Item
1. Financial Statements.
DelMar
Pharmaceuticals, Inc.
Condensed
Consolidated Interim Financial Statements
(Unaudited)
For
the six months ended December 31, 2019
(expressed
in US dollars unless otherwise noted)
DelMar
Pharmaceuticals, Inc.
Condensed
Consolidated Interim Balance Sheets
(expressed
in US dollars unless otherwise noted)
|
|
Note
|
|
December
31,
2019
$
|
|
|
June
30,
2019
$
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
|
6,348,038
|
|
|
|
3,718,758
|
|
Prepaid
expenses and deposits
|
|
|
|
|
122,993
|
|
|
|
280,248
|
|
Interest,
taxes and other receivables
|
|
|
|
|
30,576
|
|
|
|
26,187
|
|
|
|
|
|
|
6,501,607
|
|
|
|
4,025,193
|
|
Intangible
assets - net
|
|
|
|
|
6,460
|
|
|
|
12,062
|
|
|
|
|
|
|
6,508,067
|
|
|
|
4,037,255
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
|
|
750,751
|
|
|
|
1,744,517
|
|
Related
party payables
|
|
3
|
|
|
276,674
|
|
|
|
325,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,027,425
|
|
|
|
2,069,725
|
|
Stockholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
|
|
|
|
|
|
|
|
Authorized
|
|
|
|
|
|
|
|
|
|
|
5,000,000
shares, $0.001 par value
|
|
|
|
|
|
|
|
|
|
|
Issued
and outstanding
|
|
|
|
|
|
|
|
|
|
|
278,530
Series A shares at December 31, 2019 (June 30, 2019 – 278,530)
|
|
3,5
|
|
|
278,530
|
|
|
|
278,530
|
|
648,613
Series B shares at December 31, 2019 (June 30, 2019 – 673,613)
|
|
5
|
|
|
4,524,897
|
|
|
|
4,699,304
|
|
1
special voting share at December 31, 2019 (June 30, 2019 – 1)
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
|
|
|
|
|
|
|
|
Authorized
|
|
|
|
|
|
|
|
|
|
|
95,000,000
shares at December 31, 2019 and June 30, 2019, $0.001 par value
|
|
|
|
|
|
|
|
|
|
|
11,414,680
issued at December 31, 2019 (June 30, 2019 – 3,839,358)
|
|
5
|
|
|
11,415
|
|
|
|
3,839
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
5
|
|
|
56,263,825
|
|
|
|
50,954,741
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
5
|
|
|
8,313,840
|
|
|
|
6,588,283
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit
|
|
|
|
|
(63,933,043
|
)
|
|
|
(60,578,345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
other comprehensive income
|
|
|
|
|
21,178
|
|
|
|
21,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,480,642
|
|
|
|
1,967,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,508,067
|
|
|
|
4,037,255
|
|
Nature
of operations, corporate history, and going concern (note 1)
Subsequent
events (note 8)
The
accompanying notes are an integral part of these condensed consolidated interim financial statements.
DelMar
Pharmaceuticals, Inc.
Condensed
Consolidated Interim Statements of Operations
(Unaudited)
(expressed
in US dollars unless otherwise noted)
|
|
Note
|
|
Three
months
ended
December 31,
2019
$
|
|
|
Three
months
ended
December 31,
2018
$
|
|
|
Six
months ended
December 31,
2019
$
|
|
|
Six
months ended
December 31,
2018
$
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
5
|
|
|
712,193
|
|
|
|
947,249
|
|
|
|
1,433,668
|
|
|
|
1,966,369
|
|
General
and administrative
|
|
5
|
|
|
1,053,747
|
|
|
|
874,884
|
|
|
|
1,967,375
|
|
|
|
1,861,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,765,940
|
|
|
|
1,822,133
|
|
|
|
3,401,043
|
|
|
|
3,827,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(income) loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of derivative liability
|
|
4
|
|
|
-
|
|
|
|
(1,261
|
)
|
|
|
-
|
|
|
|
(1,041
|
)
|
Foreign
exchange loss
|
|
|
|
|
2,254
|
|
|
|
5,097
|
|
|
|
1,880
|
|
|
|
10,935
|
|
Interest
income
|
|
|
|
|
(28,143
|
)
|
|
|
(16,272
|
)
|
|
|
(57,001
|
)
|
|
|
(36,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,889
|
)
|
|
|
(12,436
|
)
|
|
|
(55,121
|
)
|
|
|
(26,222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
|
|
|
1,740,051
|
|
|
|
1,809,697
|
|
|
|
3,345,922
|
|
|
|
3,801,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computation
of basic loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
|
|
|
1,740,051
|
|
|
|
1,809,697
|
|
|
|
3,345,922
|
|
|
|
3,801,501
|
|
Series
B Preferred stock dividend
|
|
5
|
|
|
2,552
|
|
|
|
16,190
|
|
|
|
4,598
|
|
|
|
52,275
|
|
Net
loss for the period attributable to common stockholders
|
|
|
|
|
1,742,603
|
|
|
|
1,825,887
|
|
|
|
3,350,520
|
|
|
|
3,853,776
|
|
Basic
and fully diluted loss per share
|
|
|
|
|
0.15
|
|
|
|
0.75
|
|
|
|
0.35
|
|
|
|
1.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average number of shares
|
|
|
|
|
11,407,744
|
|
|
|
2,424,222
|
|
|
|
9,473,153
|
|
|
|
2,360,566
|
|
The
accompanying notes are an integral part of these condensed consolidated interim financial statements.
DelMar
Pharmaceuticals, Inc.
Condensed
Consolidated Interim Statements of Stockholders’ Equity
(Unaudited)
(expressed
in US dollars unless otherwise noted)
For the three and six months ended December 31, 2019
|
|
Number
of
shares
|
|
|
Common
stock
$
|
|
|
Additional
paid-in
capital
$
|
|
|
Accumulated
other
comprehensive
income
$
|
|
|
Preferred
stock
$
|
|
|
Warrants
$
|
|
|
Accumulated
deficit
$
|
|
|
Stockholders’
equity
$
|
|
Balance
- June 30, 2019
|
|
|
3,839,358
|
|
|
|
3,839
|
|
|
|
50,954,741
|
|
|
|
21,178
|
|
|
|
4,977,834
|
|
|
|
6,588,283
|
|
|
|
(60,578,345
|
)
|
|
|
1,967,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares and warrants - net of issue costs
|
|
|
4,895,000
|
|
|
|
4,895
|
|
|
|
2,489,251
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,088,820
|
|
|
|
-
|
|
|
|
6,582,966
|
|
Exercise
of warrants for cash
|
|
|
2,655,000
|
|
|
|
2,655
|
|
|
|
2,421,830
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,397,935
|
)
|
|
|
-
|
|
|
|
26,550
|
|
Conversion
of Series B preferred stock to common stock
|
|
|
6,250
|
|
|
|
6
|
|
|
|
174,401
|
|
|
|
-
|
|
|
|
(174,407
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares
issued for services
|
|
|
6,925
|
|
|
|
7
|
|
|
|
4,836
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,843
|
|
Stock
option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
50,985
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,985
|
|
Series
A preferred cash dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,089
|
)
|
|
|
(2,089
|
)
|
Series
B preferred stock dividend
|
|
|
3,700
|
|
|
|
4
|
|
|
|
2,042
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,046
|
)
|
|
|
-
|
|
Loss
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,605,871
|
)
|
|
|
(1,605,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
– September 30, 2019
|
|
|
11,406,233
|
|
|
|
11,406
|
|
|
|
56,098,086
|
|
|
|
21,178
|
|
|
|
4,803,427
|
|
|
|
8,279,168
|
|
|
|
(62,188,351
|
)
|
|
|
7,024,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,672
|
|
|
|
-
|
|
|
|
34,672
|
|
Shares
issued for services
|
|
|
4,747
|
|
|
|
5
|
|
|
|
3,339
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,344
|
|
Stock
option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
159,852
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
159,852
|
|
Series
A preferred cash dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,089
|
)
|
|
|
(2,089
|
)
|
Series
B preferred stock dividend
|
|
|
3,700
|
|
|
|
4
|
|
|
|
2,548
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,552
|
)
|
|
|
-
|
|
Loss
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,740,051
|
)
|
|
|
(1,740,051
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2019
|
|
|
11,414,680
|
|
|
|
11,415
|
|
|
|
56,263,825
|
|
|
|
21,178
|
|
|
|
4,803,427
|
|
|
|
8,313,840
|
|
|
|
(63,933,043
|
)
|
|
|
5,480,642
|
|
The
accompanying notes are an integral part of these condensed consolidated interim financial statements.
