUs”) under the 2017 Plan. As approved by the Company’s stockholders on June 25, 2021, the number of common shares available under the 2017 Plan was increased to 13,000 shares. Under the 2017 Plan 13,000 shares of Company common stock are currently reserved for issuance, less the number of shares of common stock issued under the Del Mar (BC) 2013 Amended and Restated Stock Option Plan (the “Legacy Plan”), or that are subject to grants of stock options made, or that may be made, under the Legacy Plan, or that have been previously exercised. A total of 129 shares of common stock have been issued under the Legacy Plan and/or are subject to outstanding stock options granted under the Legacy Plan, and a total of 6,680 shares of common stock have been issued under the 2017 Plan and/or are subject to outstanding stock options granted under the 2017 Plan leaving 5,997 shares of common stock available at September 30, 2021 for issuance under the 2017 Plan if all such options under the Legacy Plan were exercised, net of stock options previously exercised.

The maximum number of shares of Company common stock with respect to which any one participant may be granted awards during any calendar year is 8% of the Company’s fully diluted shares of common stock on the date of grant (excluding the number of shares of common stock issued under the 2017 Plan and/or the Legacy Plan or subject to outstanding awards granted under the 2017 Plan and/or the Legacy Plan).  No award will be granted under the 2017 Plan on, or after, July 7, 2027.

 

During the three-months ended September 30, 2021, a total of 435 options to purchase shares of common stock were granted to directors of the Company. The options to purchase shares of common stock of the Company have an exercise price of $1.24 per share. They vest in 12 equal monthly installments beginning on October 22, 2021.  All of the options to purchase shares of common stock granted have a 10-year term and are subject to cancellation upon the grantees’ termination of service for the Company, with certain exceptions.

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

 

 

 

Number of

stock options

outstanding

(in thousands)

 

 

Weighted

average

exercise

price

 

Balance – June 30, 2021

 

 

6,392

 

 

 

2.26

 

Granted

 

 

435

 

 

 

1.24

 

Expired

 

 

(18

)

 

 

13.11

 

Balance – September 30, 2021

 

 

6,809

 

 

 

2.16

 

 

The following table summarizes stock options outstanding and exercisable under all plans at September 30, 2021:

 

Exercise price

$

 

 

Number

Outstanding at

September 30, 2021

(in thousands)

 

 

Weighted

average remaining

contractual life

(years)

 

 

Number

exercisable at

September 30, 2021

(in thousands)

 

 

0.61

 

 

 

816

 

 

 

7.93

 

 

 

747

 

 

0.74

 

 

 

250

 

 

 

8.12

 

 

 

83

 

 

1.24

 

 

 

435

 

 

 

9.98

 

 

 

 

 

1.36

 

 

 

300

 

 

 

8.98

 

 

 

100

 

 

1.37

 

 

 

75

 

 

 

9.58

 

 

 

 

 

1.70

 

 

 

4,699

 

 

 

8.96

 

 

 

1,886

 

 

6.10

 

 

 

17

 

 

 

7.11

 

 

 

17

 

 

8.70

 

 

 

11

 

 

 

6.09

 

 

 

11

 

 

9.83

 

 

 

84

 

 

 

6.64

 

 

 

84

 

 

10.60

 

 

 

3

 

 

 

6.54

 

 

 

3

 

 

11.70

 

 

 

30

 

 

 

1.41

 

 

 

30

 

 

15.77

 

 

 

3

 

 

 

0.67

 

 

 

3

 

 

20.00

 

 

 

9

 

 

 

0.34

 

 

 

9

 

 

21.10

 

 

 

7

 

 

 

5.77

 

 

 

7

 

 

29.60

 

 

 

2

 

 

 

3.35

 

 

 

2

 

 

37.60

 

 

 

5

 

 

 

4.36

 

 

 

5

 

 

41.00

 

 

 

4

 

 

 

5.11

 

 

 

4

 

 

42.00

 

 

 

30

 

 

 

1.88

 

 

 

30

 

 

44.80

 

 

 

3

 

 

 

4.36

 

 

 

3

 

 

49.50

 

