Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.5.0.2
Stockholders' Equity
3 Months Ended
Sep. 30, 2016
Stockholders' Equity [Abstract]  
Stockholders' equity
6 Stockholders’ equity

 

Preferred stock

 

Authorized

 

5,000,000 preferred shares, $0.001 par value

 

Issued and outstanding

 

Special voting shares – at September 30, 2016 – 1 (June 30, 2016 – 1)

Series A shares – at September 30, 2016 – 278,530 (June 30, 2016 – 278,530)

Series B shares – at September 30, 2016 – 902,238 (June 30, 2016 – 902,238)

  

Series B Preferred Shares

  

During the year ended June 30, 2016 the Company issued an aggregate of 902,238 shares of Series B Preferred Stock at a purchase price of at $8.00 per share. Each share of Series B Preferred Stock is convertible into 2.5 shares of common stock equating to a conversion price of $3.20 (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 $8.00 or five years from the final closing dates. The holders of the Series B Preferred Stocks are entitled to an annual cumulative, in arrears dividend at the rate of 9% payable quarterly. The 9% dividend shall accrue quarterly commencing on the date of issue and be payable quarterly on June 30, September 30, December 31, and March 31 of each year commencing on June 30, 2016. Dividends shall be payable solely by delivery of shares of common stock (the “PIK Shares”), in an amount for each holder equal to the aggregate dividend payable to such holder with respect to the shares of Series B Preferred Stock held by such holder divided by the Conversion Price. The Series B Preferred Shares do not contain any repricing features.

 

(expressed in US dollars unless otherwise noted)

 

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 shares, in aggregate, a low, single-digit royalty based on their pro rata ownership of the Series B preferred shares 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 shares 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 stock dividend, the Company issued 50,793 shares of common stock on September 30, 2016 and recognized $307,298 as a direct increase in accumulated deficit.

 

Series A Preferred Shares

 

Effective September 30, 2014 pursuant to the Company’s Valent Exchange Agreement (note 3), the Company filed the Series A Certificate of Designation with the Secretary of State of Nevada. Pursuant to the Series A Certificate of Designation, the Company designated 278,530 shares of preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have a stated value of $1.00 per share (the “Series A Stated Value”) and are not convertible into common stock. The holder of the Series A Preferred Stock will be entitled 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.

 

Common stock

 

Authorized

 

50,000,000 common shares, $0.001 par value

 

Issued and outstanding

 

September 30, 2016 – 11,381,997 (June 30, 2016 – 11,187,023)

 

The issued and outstanding common shares at September 30, 2016 include 1,014,011 shares of common stock on an as-exchanged basis with respect to the shares of Exchangeco that can be exchanged for shares of common stock of the Company.

 

(expressed in US dollars unless otherwise noted)

 

    Shares of common stock 
outstanding
    Common stock     Additional paid-in capital     Warrants  
          $     $     $  
                         
Balance – June 30, 2016     11,187,023       11,187       28,833,105       1,658,382  
                                 
Warrants exercised for cash     83,587       83       467,843       (25,202 )
Warrants exercised cashlessly     594       1       5,158       -  
Shares issued for services     60,000       60       563,940       -  
Warrants issued for services     -       -       -       50,244  
Amendment of warrants     -       -       53,006       -  
Amendment of stock options     -       -       260,969       -  
Series B Preferred stock dividend     50,793       51       307,247       -  
Stock-based compensation     -       -       31,818       -  
                                 
Balance – September 30, 2016     11,381,997       11,382       30,523,086       1,683,424  

  

Three months ended September 30, 2015

 

During the three months ended September 30, 2015, pursuant to a public offering under a Registration Statement on Form S-1, the Company issued 1,069,417 shares of common stock at $2.40 per share and 1,069,417 warrants (the “2015 Investor Warrants”) to purchase shares of common stock at $0.004 per warrant for total gross proceeds of $2,566,660. The 2015 Investor Warrants are exercisable at $3.00 per share for a period of five years until they expire on July 31, 2020.

 

The Company engaged certain placement agents for the sale of a portion of the shares and 2015 Investor Warrants. Under the Company’s engagement agreements with these placement agents, the Company agreed to pay up to a 7% cash commission and issue warrants to purchase shares of common stock (the “2015 Agent Warrants”) up to the number of shares of our common stock equal to 5% of the aggregate number of shares sold in the offering by such placement agent. Pursuant to the placement agent agreements the Company paid a total cash commission of $80,575 and issued 23,477 2015 Agent Warrants (note 5). The 2015 Agent Warrants are exercisable at a per share price equal to $3.00 until July 15, 2020.