DelMar
Pharmaceuticals, Inc.
Condensed
Consolidated Interim Statements of Stockholders’ Equity …continued
(Unaudited)
(expressed
in US dollars unless otherwise noted)
For the three and six months ended December 31, 2018
|
|
Number
of
shares
|
|
|
Common
stock
$
|
|
|
Additional
paid-in
capital
$
|
|
|
Accumulated
other
comprehensive
income
$
|
|
|
Preferred
stock
$
|
|
|
Warrants
$
|
|
|
Accumulated
deficit
$
|
|
|
Stockholders’
equity
$
|
|
Balance
- June 30, 2018
|
|
|
2,296,667
|
|
|
|
2,297
|
|
|
|
43,198,193
|
|
|
|
21,178
|
|
|
|
6,425,410
|
|
|
|
8,229,482
|
|
|
|
(52,441,337
|
)
|
|
|
5,435,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,661
|
|
|
|
-
|
|
|
|
30,661
|
|
Shares
issued for services
|
|
|
706
|
|
|
|
1
|
|
|
|
4,138
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,139
|
|
Performance
stock unit expense
|
|
|
-
|
|
|
|
-
|
|
|
|
61,514
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61,514
|
|
Stock
option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
132,902
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
132,902
|
|
Series
A preferred cash dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,089
|
)
|
|
|
(2,089
|
)
|
Series
B preferred stock dividend
|
|
|
4,960
|
|
|
|
4
|
|
|
|
36,081
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(36,085
|
)
|
|
|
-
|
|
Loss
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,991,804
|
)
|
|
|
(1,991,804
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
– September 30, 2018
|
|
|
2,302,333
|
|
|
|
2,302
|
|
|
|
43,432,828
|
|
|
|
21,178
|
|
|
|
6,425,410
|
|
|
|
8,260,143
|
|
|
|
(54,471,315
|
)
|
|
|
3,670,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
and exchange of warrants
|
|
|
296,667
|
|
|
|
297
|
|
|
|
2,936,881
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,210,697
|
)
|
|
|
-
|
|
|
|
726,481
|
|
Conversion
of Series B preferred stock to common stock
|
|
|
10,000
|
|
|
|
10
|
|
|
|
279,041
|
|
|
|
-
|
|
|
|
(279,051
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,859
|
)
|
|
|
-
|
|
|
|
(2,859
|
)
|
Shares
issued for services
|
|
|
607
|
|
|
|
-
|
|
|
|
2,617
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,617
|
|
Performance
stock unit expense
|
|
|
-
|
|
|
|
-
|
|
|
|
61,514
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61,514
|
|
Stock
option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
122,751
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
122,751
|
|
Series
A preferred cash dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,089
|
)
|
|
|
(2,089
|
)
|
Series
B preferred stock dividend
|
|
|
4,735
|
|
|
|
5
|
|
|
|
16,185
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,190
|
)
|
|
|
-
|
|
Loss
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,809,697
|
)
|
|
|
(1,809,697
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2018
|
|
|
2,614,342
|
|
|
|
2,614
|
|
|
|
46,851,817
|
|
|
|
21,178
|
|
|
|
6,146,359
|
|
|
|
6,046,587
|
|
|
|
(56,299,291
|
)
|
|
|
2,769,264
|
|
The
accompanying notes are an integral part of these condensed consolidated interim financial statements.
DelMar
Pharmaceuticals, Inc.
Condensed
Consolidated Interim Statements of Cash Flows
(Unaudited)
(expressed
in US dollars unless otherwise noted)
|
|
|
|
Six
months ended
December 31,
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
Note
|
|
$
|
|
|
$
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
Loss
for the period
|
|
|
|
|
(3,345,922
|
)
|
|
|
(3,801,501
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
|
|
Amortization
of intangible assets
|
|
|
|
|
5,602
|
|
|
|
10,746
|
|
Change
in fair value of derivative liability
|
|
4
|
|
|
-
|
|
|
|
(1,041
|
)
|
Shares
issued for services
|
|
|
|
|
8,187
|
|
|
|
6,756
|
|
Warrants
issued for services
|
|
|
|
|
34,672
|
|
|
|
27,802
|
|
Stock
option expense
|
|
5
|
|
|
210,837
|
|
|
|
255,653
|
|
Performance
stock unit expense
|
|
|
|
|
-
|
|
|
|
123,028
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and deposits
|
|
|
|
|
157,255
|
|
|
|
728,276
|
|
Interest,
taxes and other receivables
|
|
|
|
|
(4,389
|
)
|
|
|
29,188
|
|
Accounts
payable and accrued liabilities
|
|
|
|
|
(993,766
|
)
|
|
|
(420,679
|
)
|
Related
party payables
|
|
|
|
|
(48,534
|
)
|
|
|
(8,104
|
)
|
Net
cash used in operating activities
|
|
|
|
|
(3,976,058
|
)
|
|
|
(3,049,876
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Net
proceeds from the issuance of shares and warrants
|
|
5
|
|
|
6,582,966
|
|
|
|
-
|
|
Net
proceeds from the exercise of warrants
|
|
5
|
|
|
26,550
|
|
|
|
784,961
|
|
Series
A preferred stock dividend
|
|
3
|
|
|
(4,178
|
)
|
|
|
(4,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
|
|
6,605,338
|
|
|
|
780,783
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
|
|
2,629,280
|
|
|
|
(2,269,093
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - beginning of period
|
|
|
|
|
3,718,758
|
|
|
|
5,971,995
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - end of period
|
|
|
|
|
6,348,038
|
|
|
|
3,702,902
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary
information (note 7)
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated interim financial statements.
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
1
|
Nature
of operations, corporate history, and going concern
|
Nature
of operations
DelMar
Pharmaceuticals, Inc. (the “Company”) is a clinical stage drug development company with a focus on the treatment of
solid tumor cancers. The Company is currently conducting two phase 2 clinical trials in the United States and China with its product
candidate, VAL-083, as a potential new treatment for glioblastoma multiforme, the most common and aggressive form of brain cancer.
Historical research indicates that VAL-083 is also active in other solid tumor cancers such as ovarian, lung, pediatric brain
cancer, as well as other solid tumors of the central nervous system. The Company may pursue opportunities in these cancers in
the future. In order to accelerate the Company’s development timelines, it leverages existing preclinical and clinical data
from a wide range of sources. The Company may seek marketing partnerships in order to potentially offset clinical costs
and to generate future royalty revenue from approved indications of its product candidate.
Corporate
history
The
Company is a Nevada corporation formed on June 24, 2009 under the name Berry Only, Inc. On January 25, 2013, the Company entered
into and closed an exchange agreement (the “Exchange Agreement”), with Del Mar Pharmaceuticals (BC) Ltd. (“Del
Mar (BC)”), 0959454 B.C. Ltd. (“Callco”), and 0959456 B.C. Ltd. (“Exchangeco”) and the security
holders of Del Mar (BC). Upon completion of the Exchange Agreement, Del Mar (BC) became a wholly-owned subsidiary of the Company
(the “Reverse Acquisition”).
DelMar
Pharmaceuticals, Inc. is the parent company of Del Mar (BC), a British Columbia, Canada corporation incorporated on April 6, 2010,
which is a clinical stage company with a focus on the development of drugs for the treatment of cancer. The Company is also the
parent company to Callco and Exchangeco which are British Columbia, Canada corporations. Callco and Exchangeco were formed to
facilitate the Reverse Acquisition.
References
to the Company refer to the Company and its wholly-owned subsidiaries, Del Mar (BC), Callco and Exchangeco.
Going
concern
These
condensed consolidated interim financial statements have been prepared on a going concern basis which assumes that the Company
will continue its operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities
in the normal course of business.
For the six
months ended December 31, 2019, the Company reported a loss of $3,345,922, and a negative cash flow from operations of $3,976,058.
The Company had an accumulated deficit of $63,933,043 and had cash and cash equivalents of $6,348,038 as of December 31, 2019.
