Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.22.2.2
Stockholders' Equity
3 Months Ended
Sep. 30, 2022
Equity [Abstract]  
Stockholders' Equity Stockholders’ equity

Preferred stock

Series C Preferred Stock

 

 

 

Series C Preferred Stock

 

 

 

Number
of shares

 

 

$
(in thousands)

 

Balance – June 30, 2022 and September 30, 2022

 

 

16,838

 

 

 

12,275

 

 

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. The Company paid the 12th and 24th month anniversary dividends of 10% and 15% common stock dividends on August 19, 2021 and 2022, respectively.

 

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 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, 2022, was determined by multiplying the dividends paid of 2,174 by the Company’s closing share price on August 19, 2022, of $0.1667 per share for a total fair value of $362. Any outstanding shares of Series C Preferred Stock will automatically convert to shares of common stock on August 19, 2024. In addition, as part of the Series C Preferred financing, the Company issued warrants to the placement agent (“Series C Agent Warrants”).

The Company’s Series C Preferred Stock outstanding, conversion shares, and aggregate dividends as of September 30, 2022, are as follows:

 

Series

 

Number

 

 

Conversion
price
$

 

 

Number of
conversion
shares
(in
thousands)

 

 

Dividend Shares (in thousands)

 

Series 1

 

 

13,945

 

 

 

1.16

 

 

 

12,022

 

 

 

8,641

 

Series 2

 

 

898

 

 

 

1.21

 

 

 

740

 

 

 

518

 

Series 3

 

 

1,995

 

 

 

1.15

 

 

 

1,734

 

 

 

1,237

 

 

 

 

16,838

 

 

 

 

 

 

14,496

 

 

 

10,396

 

 

Series C Dividends

 

Dividend Shares
(in thousands)

 

10% - August 19, 2021 (actual)

 

 

1,698

 

15% - August 19, 2022 (actual)

 

 

2,174

 

20% - August 19, 2023 (estimated)

 

 

2,899

 

25% - August 19, 2024 (estimated)

 

 

3,625

 

 

 

 

10,396

 

 

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, 2022, is the stated value of $16,838 (June 30, 2022 - $16,838).

Series B Preferred Stock

 

The Company previously issued Series B Preferred Stock that has since been fully converted to shares of common stock. As part of the Series B Preferred Stock financing, the Company and the Series B Preferred Stockholders entered into a royalty agreement, pursuant to which the Company will pay the holders of the Series B Preferred Stock, in aggregate, a 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, should such events occur.

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, 2022 is its stated value of $279 (June 30, 2022 - $279).

There was no change to the Series A Preferred stock for the three months ended September 30, 2022 or 2021.

Common stock

Common stock issuances during the three months ended September 30, 2022

 

On August 2, 2022, the Company entered into a purchase agreement, dated as of August 2, 2022 (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park committed to purchase up to $20,000 of shares (the “Purchase Shares”) of the Company’s common stock. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to take certain actions relating to the registration of the offer and sale of the shares of common stock available for issuance under the Purchase Agreement. Upon execution of the Purchase Agreement, the Company issued 1,630 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the Purchase Agreement.

 

Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to present Lincoln Park with a purchase notice directing Lincoln Park to purchase up to 500 Purchase Shares provided that the closing sale price of the common stock on the purchase date is not below a threshold price set forth in the Purchase Agreement (a “Regular Purchase”). The Company and Lincoln Park may mutually agree to increase the Regular Purchase amount with respect to any Regular Purchase under the Purchase Agreement, provided that Lincoln Park’s maximum committed purchase obligation under any single Regular Purchase shall not exceed $2,000. The purchase price per share for each Regular Purchase is based on prevailing market prices of the common stock immediately preceding the time of sale as computed in accordance with the terms set forth in the Purchase Agreement. There are no upper limits on the price per share that Lincoln Park must pay for shares of common stock under the Purchase Agreement.

If the Company directs Lincoln Park to purchase the maximum number of shares of common stock that the Company may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park to purchase additional shares of common stock in an “accelerated purchase” (each, an “Accelerated Purchase”) and an “additional accelerated purchase” (each, an “Additional Accelerated Purchase”) (including multiple Additional Accelerated Purchases on the same trading day) as provided in the Purchase Agreement. The purchase price per share for each Accelerated Purchase and Additional Accelerated Purchase will be based on market prices of the common stock on the applicable purchase date for such Accelerated Purchases and such Additional Accelerated Purchases.