 

 

13

 

 

 

5.38

 

 

 

13

 

 

53.20

 

 

 

8

 

 

 

4.60

 

 

 

8

 

 

61.60

 

 

 

2

 

 

 

1.50

 

 

 

2

 

 

92.00

 

 

 

3

 

 

 

1.67

 

 

 

3

 

 

 

 

 

 

6,809

 

 

 

 

 

 

 

3,050

 

 

Included in the number of stock options outstanding are 2.5 stock options granted at an exercise price of CA$20.00. The exercise price of these options shown in the above table have been converted to US$15.77 per share using the period ending closing exchange rate. Stock options granted during the three months ended September 30, 2021, have been valued using a Black-Scholes pricing model with the following assumptions:

 

 

 

September 30,

2021

 

 

Dividend rate

 

 

 

%

Estimated volatility

 

93.9

 

%

Risk-free rate

 

1.55

 

%

Expected term – years

 

5.3

 

 

 

The estimated volatility of the Company’s common stock at the date of issuance of the stock options is based on the historical volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining term of the stock options at the valuation date.  The expected term of the stock options has been estimated using the plain vanilla method.

The Company has recognized the following amounts as stock option expense for the periods noted (in thousands):

 

 

 

Three months ended

September 30,

 

 

 

2021

$

 

 

2020

$

 

Research and development

 

 

244

 

 

 

91

 

General and administrative

 

 

567

 

 

 

314

 

 

 

 

811

 

 

 

405

 

 

All of the stock option expense for the periods ended September 30, 2021, and 2020 has been recognized as additional paid in capital.  The aggregate intrinsic value of stock options outstanding at September 30, 2021 was $235 (2020 - $977) and the aggregate intrinsic value of stock options exercisable at September 30, 2021 was $197 (2020 - $447). As of September 30, 2021, there was $2,597 in unrecognized compensation expense that will be recognized over the next 2.58 years.

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

 

 

 

Number of

Options

(in thousands)

 

 

Weighted

average

exercise

price

$

 

Unvested at June 30, 2021

 

 

3,860

 

 

 

1.60

 

Granted

 

 

435

 

 

 

1.24

 

Vested

 

 

(536

)

 

 

1.62

 

Unvested at September 30, 2021

 

 

3,759

 

 

 

1.56

 

 

The aggregate intrinsic value of unvested stock options at September 30, 2021 was $38 (2020 - $531). The unvested stock options have a remaining weighted average contractual term of 9.03 years (2020 – 9.83).

Common stock warrants

The following table sets forth changes in outstanding common stock warrants:

 

 

 

Number of

Warrants

(in thousands)

 

 

Weighted

average

exercise

price

$

 

Balance – June 30, 2021

 

 

6,974

 

 

 

3.34

 

Issuance of 2022 Investor Warrants

 

 

12,000

 

 

 

1.25

 

Issuance of PFW

 

 

4,800

 

 

 

0.001

 

Issuance of 2022 Agent Warrants

 

 

600

 

 

 

1.5625

 

Exercise of PFW

 

 

(4,800

)

 

 

0.001

 

Exercise of 2020 Investor Warrants

 

 

(69

)

 

 

1.00

 

Expiry of Adgero replacement warrants

 

 

(353

)

 

 

3.18

 

Balance – September 30, 2021

 

 

19,152

 

 

 

1.99

 

 

 

The following table summarizes the Company’s outstanding common stock warrants as of September 30, 2021:

 

Description of warrants

 

Number

(in thousands)

 

 

Exercise

price $

 

 

Expiry date

 

 

 

 

 

 

 

 

 

 

 

2022 Investor warrants

 

 

12,000

 

 

 

1.25

 

 

March 28, 2025

2020 Investor warrants

 

 

3,264

 

 

 

1.00

 

 

August 16, 2024

2019 Investor warrants

 

 

760

 

 

 

3.10

 

 

June 5, 2024

2018 Investor warrants

 

 

280

 

 

 

12.50

 

 

September 22, 2022

2017 Investor warrants

 

 

208

 

 

 

35.00

 

 