The Company is in the development stage and has not generated any revenues to date. The Company does not have the prospect of achieving
revenues until such time that its product candidate is commercialized, or partnered, which may not ever occur. In the near future,
the Company will require additional funding to maintain its clinical trials, research and development projects, and for general
operations. These circumstances indicate substantial doubt exists about the Company’s ability to continue as a going concern
within one year from the date of filing of these condensed consolidated financial statements.
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
Consequently,
management is pursuing various financing alternatives to fund the Company’s operations so it can continue as a going concern.
Management plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership
arrangements. The Company may tailor its drug candidate development program based on the amount of funding the Company is able
to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.
These
financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may
be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
|
2
|
Significant
accounting policies
|
Reverse
stock split
On
May 7, 2019, the Company filed a Certificate of Change with the Secretary of State of Nevada that effected a 1-for-10 (1:10) reverse
stock split of its common stock, par value $0.001 per share, which became effective on May 8, 2019. Pursuant to the Certificate
of Change, the Company’s authorized common stock was decreased in the same proportion as the split resulting in a decrease
from 70,000,000 authorized shares of common stock to 7,000,000 shares authorized. The par value of its common stock was unchanged
at $0.001 per share, post-split. All common shares, warrants, stock options, conversion ratios, and per share information in these
condensed consolidated interim financial statements give retroactive effect to the 1-for-10 reverse stock split. The Company’s
authorized and issued preferred stock was not affected by the split.
Amended
articles of incorporation
On June 26, 2019, the Company amended its articles
of incorporation to increase the number of authorized shares of common stock from 7,000,000 to 95,000,000 shares.
Basis
of presentation
The
condensed consolidated interim financial statements of the Company have been prepared in accordance with United States Generally
Accepted Accounting Principles (“U.S. GAAP”) and are presented in United States dollars. The functional currency of
the Company and each of its subsidiaries is the United States dollar.
The
accompanying condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiaries,
Del Mar BC, Callco, and Exchangeco. All intercompany balances and transactions have been eliminated in consolidation.
The
principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set
out below and have been consistently applied to all periods presented.
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
Unaudited
interim financial data
The accompanying unaudited condensed consolidated
interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission
(“SEC”) for interim financial information. Accordingly, they do not include all of the information and the notes required
by U.S. GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements should be read
in conjunction with the audited financial statements of the Company as of, and for the fiscal year ended, June 30, 2019 included
in the Form 10-K filed with the SEC on September 9, 2019. 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 and six months ended December 31, 2019 are not necessarily indicative of the results to be expected for the
fiscal year ending June 30, 2020, or for any other future annual or interim period.
Use
of estimates
The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of assets,
liabilities, expenses, contingent assets and contingent liabilities as at the end of, or during, the reporting period. Actual results
could significantly differ from those estimates. Significant areas requiring management to make estimates include the derivative
liability, the valuation of equity instruments issued for services, and clinical trial accruals. Further details of the nature
of these assumptions and conditions may be found in the relevant notes to these condensed consolidated interim financial statements.
Accruals
for research and development expenses and clinical trials
As
part of the process of preparing its financial statements, the Company is required to estimate its expenses resulting from
its obligations under contracts with vendors, clinical research organizations and consultants, and under clinical site
agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations,
which vary from contract to contract and may result in payment terms that do not match the periods over which materials or
services are provided under such contracts. The Company’s objective is to reflect the appropriate expenses in its
financial statements by matching those expenses with the period in which services are performed and efforts are expended. The
Company accounts for these expenses according to the timing of various aspects of the expenses. The Company determines
accrual estimates by taking into account discussion with applicable personnel and outside service providers as to the
progress of clinical trials, or the services completed. During the course of a clinical trial, the Company adjusts its
clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses
as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical
trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party
vendors. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its
understanding of the status and timing of services performed relative to the actual status and timing of services performed
may vary and may result in it reporting amounts that are too high or too low for any particular period. For the three and six
months ended December 31, 2019 and 2018, there were no material adjustments to the Company’s prior period estimates of
accrued expenses for clinical trials.
Loss
per share
Income or loss per share is calculated based on the
weighted average number of common shares outstanding. For the three and six month periods ended December 31, 2019 and 2018 diluted
loss per share does not differ from basic loss per share since the effect of the Company’s warrants, stock options, performance
stock units, and convertible preferred shares is anti-dilutive. As of December 31, 2019, potential common shares of 9,963,596 (2018
– 940,353) related to outstanding warrants, 778,750 (2018 – 292,683) relating to stock options, nil (2018 – 120,000)
relating to performance stock units, and 162,177 (2018 – 210,279) relating to outstanding Series B convertible preferred
shares were excluded from the calculation of net loss per common share.
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
Recent
accounting pronouncements
From
time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other
standard setting bodies that are adopted by the Company as of the specified effective date.
Recently
adopted
ASU
2016-02 — Leases (Topic 842)
The
new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability
on the consolidated balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance
or operating, with classification affecting the pattern of expense recognition in the consolidated income statement. ASU 2016-02
is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with
early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases
existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with
certain practical expedients available. The adoption of ASU 2016-02 did not have a material impact on the Company’s results
of operations or financial results.
ASU
2018-07 — Stock Compensation (Topic 718) Improvements to Nonemployee Shares-based Payment Accounting
The
amendments in this update are intended to the reduce cost and complexity and to improve financial reporting for share-based payments
issued to nonemployees. The ASU expands the scope of Topic 718, Compensation —Stock Compensation, which currently only
includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services.
The existing guidance on nonemployee share-based payments is significantly different from current guidance for employee share-based
payments. This ASU expands the scope of the employee share-based payments guidance to include share-based payments issued to nonemployees.
By doing so, the FASB improves the accounting of nonemployee share-based payments issued to acquire goods and services used in
its own operations. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15,
2018, including interim periods within that fiscal year. The adoption of ASU 2018-07 did not have a material impact on the Company’s
results of operations or financial results.
Not
yet adopted
ASU
2017-11 — I. Accounting for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral
for Mandatorily Redeemable Financial Instruments of Certain Non-public Entities and Certain Mandatorily Redeemable Noncontrolling
Interests with a Scope Exception
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
The
amendments in this update are intended to reduce the complexity associated with the accounting for certain financial instruments
with characteristics of liabilities and equity. Specifically, a down round feature would no longer cause a freestanding equity-linked
financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes
in fair value recognized in current earnings. In addition, the indefinite deferral of certain provisions of Topic 480 have been
re-characterized to a scope exception. The re-characterization has no accounting effect. ASU 2017-11 is effective for public business
entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is
permitted. The Company has not yet evaluated the impact of adoption of this ASU on its condensed consolidated interim financial
statements and related disclosures.
During
the six months ended December 31, 2019, other than ASU 2017-11, there have been no new, or existing recently issued,
accounting pronouncements that are of significance, or potential significance, that impact the Company’s condensed
consolidated interim financial statements.
|
3
|
Related
party transactions
|
The
Series A Preferred Stock is held by Valent Technologies, LLC (“Valent”), an entity owned by Dr. Dennis Brown, the
Company’s Chief Scientific Officer. Therefore, Valent is a related party to the Company. For the three months ended
December 31, 2019 and 2018 respectively, the Company recorded $2,089 related to the dividend payable to Valent on the Series
A Preferred Stock and for the six months ended December 31, 2019 and 2018 respectively, the Company recorded $4,178 related
to the dividend (note 5). The dividends have been recorded as a direct increase in accumulated deficit.
The
Company has issued common stock purchase warrants. Based on the terms of certain of these warrants the Company determined that
the warrants were a derivative liability which is recognized at fair value at the date of the transaction and re-measured at fair
value each reporting period with the changes in fair value recorded in the condensed consolidated interim statement of operations.
The derivative liabilities balance was zero at December
31, 2019 and June 30, 2019. The derivative liabilities balance consisted of the 2,180 agent warrants at December 31, 2019 and June
30, 2019.