 

The aggregate number of shares that the Company can issue or sell to Lincoln Park under the Purchase Agreement may in no case exceed 13,100 shares of the common stock (which is equal to approximately 19.99% of the shares of the common stock outstanding immediately prior to the execution of the Purchase Agreement) (the “Exchange Cap”), unless (i) stockholder approval is

obtained to issue Purchase Shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of our common stock to Lincoln Park under the Purchase Agreement equals or exceeds $0.2024 per share (which represents the lower of (A) the official closing price of the Company's common stock on Nasdaq on the trading day immediately preceding the date of the Purchase Agreement and (B) the average official closing price of the Company's common stock on Nasdaq for the five consecutive trading days ending on the trading day on the date of the Purchase Agreement, adjusted such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules). The Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the Purchase Agreement.

 

During the three months ended September 30, 2022, the Company sold 11,470 shares of common stock for total net proceeds of approximately $1,903 under this facility. As of September 30, 2022, the sales made under the Purchase Agreement are the maximum amounts available due to ownership limitations under Nasdaq rules.

Common 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, (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 “September 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 September 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 the adoption of the Company’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”), as amended. 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 21, 2022, the number of common shares available under the 2017 Plan is 22,000 shares. Under the 2017 Plan, 22,000 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 117 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 12,174 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 9,515 shares of common stock available at September 30, 2022 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, 2022, a total of 3,481 stock options to purchase shares of common stock were granted to directors and officers of the Company. Of the total stock options granted, 300 have an exercise price of $0.255 per share and vest in 12 equal monthly installments beginning on August 1, 2022. The remaining 3,181 stock options granted have an exercise price of $0.1757 per share and vest as to 25% on August 1, 2023, with the remaining portion vesting in equal monthly installments over a period of 36 months commencing on September 1, 2023. 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, 2022

 

 

8,810

 

 

 

1.74

 

Granted

 

 

3,481

 

 

 

0.18

 

Balance – September 30, 2022

 

 

12,291

 

 

 

1.30

 

 

The following table summarizes stock options outstanding and exercisable under all plans at September 30, 2022:

 

Exercise price
$

 

 

Number
Outstanding at
September 30, 2022
(in thousands)

 

 

Weighted
average remaining
contractual life
(years)

 

 

Number
exercisable at
September 30, 2022
(in thousands)

 

 

0.18

 

 

 

3,181

 

 

 

9.84

 

 

 

 

 

0.26

 

 

 

300

 

 

 

9.76

 

 

 

25

 

 

0.33

 

 

 

10

 

 

 

9.47

 

 

 

 

 

0.61

 

 

 

816

 

 

 

3.27

 

 

 

816

 

 

0.74

 

 

 

250

 

 

 

7.12

 

 

 

167

 

 

0.96

 

 

 

3,519

 

 

 

9.11

 

 

 

 

 

1.24

 

 

 

335

 

 

 

8.98

 

 

 

335

 

 

1.36

 

 

 

300

 

 

 

7.98

 

 

 

199

 

 

1.37

 

 

 

75

 

 

 

8.58

 

 

 

30

 

 

1.70

 

 

 

3,282

 

 

 

2.80

 

 

 

3,052

 

 

6.10

 

 

 

17

 

 

 

6.11

 

 

 

17

 

 

8.70

 

 

 

12

 

 

 

0.40

 

 

 

12

 

 

9.83

 

 

 

83

 

 

 

0.40

 

 

 

83

 

 

10.60

 

 

 

4

 

 

 

5.54

 

 

 

4

 

 

11.70

 

 

 

30

 

 

 

0.41

 

 

 

30

 

 

21.10

 

 

 

7

 

 

 

2.58

 

 

 

7

 

 

29.60

 

 

 

2

 

 

 

2.35

 

 

 

2

 

 

37.60

 

 

 

5

 

 

 

3.37

 

 

 

5

 

 

41.00

 

 

 

4

 

 

 

4.12

 

 

 

4

 

 

42.00

 

 

 

30

 

 

 

0.88

 

 

 

30

 

 

44.80

 