April 19, 2022

NBTS Warrants

 

 

125

 

 

 

1.09

 

 

June 19, 2025

Warrants issued for services

 

 

6

 

 

 

17.80

 

 

January 25, 2023

Warrants issued for services

 

 

34

 

 

 

11.70

 

 

February 27, 2023

Warrants issued for services

 

 

14

 

 

 

9.00

 

 

September 15, 2023

Warrants issued for services

 

 

280

 

 

 

0.75

 

 

October 11, 2023

Warrants issued for services

 

 

125

 

 

 

0.64

 

 

November 18, 2023

Warrants issued for services

 

 

280

 

 

 

1.49

 

 

January 20, 2024

Warrants issued for services

 

 

50

 

 

 

1.49

 

 

September 22, 2023

Warrants issued for services

 

 

50

 

 

 

1.82

 

 

November 13, 2023

Warrants issued for services

 

 

100

 

 

 

1.47

 

 

January 20, 2024

Warrants issued for services

 

 

70

 

 

 

2.75

 

 

February 17, 2024

Warrants issued for services

 

 

50

 

 

 

2.38

 

 

February 25, 2024

2022 Agent warrants

 

 

600

 

 

 

1.56

 

 

March 28, 2025

2019 Agent warrants

 

 

47

 

 

 

3.88

 

 

June 3, 2024

2018 Agent warrants

 

 

40

 

 

 

12.50

 

 

September 20, 2022

2017 Agent warrants

 

 

14

 

 

 

40.60

 

 

April 12, 2022

Adgero Warrants

 

 

755

 

 

 

3.18

 

 

January 17, 2022

 

 

 

19,152

 

 

 

 

 

 

 

 

Series C Preferred Stock warrants

In connection with the Series C Preferred Stock private placement, the Company issued 2,504 Series C Agent Warrants.  The Series C Agent Warrants have an exercise price of $1,000 per share, provide for a cashless exercise feature, and are exercisable for a period of four years from August 19, 2020. The Series C Preferred Stock issuable upon exercise of the Series C Agent Warrants is convertible into shares of common stock in the same manner as each respective underlying series of outstanding Series C Preferred Stock and will be entitled to the same dividend rights as each respective series.

The Series C Agent Warrants were valued at a total of $3,287 using a binomial pricing model with a risk-free interest rate of 0.27%, a term of 4.0 years, and a volatility of 95.2% to 95.8%.  The estimated volatility of the Company’s common stock at the date of measurement is based on the historical volatility of the Company’s common stock. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the instrument at the valuation date. The expected term has been estimated using the contractual term of the warrant.

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

 

 

 

Balance

June 30, 2021

 

 

Number of

Warrants Issued

 

 

Number of

Warrants Exercised

 

 

Balance,

September 30, 2021

 

 

Conversion

price

$

 

Issuance of Preferred Series C-1 Agent Warrants

 

 

1,929

 

 

 

 

 

 

 

 

 

1,929

 

 

 

1.16

 

Issuance of Preferred Series C-2 Agent Warrants

 

 

219

 

 

 

 

 

 

 

 

 

219

 

 

 

1.21

 

Issuance of Preferred Series C-3 Agent Warrants

 

 

296

 

 

 

 

 

 

 

 

 

296

 

 

 

1.15

 

 

 

 

2,444

 

 

 

 

 

 

 

 

 

2,444

 

 

 

 

 

 

 

 

The following table summarizes the Company’s outstanding Series C Agent Warrants as of September 30, 2021:

 

Series C Agent Warrants

 

Number

 

 

Conversion

price

$

 

 

Number of

conversion

shares

(in

thousands)

 

 

Cumulative

common

stock

dividends

(in

thousands)

 

Series 1

 

 

1,929

 

 

 

1.16

 

 

 

1,663

 

 

 

1,164

 

Series 2

 

 

219

 

 

 

1.21

 

 

 

180

 

 

 

126

 

Series 3

 

 

296

 

 

 

1.15

 

 

 

257

 

 

 

180

 

 

 

 

2,444

 

 

 

 

 

 

 

2,100

 

 

 

1,470