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
Changes
in the Company’s derivative liability are summarized as follows:
|
|
Three
months ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Opening
balance
|
|
-
|
|
|
1,337
|
|
Change
in fair value of warrants
|
|
|
-
|
|
|
|
(1,261
|
)
|
|
|
|
|
|
|
|
|
|
Closing
balance
|
|
|
-
|
|
|
|
76
|
|
Less
current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Long
term portion
|
|
|
-
|
|
|
|
76
|
|
|
|
Six months ended
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Opening
balance
|
|
|
-
|
|
|
|
1,117
|
|
Change
in fair value of warrants
|
|
|
-
|
|
|
|
(1,041
|
)
|
|
|
|
|
|
|
|
|
|
Closing
balance
|
|
|
-
|
|
|
|
76
|
|
Less
current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Long
term portion
|
|
|
-
|
|
|
|
76
|
|
Series B Preferred Stock
|
|
Series
B Preferred Stock
|
|
|
|
2019
|
|
|
|
Number
of shares
|
|
|
$
|
|
Balance
– June 30, 2019
|
|
|
673,613
|
|
|
|
4,699,304
|
|
Conversion
of Series B Preferred stock to common stock
|
|
|
(25,000
|
)
|
|
|
(174,407
|
)
|
|
|
|
|
|
|
|
|
|
Balance
– December 31, 2019
|
|
|
648,613
|
|
|
|
4,524,897
|
|
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
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. The holders of the Series B Preferred
Stock are entitled to an annual cumulative, in arrears, dividend at the rate of 9% payable quarterly. The 9% dividend accrues quarterly
commencing on the date of issue and is payable quarterly on June 30, September 30, December 31, and March 31 of each year
commencing on June 30, 2016. Dividends are payable solely by delivery of shares of common stock, in an amount for each holder equal
to the aggregate dividend payable to such holder with respect to the shares of Series B Preferred Stock held by such holder divided
by the Conversion Price. The Series B Preferred Stock does not contain any repricing features. Each share of Series B Preferred
Stock entitles its holder to vote with the common stock on an as-converted basis.
The
Series B Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i)
senior to the Company’s common stock and (ii) senior to the Special Voting Preferred Stock and (iii) senior to any other
class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to,
the Series B Preferred Stock. The Series B Preferred Stock shall be pari passu in liquidation to the Company’s Series A
Preferred Stock. The liquidation value of the Series B Preferred Stock at December 31, 2019 is the stated value of $5,188,904
(June 30, 2019 - $5,388,904).
In
addition, the Company and the holders entered into a royalty agreement, pursuant to which the Company will pay the holders of
the Series B Preferred Stock, in aggregate, a low, single-digit royalty based on their pro rata ownership of the Series B Preferred
Stock on products sold directly by the Company or sold pursuant to a licensing or partnering arrangement (the “Royalty Agreement”).
Upon
conversion of a holder’s Series B Preferred Stock to common stock, such holder shall no longer receive ongoing royalty payments
under the Royalty Agreement but will be entitled to receive any residual royalty payments that have vested. Rights to the royalties
shall vest during the first three years following the applicable closing date, in equal thirds to holders of the Series B Preferred
Stock on each of the three vesting dates, upon which vesting dates such royalty amounts shall become vested royalties.
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
Pursuant
to the Series B Preferred Stock dividend, during the three months ended December 31, 2019, the Company issued 3,700 (2018
– 4,735) shares of common stock for an amount of $2,552 (2018 – $16,190) and during the six months ended
December 31, 2019, the Company issued 7,400 (2018 – 9,695) shares of common stock for an amount of $4,598 (2018 –
$52,275). These dividends have been recognized as a direct increase in accumulated deficit.
A
total of 648,613 (2018 – 841,113) shares of Series B Preferred Stock are outstanding as of December 31, 2019, such that
a total of 162,177 (2018 – 210,279) shares of common stock are issuable upon conversion of the Series B Preferred Stock
as at December 31, 2019. Converted shares are rounded up to the nearest whole share.
Series A Preferred Stock
Effective
September 30, 2014, the Company filed a Certificate of Designation of Series A Preferred Stock (the “Series A Certificate
of Designation”) with the Secretary of State of Nevada. Pursuant to the Series A Certificate of Designation, the Company
designated 278,530 shares of preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have a stated
value of $1.00 per share (the “Series A Stated Value”) and are not convertible into common stock. The holder of the
Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in
arrears. Upon any liquidation of the Company, the holder of the Series A Preferred Stock will be entitled to be paid, out of any
assets of the Company available for distribution to stockholders, the Series A Stated Value of the shares of Series A Preferred
Stock held by such holder, plus any accrued but unpaid dividends thereon, prior to any payments being made with respect to the
common stock. The Series A Preferred Stock is held by Valent (note 3).
The
Series A Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i)
senior to the Company’s common stock, and (ii) senior to the Company’s Special Voting Preferred Stock and (iii) senior
to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with,
or senior to, the Series A Preferred Stock. The Series A Preferred Stock shall be pari passu in liquidation to the Company’s
Series B Preferred Stock. The liquidation value of the Series A Preferred stock at December 31, 2019 and June 30, 2019 is the
stated value of $278,530.
There was no change to the Series A Preferred stock
for the three or six month periods ended December 31, 2019 or 2018.
Common
stock
Stock
Issuances
Six
months ended December 31, 2019
Underwritten
public offering
On
August 16, 2019, the Company closed on the sale of (i) 4,895,000 shares of its common stock, par value $0.001 per share (the “Common
Stock”), (ii) pre-funded warrants (“PFW”) to purchase an aggregate of 2,655,000 shares of Common Stock and (iii)
common warrants to purchase an aggregate of 7,762,500 shares of Common Stock (“2020 Investor Warrants”), including
800,000 shares of Common Stock and 2020 Investor Warrants to purchase an aggregate of 1,012,500 shares of Common Stock sold pursuant
to a partial exercise by the underwriters of the underwriters’ option to purchase additional securities, in the Company’s
underwritten public offering (the “Offering”). Each share of Common Stock or PFW, as applicable, was sold together
with a 2020 Investor Warrant to purchase one share of Common Stock at a combined effective price to the public of $1.00 per share
of Common Stock and accompanying 2020 Investor Warrant.
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
The
net proceeds from the Offering, including from the partial exercise of the underwriters’ option to purchase additional securities,
were $6,582,966, after deducting underwriting discounts and commissions, and other offering expenses.
The
2020 Investor Warrants are exercisable at $1.00 per share until their expiry on August 16, 2024 and the PFW are exercisable at
$0.01 per share at any time after August 16, 2019. The Company also issued 377,500 warrants to the underwriters of the Offering.
The underwriter warrants are exercisable at $1.15 per share commencing February 10, 2020 until their expiry on August 14, 2022.
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.
2017
Omnibus Incentive Plan
As
approved by the Company’s stockholders at the annual meeting of stockholders held on April 11, 2018, on July 7, 2017, as
amended on February 1, 2018, the Company’s board of directors approved adoption of the Company’s 2017 Omnibus Equity
Incentive Plan (the “2017 Plan”). The board of directors also approved a form of Performance Stock Unit Award Agreement
to be used in connection with grants of performance stock units (“PSUs”) under the 2017 Plan. Under the 2017 Plan,
780,000 shares of Company common stock are reserved for issuance, less the number of shares of common stock issued under the Del
Mar (BC) 2013 Amended and Restated Stock Option Plan (the “Legacy Plan”) or that are subject to grants of stock options
made, or that may be made, under the Legacy Plan. A total of 164,235 shares of common stock have been issued under the Legacy
Plan and/or are subject to outstanding stock options granted under the Legacy Plan, and a total of 614,515 shares of common stock
have been issued under the 2017 Plan and/or are subject to outstanding stock options granted under the 2017 Plan leaving 1,250
shares of common stock available at December 31, 2019 for issuance under the 2017 Plan if all such options under the Legacy Plan
were exercised.
The
maximum number of shares of Company common stock with respect to which any one participant may be granted awards during any calendar
year is 8% of the Company’s fully diluted shares of common stock on the date of grant (excluding the number of shares of
common stock issued under the 2017 Plan and/or the Legacy Plan or subject to outstanding awards granted under the 2017 Plan and/or
the Legacy Plan). No award will be granted under the 2017 Plan on or after July 7, 2027, but awards granted prior to that date
may extend beyond that date.
During
the six months ended December 31, 2019, and subject to approval by the Company’s stockholders, the Company’s
board of directors approved an increase in the number of shares of common stock available to be issued under the 2017 Plan by
1,500,000. The increase brings the total number of shares available under the 2017 Plan to 2,280,000.
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
During
the six months ended December 31, 2019, the Company granted 1,041,016 stock options to officers and directors of the Company.