 

In addition to the cash commission of $80,575 the Company also incurred additional cash issue and closing costs of $582,511 resulting in net cash proceeds of $1,903,514. The 2015 Agent Warrants have been recognized as non-cash issue costs of $29,594.

 

(expressed in US dollars unless otherwise noted)

 

Stock Options

 

The following table sets forth the options outstanding:

 

      Number of 
stock 
options
outstanding
    Weighted   
average 
exercise 
  price   
$
 
                   
  Balance – September 30 and June 30, 2016     856,250       3.77  

 

The following table summarizes stock options currently outstanding and exercisable at September 30, 2016:

 

  Exercise price $     Number
Outstanding at
September 30, 
2016
    Weighted  
average
remaining 
contractual 
life 
(years)
    Number 
exercisable 
at 
 September 30,  
2016
 
                       
  1.52       25,000       5.39       25,000  
  2.00       131,250       5.39       131,250  
  2.96       45,000       8.35       45,000  
  3.20       30,000       8.50       30,000  
  3.32       30,000       9.34       6,639  
  3.60       25,000       9.47       4,444  
  3.76       45,000       9.25       11,208  
  4.00       12,500       3.00       12,500  
  4.20       412,500       6.88       412,500  
  4.48       30,000       9.27       7,306  
  4.76       25,000       9.59       3,449  
  6.16       15,000       6.50       15,000  
  9.20       30,000       6.67       30,000  
          856,250               734,296  

  

Included in the number of stock options outstanding are 25,000 stock options granted at an exercise price of CDN $2.00. The exercise prices shown in the above table have been converted to $1.52 using the period ending closing exchange rate. Certain stock options have been granted to non-employees and will be revalued at each reporting date until they have fully vested. The stock options have been re-valued using a Black-Scholes pricing model using the following assumptions:

 

      September 30,  
2016
 
         
  Dividend rate     0 %
  Volatility     80.4% to 91.5 %
  Risk-free rate     1.00 %
  Term - years     0.5 to 2.5  

 

(expressed in US dollars unless otherwise noted)

 

The Company has recognized the following amounts as stock-based compensation expense for the periods noted:

 

    Three months ended
September 30,
 
    2016     2015  
    $     $  
Research and development     30,715       6,455  
General and administrative     1,103       33,451  
                 
      31,818       39,906  

 

All of the total stock option expense of $31,818 and $39,906 for the three months ended September 30, 2016 and 2015 respectively has been recognized as additional paid in capital. The aggregate intrinsic value of stock options outstanding at September 30, 2016 was $1,982,263 (September 30, 2015 - $329,051) and the aggregate intrinsic value of stock options exercisable at September 30, 2016 was $1,728,712 (September 30, 2015 - $326,614). As of September 30, 2016 there was $263,437 in unrecognized compensation expense that will be recognized over the next 2.5 years. No stock options granted under the Plan have been exercised to September 30, 2016. Upon the exercise of stock options new shares will be issued.

 

A summary of status of the Company’s unvested stock options under all plans is presented below:

 

      Number of
Options
    Weighted   
average   
exercise  
price  
$
    Weighted  
average  
grant date  
fair value  
$
 
                     
  Unvested at June 30, 2016     141,016       3.17       1.73  
  Vested     (19,062 )     4.03       2.19  
                           
  Unvested at September 30, 2016     121,954       3.12       1.70  

 

Stock option liability

 

Certain of the Company’s stock options have been issued in CA$. Of these, a portion have been classified as a stock option liability which is revalued at each reporting date. During the three months ended September 30, 2016, the Company amended 43,750 of these stock options held by five optionees such that the exercise price of the options was adjusted to be denominated in US$. No other terms of the stock options were amended. As a result of the amendment, the Company recognized $85,094 in stock option liability expense and $260,969 was reclassified to equity during the three months ended September 30, 2016.

(expressed in US dollars unless otherwise noted)

 

Warrants

 

Certain of the Company’s warrants have been recognized as a derivative liability (note 5). The following table summarizes all of the Company’s outstanding warrants as of September 30, 2016:

 

  Description   Number  
         
  Balance – June 30, 2016     4,612,627  
  2013 Investor Warrants (i)     (42,907 )
  2015 Investor Warrants (ii)     (40,000 )
  2015 Agent Warrants (iii)     (1,680 )
           
  Balance - September 30, 2016     4,528,040  

 

i) 2013 Investor Warrants were exercised for cash proceeds of $134,900.

 

ii) 2015 Investor Warrants were exercised for cash proceeds of $120,000.

 

iii)

680 of the 2015 Agent Warrants were exercised for cash proceeds of $2,040 and 1,000 of the 2015 Agent Warrants were exercised on a cashless basis for 594 shares of common stock.