 

 

3

 

 

 

3.37

 

 

 

3

 

 

49.50

 

 

 

13

 

 

 

4.39

 

 

 

13

 

 

53.20

 

 

 

8

 

 

 

3.60

 

 

 

8

 

 

61.60

 

 

 

2

 

 

 

0.50

 

 

 

2

 

 

92.00

 

 

 

3

 

 

 

0.67

 

 

 

3

 

 

 

 

 

12,291

 

 

 

 

 

 

4,847

 

 

Stock options granted during the three months ended September 30, 2022, have been valued using a Black-Scholes pricing model with the following assumptions:

 

 

 

September 30, 2022

 

 

Dividend rate

 

 

 

%

Estimated volatility

 

 

91.40

 

%

Risk-free rate

 

 

2.67

 

%

Expected term – years

 

 

6.08

 

 

 

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,

 

 

 

2022
$

 

 

2021
$

 

Research and development

 

 

140

 

 

 

244

 

General and administrative

 

 

378

 

 

 

567

 

 

 

 

518

 

 

 

811

 

 

All of the stock option expense for the periods ended September 30, 2022, and 2021, has been recognized as additional paid in capital. The aggregate intrinsic value of stock options outstanding at September 30, 2022 was $nil (2021 - $235) and the aggregate intrinsic value of stock options exercisable at September 30, 2022 was $nil (2021 - $197). As of September 30, 2022, there was $1,757 in unrecognized compensation expense that will be recognized over the next 3.32 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, 2022

 

 

4,199

 

 

 

1.02

 

Granted

 

 

3,481

 

 

 

0.18

 

Vested

 

 

(236

)

 

 

1.05

 

Unvested at September 30, 2022

 

 

7,444

 

 

 

0.63

 

 

The aggregate intrinsic value of unvested stock options at September 30, 2022 was $332 (2021 - $38). The unvested stock options have a remaining weighted average contractual term of 9.37 years (2021 – 9.03).

Restricted stock units

 

As of September 30, 2022, the Company has issued 880 restricted stock units ("RSU") to its officers. Subject to providing continuous service to the Company, the RSU vest in four equal annual installments commencing August 1, 2023.

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, 2022

 

 

36,024

 

 

 

0.99

 

Expiry of 2018 Investor warrants

 

 

(280

)

 

 

12.50

 

Expiry of 2018 Agent warrants

 

 

(40

)

 

 

12.50

 

Balance – September 30, 2022

 

 

35,704

 

 

 

0.88

 

 

 

The following table summarizes the Company’s outstanding common stock warrants as of September 30, 2022:

 

Description of warrants

 

Number
(in thousands)

 

 

Exercise
price $

 

 

Expiry date

 

 

 

 

 

 

 

 

 

2022 April Investor warrants

 

 

16,226

 

 

 

0.41

 

 

April 14, 2027

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

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

 

 

October 11, 2023

Warrants issued for services

 

 

280

 

 

 

0.75

 

 

November 18, 2023

Warrants issued for services

 

 

125

 

 

 

0.64

 

 

January 20, 2024

Warrants issued for services

 

 

280

 

 

 

1.49

 

 

September 22, 2023

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 7, 2024

Warrants issued for services

 

 

70

 

 

 

2.75

 

 

February 17, 2024

Warrants issued for services

 

 

50

 

 

 

2.38

 

 

February 25, 2024

2022 April Agent warrants

 

 

1,623

 

 

 

0.66

 

 

October 14, 2026

2022 Agent warrants

 

 

600

 

 

 

1.56

 

 

March 28, 2025

2019 Agent warrants

 

 

47

 

 

 

3.88

 

 

June 3, 2024

 

 

 

35,704

 

 

 

 

 

 

 

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

 

 

 

Balance
June 30, 2022

 

 

Number of
Warrants Issued

 

 

Number of
Warrants Exercised

 

 

Balance,
September 30, 2022

 

 

Conversion
price
$

 

Preferred Series C-1 Agent Warrants

 

 

1,929

 

 

 

 

 

 

 

 

 

1,929

 

 

 

1.16

 

Preferred Series C-2 Agent Warrants

 

 

219

 

 

 

 

 

 

 

 

 

219

 

 

 

1.21

 

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, 2022:

 

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