The total grant date aggregate fair value of the stock options was $505,385. Of the total stock options granted during the
six months ended December 31, 2019, 491,817 were granted under the existing 2017 Plan limit and 549,199 will be
exercisable subject to approval by the Company’s stockholders of the 2017 Plan share increase. All of these stock
options granted to officers and directors have an exercise price of $0.61 and expire on September 5, 2029. Of the 1,041,016
stock options granted, 375,000 vest pro rata monthly over one year from the date of grant and 666,016 vest as to one-sixth on
the six month anniversary of the grant date with the remaining five-sixths vesting pro rate monthly over 30 months commencing
on the seven-month anniversary of the grant date.
In
addition, during the six months ended December 31, 2019, the Company granted 250,000 stock options to an officer of the
Company, subject to stockholder approval of the share increase to the 2017 Plan. The options have an exercise price of $0.735
and expire November 12, 2029. The options vest upon the achievement of certain clinical development milestones.
Stock
Options
The
following table sets forth the aggregate stock options outstanding under all plans as of December 31, 2019:
|
|
Number
of
stock
options
outstanding
|
|
|
Weighted
average
exercise
price
$
|
|
Balance
– June 30, 2019
|
|
|
288,183
|
|
|
|
22.31
|
|
Granted
|
|
|
491,817
|
|
|
|
0.61
|
|
Expired
|
|
|
(1,250
|
)
|
|
|
(40.00
|
)
|
|
|
|
|
|
|
|
|
|
Balance
– December 31, 2019
|
|
|
778,750
|
|
|
|
8.58
|
|
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
The
following table summarizes stock options outstanding and exercisable under all plans at December 31, 2019:
Exercise
price
$
|
|
|
Number
Outstanding at
December 31,
2019
|
|
|
Weighted
average
remaining
contractual
life
(years)
|
|
|
Number
exercisable
at
December 31,
2019
|
|
|
0.61
|
|
|
|
491,817
|
|
|
|
9.68
|
|
|
|
93,750
|
|
|
6.10
|
|
|
|
30,000
|
|
|
|
8.85
|
|
|
|
23,611
|
|
|
7.00
|
|
|
|
5,451
|
|
|
|
8.48
|
|
|
|
2,726
|
|
|
8.70
|
|
|
|
12,000
|
|
|
|
7.84
|
|
|
|
12,000
|
|
|
9.83
|
|
|
|
83,647
|
|
|
|
8.39
|
|
|
|
44,147
|
|
|
10.60
|
|
|
|
3,600
|
|
|
|
8.28
|
|
|
|
2,100
|
|
|
11.70
|
|
|
|
30,000
|
|
|
|
3.16
|
|
|
|
30,000
|
|
|
15.36
|
|
|
|
2,500
|
|
|
|
2.42
|
|
|
|
2,500
|
|
|
20.00
|
|
|
|
13,125
|
|
|
|
1.77
|
|
|
|
13,125
|
|
|
21.10
|
|
|
|
14,400
|
|
|
|
7.52
|
|
|
|
10,800
|
|
|
29.60
|
|
|
|
4,500
|
|
|
|
5.09
|
|
|
|
4,500
|
|
|
37.60
|
|
|
|
4,500
|
|
|
|
6.11
|
|
|
|
4,500
|
|
|
41.00
|
|
|
|
4,000
|
|
|
|
6.86
|
|
|
|
4,000
|
|
|
42.00
|
|
|
|
41,250
|
|
|
|
3.06
|
|
|
|
41,250
|
|
|
44.80
|
|
|
|
3,000
|
|
|
|
6.11
|
|
|
|
3,000
|
|
|
49.50
|
|
|
|
22,460
|
|
|
|
4.56
|
|
|
|
21,733
|
|
|
53.20
|
|
|
|
8,000
|
|
|
|
6.35
|
|
|
|
8,000
|
|
|
61.60
|
|
|
|
1,500
|
|
|
|
3.25
|
|
|
|
1,500
|
|
|
92.00
|
|
|
|
3,000
|
|
|
|
3.42
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
778,750
|
|
|
|
|
|
|
|
326,242
|
|
The
above table excludes 799,199 granted stock options that are exercisable subject to approval by the Company’s stockholders
of the share reserve increase under the 2017 Plan. Of these options, 549,199 are exercisable at $0.61 per share until September
5, 2029 and 250,000 are exercisable at $0.735 until November 12, 2029.
Included
in the number of stock options outstanding are 2,500 stock options granted at an exercise price of CA $20.00. The exercise
price of these options shown in the above table have been converted to US $15.36 using the period ending closing exchange
rate. Stock options issued during the six months ended December 31, 2019 have been valued using a Black-Scholes pricing
model with the following assumptions:
|
|
December 31,
2019
|
|
Dividend
rate
|
|
|
0
|
%
|
Volatility
|
|
|
99%
to 102
|
%
|
Risk-free
rate
|
|
|
1.50
|
%
|
Term
– years
|
|
|
5.5
to 6.5
|
|
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
The
estimated volatility of the Company’s common stock at the date of issuance of the stock options is based on the historical
volatility of the Company. The risk-free interest rate is based on rates published by the government for bonds with a maturity
similar to the expected remaining life of the stock options at the valuation date. The expected life of the stock options has been estimated using the plain vanilla method.
The
Company has recognized the following amounts as stock option expense for the periods noted:
|
|
Three
months ended
December 31,
|
|
|
Six
months ended
December 31,
|
|
|
|
2019
$
|
|
|
2018
$
|
|
|
2019
$
|
|
|
2018
$
|
|
Research
and development
|
|
|
24,151
|
|
|
|
23,127
|
|
|
|
32,304
|
|
|
|
51,577
|
|
General
and administrative
|
|
|
135,701
|
|
|
|
99,624
|
|
|
|
178,533
|
|
|
|
204,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159,852
|
|
|
|
122,751
|
|
|
|
210,837
|
|
|
|
255,653
|
|
All
of the stock option expense for the periods ended December 31, 2019 and 2018 has been recognized as additional paid in capital.
The aggregate intrinsic value of stock options outstanding at December 31, 2019 was $39,198 (2018 - $0) and the aggregate intrinsic
value of stock options exercisable at December 31, 2019 was $7,472 (2018 - $0). As of December 31, 2019, there was $192,252 in
unrecognized compensation expense that will be recognized over the next 2.43 years. No stock options granted under the Company’s
equity plans have been exercised during the six months ended December 31, 2019. Upon the exercise of stock options new shares will be issued.
The
following table sets forth unvested stock options under all plans at December 31, 2019:
|
|
Number
of
Options
|
|
|
Weighted
average
exercise
price
$
|
|
|
Weighted
average
grant date
fair value
$
|
|
Unvested
at June 30, 2019
|
|
|
84,990
|
|
|
|
11.35
|
|
|
|
5.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
491,817
|
|
|
|
0.61
|
|
|
|
0.41
|
|
Vested
|
|
|
(124,299
|
)
|
|
|
3.60
|
|
|
|
1.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested
at December 31, 2019
|
|
|
452,508
|
|
|
|
1.81
|
|
|
|
1.01
|
|
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
Warrants
Certain
of the Company’s warrants have been recognized as a derivative liability (note 4). The following table summarizes
changes in the Company’s outstanding warrants as of December 31, 2019:
Description
|
|
Number
|
|
Balance – June 30, 2019
|
|
|
1,543,596
|
|
|
|
|
|
|
2020 Investor Warrants issued in underwritten offering
|
|
|
7,762,500
|
|
PFW issued in underwritten offering
|
|
|
2,655,000
|
|
2020 Underwriter Warrants
|
|
|
377,500
|
|
Exercise of PFW
|
|
|
(2,655,000
|
)
|
Warrants issued for services (i)
|
|
|
280,000
|
|
|
|
|
|
|
Balance - December 31, 2019
|
|
|
9,963,596
|
|
|
(i)
|
The Company issued 280,000 warrants for services during the six months ended December 31, 2019. The warrants are exercisable
at $0.75 per share until November 18, 2023 and they vest pro rata monthly commencing December 18, 2019. The total fair value of
the warrants issued was $132,519 with $34,672 being recognized during the six months ended December 31, 2019.
|
The
following table summarizes the Company’s outstanding warrants as of December 31, 2019:
Description
|
|
Number
|
|
|
Exercise
price $
|
|
|
Expiry date
|
2020 Investor Warrants
|
|
|
7,762,500
|
|
|
|
1.00
|
|
|
August 16, 2024
|
2019 Investor Warrants
|
|
|
760,500
|
|
|
|
3.10
|
|
|
June 5, 2024
|
2018 Investor Warrants
|
|
|
280,000
|
|
|
|
12.50
|
|
|
September 22, 2022
|
2017 Investor Warrants
|
|
|
207,721
|
|
|
|
35.00
|
|
|
April 19, 2022
|
2015 Investor Warrants
|
|
|
97,905
|
|
|
|
30.00
|
|
|
July 31, 2020
|
Warrants issued for services
|
|
|
280,000
|
|
|
|
0.75
|
|
|
November 18, 2023
|
Warrants issued for services
|
|
|
26,500
|
|
|
|
30.00
|
|
|
July 1, 2020 to February 1, 2021
|
Warrants issued for services
|
|
|
6,000
|
|
|
|
17.80
|
|
|
January 25, 2023
|
Warrants issued for services
|
|
|
33,600
|
|
|
|
11.70
|
|
|
February 27, 2023
|
Warrants issued for services
|
|
|
12,000
|
|
|
|
9.00
|
|
|
September 15, 2023
|
Warrants issued for services
|
|
|
4,140
|
|
|
|
59.30
|
|
|
February 27, 2020
|
Warrants issued for services
|
|
|
2,000
|
|
|
|
9.00
|
|
|
October 11, 2021
|
2020 Underwriter Warrants
|
|
|
377,500
|
|
|
|
1.15
|
|
|
August 14, 2022
|
2019 Agent Warrants
|
|
|
46,800
|
|
|
|
3.875
|
|
|
June 3, 2024
|
2018 Agent Warrants
|
|
|
40,000
|
|
|
|
12.50
|
|
|
September 20, 2022
|
2017 Agent Warrants
|
|
|
13,848
|
|
|
|
40.60
|
|
|
April 12, 2022
|
2016 Agent Warrants
|
|
|
10,402
|
|
|
|
40.00
|
|
|
May 12, 2021
|
2015 Agent Warrants
|
|
|
2,180
|
|
|
|
30.00
|
|
|
July 15, 2020
|
|
|
|
9,963,596
|
|
|
|
|
|
|
|
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
The Company has financial instruments that are measured
at fair value. To determine the fair value, the Company uses the fair value hierarchy for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs
be used when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed
based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market
participants would use to value an asset or liability. The three levels of inputs that may be used to measure fair value are as
follows:
|
●
|
Level
one - inputs utilize quoted prices (unadjusted) in active markets for identical
assets or liabilities;
|
|
●
|
Level
two - inputs are inputs other than quoted prices included in Level 1 that are observable
for the asset or liability, either directly or indirectly such as interest rates, foreign
exchange rates, and yield curves that are observable at commonly quoted intervals; and
|
|
●
|
Level
three - unobservable inputs developed using estimates and assumptions, which are
developed by the reporting entity and reflect those assumptions that a market participant
would use.
|
Assets
and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes
in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value
hierarchy.
The
Company’s financial instruments consist of cash and cash equivalents, other receivables, accounts payable, related party
payables and derivative liability. The carrying values of cash and cash equivalents, other receivables, accounts payable and related
party payables approximate their fair values due to the immediate or short-term maturity of these financial instruments.
Derivative
liability
The
Company accounts for certain warrants under the authoritative guidance on accounting for derivative financial instruments indexed
to, and potentially settled in, a company’s own stock, on the understanding that in compliance with applicable securities
laws, the warrants require the issuance of securities upon exercise and do not sufficiently preclude an implied right to net cash
settlement. The Company classifies these warrants on its balance sheet as a derivative liability which is fair valued at each
reporting period subsequent to the initial issuance. The Company has used a Black-Scholes Option Pricing Model (based on a closed-form
model that uses a fixed equation) to estimate the fair value of the warrants which is equivalent to the fair value of the warrants
calculated using the Binomial-Lattice Pricing Model. Determining the appropriate fair-value model and calculating the fair value
of warrants requires considerable judgment. Any change in the estimates (specifically probabilities and volatility) used may cause
the value to be higher or lower than that reported. The estimated volatility of the Company’s common stock at the date of
issuance, and at each subsequent reporting period, is based on the historical volatility of the Company. The risk-free interest
rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the warrants
at the valuation date. The expected life of the warrants is assumed to be equivalent to their remaining contractual term.
DelMar
Pharmaceuticals, Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(Unaudited)
December
31, 2019
(expressed
in US dollars unless otherwise noted)
|
a)
|
Fair
value of derivative liability
|
The
derivative is not traded in an active market and the fair value is determined using valuation techniques. The Company uses judgment
to select a variety of methods to make assumptions that are based on specific management plans and market conditions at the end
of each reporting period. The Company uses a fair value estimate to determine the fair value of the derivative liability. The
carrying value of the derivative liability would be higher, or lower, as management estimates around specific probabilities change.
The estimates may be significantly different from those amounts ultimately recorded in the consolidated financial statements because
of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an
active market. All changes in the fair value are recorded in the consolidated statement of operations and comprehensive loss each
reporting period. This is considered to be a Level 3 financial instrument as volatility is considered a Level 3 input.
The
fair value of derivative liabilities at December 31, 2019 and June 30, 2019 was $0.
|
7
|
Supplementary
statement of cash flows information
|
|
|
Six
months ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Series
B Preferred share common stock dividend (note 5)
|
|
|
4,598
|
|
|
|
52,275
|
|
Income
taxes paid
|
|
|
-
|
|
|
|
-
|
|
Interest
paid
|
|
|
-
|
|
|
|
-
|
|
The
Company has evaluated its subsequent events from December 31, 2019 through the date these condensed consolidated financial statements
were issued and has determined that there are no subsequent events requiring disclosure in these condensed consolidated financial
statements other than the items noted below.
Subsequent to December 31,
2019, the Company issued 2,658 shares of common stock and 250,000 stock purchase warrants for services. The warrants are exercisable
at $0.64 per share until January 20, 2024.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This
Management’s Discussion and Analysis (“MD&A”) contains “forward-looking statements”, within
the meaning of the Private Securities Litigation Reform Act of 1995, which represent our projections, estimates, expectations,
or beliefs concerning, among other things, financial items that relate to management’s future plans or objectives or to
our future economic and financial performance. In some cases, you can identify these statements by terminology such as “may”,
“should”, “plans”, “believe”, “will”, “anticipate”, “estimate”,
“expect” “project”, or “intend”, including their opposites or similar phrases or expressions.
You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors
that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation
by us or any other person that our events or plans will be achieved. You should not unduly rely on these forward-looking statements,
which speak only as of the date of this report. Except as may be required under applicable securities laws, we undertake no obligation
to publicly revise any forward-looking statement to reflect circumstances or events after the date of this report or to reflect
the occurrence of unanticipated events.
You
should review the factors and risks we describe under “Risk Factors” in this report on Form 10-K for the year ended
June 30, 2019 and in our other filings with the Securities and Exchange Commission, available at www.sec.gov. Actual results may
differ materially from any forward-looking statement.
References
to “we”, “us”, and “our”, refer to DelMar Pharmaceuticals, Inc. and our wholly-owned subsidiaries,
Del Mar (BC), Callco and Exchangeco.
Recent
Highlights
●
|
On January 29, 2020 we announced the publication of previously released interim clinical data in the February 2020 issue of peer-reviewed journal, Glioma. The article highlights results from the first 22 patients of our ongoing Phase 2 clinical study investigating the first-line treatment of VAL-083 with radiation therapy in newly-diagnosed, MGMT-unmethylated glioblastoma multiforme (“GBM”) being conducted at Sun Yat-sen University Cancer Center (“SYSUCC”).
|
●
|
On November 22, 2019 at the Society for Neuro-Oncology (“SNO”) Annual Meeting we presented positive interim clinical data in two posters updating results from our two ongoing Phase 2 clinical studies of VAL-083 in the treatment of GBM. In addition, we hosted a key opinion leader (“KOL”) event which included our Scientific Advisory Board (“SAB”) as well members of our senior management team. The KOL event featured our SAB and management in a panel discussion of our GBM clinical studies. A recording and transcript of the KOL event are available in the “Publications and Abstracts” tab of the “News & Media” section of our website, located at www.delmarpharma.com.
|
The
updated clinical data we presented at SNO included the following:
|
●
|
The first poster outlined the open-label, Phase 2 study of VAL-083 as a first-line treatment in newly-diagnosed, unmethylated GBM.
|
|
●
|
The second poster outlined interim data from two groups of patients receiving VAL-083 in the open-label, Phase 2 study in recurrent and adjuvant unmethylated GBM settings.
|
|
●
|
On
August 16, 2019, we completed a financing raising approximately $6.6 million in net proceeds.
We believe the net proceeds from this offering will be sufficient to complete full enrollment
in all three patient groups of our two ongoing Phase 2 clinical studies which is expected
to occur by the fourth quarter of calendar year 2020.
|
VAL-083
Clinical Studies
We
are currently developing VAL-083, a novel DNA-targeting agent for the treatment of GBM and potentially other solid tumors, including
ovarian cancer. Our recent research has highlighted the opportunities afforded by VAL-083’s unique mechanism of action and
its potential to address unmet medical needs by focusing our development efforts on patients whose tumors exhibit biological features
that make them resistant to, or unlikely to respond to, currently available therapies. For example, our research demonstrating
VAL-083’s activity in GBM is independent of the MGMT methylation status allows us to focus patient selection based on this
important biomarker.
The
evaluation of MGMT promoter methylation status has increasingly become common practice in the diagnostic assessment of GBM. In
September 2017, the National Comprehensive Cancer Network (“NCCN”) updated its guidelines for the standard treatment
of GBM based on MGMT methylation status. We believe these guidelines provide for enhanced opportunities for us to capitalize on
VAL-083’s unique mechanism of action by utilizing MGMT methylation as a biomarker to optimize patient selection for our
novel DNA-targeting agent to focus on the majority of GBM patients who are diagnosed with MGMT-unmethylated tumors.
Our
current priority is to leverage this research, and VAL-083’s unique mechanism of action, to efficiently advance VAL-083
for the most promising indications, including:
|
●
|
MGMT-unmethylated
GBM, currently comprising two ongoing separate Phase 2 clinical studies for:
|
|
o
|
GBM
patients in two study arms at MDACC:
|
|
■
|
as
adjuvant therapy immediately following chemoradiation; and
|
|
■
|
in
Avastin®-naïve recurrent GBM patients;
|
|
o
|
Newly
diagnosed GBM patients (ongoing study at SYSUCC); and
|
|
●
|
Potential
future indications including ovarian cancer, non-small cell lung cancer (“NSCLC”),
and other solid tumor indications.
|
Phase
2 Study in Newly-Diagnosed MGMT-unmethylated GBM
In
September 2017, we initiated a single arm, biomarker driven, open-label Phase 2 study in newly-diagnosed MGMT-unmethylated GBM
patients at SYSUCC in Guangzhou, China. The study is being conducted under our collaboration agreement with Guangxi Wuzhou Pharmaceutical
Company.
In this Phase 2 study, VAL-083 is being combined with radiotherapy
as a potential replacement for standard-of-care chemoradiation with temozolomide in patients with MGMT-unmethylated GBM. The goals
of the study are to confirm the safety of the three-day VAL-083 dosing regimen in combination with radiotherapy and to investigate
efficacy outcomes of the combination of VAL-083 and radiotherapy in MGMT-unmethylated GBM patients.
We
plan to enroll up to 30 newly-diagnosed, MGMT-unmethylated GBM patients in this study. The efficacy endpoints of the study
include tumor response, as assessed by the Response Assessment in NeuroOncology (“RANO”), and progression-free
survival (“PFS”), progression-free survival at six months (“PFS6”), and overall survival
(“OS”), compared to historical results in the target population. The study is being conducted in two parts: (1)
Dose-confirmation: VAL-083 in cohorts (20, 30 and 40 mg/m2/day IV daily x 3 every 21 days) to assess safety and
activity when administered concurrently with x-ray therapy (“XRT”) to confirm the maximum tolerated dose
(“MTD”), and (2) Expansion: VAL-083 will be studied in up to 20 additional patients at the target dose, as
determined by the dose-confirmation part of the study, administered concurrently with XRT. Assessments of safety and
tolerability will be used to support further clinical development of VAL-083 in combination with radiotherapy.
Pharmacokinetic assessments of VAL-083 in plasma and cerebral spinal fluid (“CSF”) will be used to correlate drug
exposure in the central nervous system with patient outcomes.
Dose-confirming cohorts studying 20, 30, and 40 mg/m2/day
x three every 21 days have been completed. Based on the dose confirmation phase of the study, we have selected 30 mg/m2/day
for combination with irradiation for the treatment of newly-diagnosed MGMT-unmethylated GBM patients.
This study has enrolled 23 out of a planned 30 patients as of
the data cut-off date of November 2, 2019. For the 22 patients who had completed at least one cycle of treatment as of that date,
median PFS with VAL-083 was 9.9 months (CI 7.3-12.0 months). For the 18 patients initially receiving the intended treatment
dose (30 mg/m2/day on days 1, 2 and 3 of a 21-day cycle) median PFS was 10.4 months (CI 6.0-12.0 months). While this
is not a head-to-head study, historically, temozolomide (“TMZ”) has been demonstrated to have 6.9 months PFS in unmethylated
GBM patients. Other doses were also examined as part of the dose escalation aspect of the study, and all but the 20 mg/m2/day
dose also demonstrated superior PFS to the historical comparator. A median of eight cycles of treatment has been received by all
patients who had either completed treatment, or remain in active treatment. Nine patients have received ten or more cycles.
Through our research, and that of the NCI, we have previously demonstrated
that VAL-083 crosses the blood brain barrier. Preliminary data from the SYSUCC study indicate that the concentration of VAL-083
is generally as high in CSF as in plasma at two hours post-infusion.
Concentration
of VAL-083 — Two Hours Post Dose
|
|
|
|
Mean
Concentrations (ng/mL)
|
|
Conc.
Ratio @ 2 hours
|
Dose
(mg/m2)
|
|
n
|
|
Plasma
(2 hours post dose)
|
|
CSF
(2 hours post dose)
|
|
CSF/Plasma
|
20
|
|
1
|
|
110
|
|
154
|
|
1.40
|
30
|
|
3
|
|
97
|
|
134
|
|
1.41
|
40
|
|
3
|
|
170
|
|
190
|
|
1.13
|
By comparison, temozolomide is typically 80% lower in the CSF
than the plasma (Schreck et al. 2018, Oncology (Williston Park)). The accumulation of VAL-083 in the CSF further validates that
VAL-083 crosses the blood-brain-barrier and demonstrates that therapeutic drug concentrations in the CSF are achievable for extended
periods of time.
Phase
2 Study in MGMT-unmethylated GBM in Collaboration with University of Texas MD Anderson Cancer Center
In February 2017, we initiated a biomarker driven, open-label,
single-arm Phase 2 study in collaboration with MDACC. This biomarker-driven study (testing for MGMT methylation status) has been
amended to enroll up to 83 patients (35 with a starting dose of 40 mg/m2/day and 48 with a starting dose of 30 mg/m2/day)
to determine the potential of VAL-083 treatment to improve overall survival in GBM patients whose tumors have recurred following
treatment with temozolomide. These patients will not have been treated previously with Avastin®. In addition, this
study has been amended to add a new adjuvant patient arm. This arm will include 24 patients previously treated with TMZ in combination
with radiation who, rather than being treated with additional cycles of TMZ, will begin treatment with VAL-083.
Recurrent
Study Arm
The patients in the recurrent study arm are receiving second-line
therapy with VAL-083 following TMZ failure. Sixty-two patients (out of a planned 83) have been enrolled as of November 15,
2019, with 35 patients (with no additional patients planned) having received an initial dose of 40 mg/m2/day and 27
(out of a planned 48) having received an initial dose of 30 mg/m2/day (on days 1, 2 and 3 of a 21-day cycle). mOS for
the 60 patients who have completed at least one cycle of treatment was 7.5 months (CI 6.0-11.5 months). For the 25 of those patients
who initially received the intended treatment dose of 30 mg/m2/day, mOS was 10.6 months (CI 5.8-10.6 months). While
this is not a head-to-head study, historically lomustine, which is the most commonly used chemotherapy for these recurrent patients,
has demonstrated a mOS of 7.2 months (EORTC 26101, MGMT-unmethylated lomustine arm).
The safety profile has been well within the existing safety
monitoring guidelines described in the present study protocol. However, in consultation with the principal investigator at MDACC,
we have amended the protocol for this clinical study to modify the starting dose of VAL-083 to 30 mg/m2/day on days
1, 2 and 3, of a 21-day cycle. This modification may improve tolerance in this patient population and thereby potentially increase
overall exposure to VAL-083 by increasing the number of cycles of drug patients may be able to receive. We have modified the patient
screening platelet count, from 100,000/µL to 125,000/µL, for the same reasons. Safety data from this study will become
part of the overall safety dossier to support future filings with the FDA and other regulatory agencies.
It is important for this GBM patient population, which has been
heavily pre-treated with temozolomide, to be able to be treated with multiple cycles of VAL-083 without significant hematological
toxicities. We believe the modified dose of VAL-083, in addition to the change in patient eligibility platelet counts, should help
provide for enhanced patient safety. We believe a positive outcome from this study can establish a position for VAL-083 in the
treatment of MGMT-unmethylated recurrent GBM.
A
detailed description of this study can be found at clinicatrials.gov, Identifier Number: NCT02717962.
Adjuvant
Study Arm
On July 24, 2019, we announced the enrollment of the first patient
in the adjuvant arm of the Phase 2 study being conducted at MDACC. The adjuvant arm will include up to 24 patients. These patients
will have had initial cycles of temozolomide concomitant with radiation but will not have yet started subsequent cycles of TMZ
(i.e. maintenance stage TMZ patients). Published data from Tanguturi et al (2017 Nero-Oncology) indicates that MGMT-unmethylated
patients receiving current standard of care have a median progression-free survival of 6.9 months. As of November 15, 2019, five
patients (out of a planned 24) have been enrolled and all patients remain alive on continued therapy.
As
noted above, patients in the recurrent arm of the MDACC clinical study have been heavily pre-treated with temozolomide. Based
on published data from our MDACC and SYSUCC clinical studies, we believe there is a significant opportunity to treat GBM patients
in the pre-temozolomide maintenance stage (i.e., adjuvant). At the AACR’s annual meeting in April 2019, we reported that
myelosuppression (thrombocytopenia and neutropenia) is the most common adverse event associated with VAL-083. The higher potential
for myelosuppression with the 40 mg/m2/day of VAL-083 in this study appears to be correlated with the number of cycles
of prior TMZ maintenance therapy (> 5 cycles).
Safety Across Studies
Four subjects have experienced a serious adverse event (“SAE”)
possibly related to VAL-083 in the newly-diagnosed group, eleven subjects have experienced a possibly drug-related SAE in the
recurrent group, and no patients have experienced a possibly drug-related SAE in the adjuvant group as of the relevant data cut-off
dates.
Fast
Track Designation
The FDA has granted us Fast Track designation for VAL-083 in
recurrent GBM.
Fast
Track designation is designed to expedite the review of drugs that show promise in treating life-threatening diseases and
address unmet medical needs, with the goal of getting new treatments to patients earlier. Fast Track designation provides
sponsors with an opportunity for increased frequency for communication with the FDA to ensure an optimal development plan and
to collect appropriate data needed to support drug approval. Additional benefits of the Fast Track designation may include an
Accelerated Approval, a Priority Review, and a Rolling Review. Accelerated Approval is granted to drugs that demonstrate an
effect on a surrogate, or intermediate endpoints, reasonably likely to predict clinical benefit. Priority Review shortens the
FDA review process for a new drug from ten months to six months and is appropriate for drugs that demonstrate significant
improvements in both safety and efficacy of an existing therapy. Rolling Review provides a drug company the opportunity to
submit completed sections of its New Drug Application (“NDA”) for review by the FDA. Typically, NDA reviews do
not commence until the drug company has submitted the entire application to the FDA. Through the Fast Track designation, the
FDA attempts to ensure that questions raised during the drug development process are resolved quickly, often leading to
earlier approval and increased access for patients.
MGMT-unmethylated
GBM
GBM
is the most common and the most lethal form of glioma. According to the Central Brain Tumor Registry of the United States, GBM
occurs with an incidence of 3.20 per 100,000 person-years. Approximately 13,000 new cases of GBM were diagnosed in the United
States and 16,000 in Europe during 2017. Within the GBM patient population, approximately two-thirds of patients are unmethylated
with respect to their MGMT status.
Measurement of MGMT (O6-methyl guanine methyltransferase) methylation
status has become routine in clinical practice as a biomarker that correlates with resistance to the standard-of-care chemotherapy
with TMZ (Temodar®), and patient outcomes in GBM. Approximately two-thirds of GBM patients’ tumors are characterized
as “MGMT-unmethylated” and exhibit a high expression of MGMT, a naturally occurring DNA-repair enzyme, the activity
of which nullifies the chemotherapeutic activity of TMZ. The lack of specific therapies for MGMT-unmethylated GBM is a significant
unmet medical need. Importantly, the 2017 update to the NCCN guidelines states that the treatment benefit of TMZ is likely to
be lower in GBM patients with an unmethylated MGMT promoter.
We have demonstrated that VAL-083’s anti-tumor mechanism
is active independent from the MGMT status in vitro. We believe this suggests the potential of VAL-083 as a replacement
for the current standard-of-care chemotherapy, temozolomide, in MGMT-unmethylated GBM. We are therefore utilizing MGMT-methylation
status to identify GBM patients who are unlikely to respond to temozolomide and including only MGMT-unmethylated patients in our
current clinical studies of VAL-083.
We
believe that our research, in the context of the 2017 update to the NCCN guidelines, highlights this unmet need and the opportunity
for VAL-083 as a potential new standard-of-care in the treatment of MGMT-unmethylated GBM.
Current
Treatments for Gliomas and Glioblastoma Multiforme
Gliomas
are a type of Central Nervous System (“CNS”) tumor that arises from glial cells in the brain or spine. Glial cells
are the cells surrounding nerves. Their primary function is to provide support and protection for neurons in the CNS.
GBM
is the most common and the most lethal form of glioma. According to the Central Brain
Tumor Registry of The United States, GBM occurs with an incidence of 3.20 per 100,000
person-years. Approximately 13,000 new cases of GBM were diagnosed in the United States
and 16,000 in Europe during 2017.
Common
symptoms of GBM include headaches, seizures, nausea, weakness, paralysis and personality or cognitive changes such as loss of
speech or difficulty in thinking clearly. GBM progresses quickly and patients’ conditions deteriorate rapidly progressing
to death. The outlook for GBM patients is generally poor. The overall median survival in newly diagnosed GBM patients with best
available treatments is less than 15 months, and two-year and five-year survival rates are approximately 30% and 10%, respectively.
Median overall survival in newly-diagnosed, unmethylated GBM patients is 12.2 months.
In
September 2017, the NCCN updated treatment guidelines for GBM. The recommended treatment regimen for GBM includes surgical resection
to remove as much of the tumor as possible (“debulking”) followed by radiotherapy with concomitant and adjuvant chemotherapy
with temozolomide with or without tumor treating fields (“TTF”). GBM patients whose tumors exhibit an unmethylated
promoter for the gene encoding the DNA repair enzyme MGMT, a biomarker correlated with resistance to temozolomide, may be treated
with radiation alone following surgery.
Patients
with an unmethylated MGMT promoter have high levels of MGMT, a naturally-occurring DNA repair enzyme that repairs tumor-fighting
lesions induced by TMZ thus allowing a patient’s tumor to continue to grow despite treatment, which leads to poor outcomes.
Measurement of MGMT methylation status has become routine in clinical practice as biomarker that correlates with response to TMZ
and patient outcomes in GBM.
Probability
of GBM Patient Survival Correlated to Expression of MGMT Enzyme
(Unmethylated promoter = High MGMT Expression and Significantly Shorter Survival)
TTF
(Optune®) is a non-invasive technique for adults with GBM. TTF uses alternating electrical fields to disrupt tumor
cell division, or cause cell death, thereby preventing the tumor from growing or spreading as quickly. A clinical study reported
that GBM patients treated with TTF combined with TMZ experienced longer survival than those treated with TMZ alone.
The
majority of GBM patients’ tumors recur within 6 – 12 months of initial treatment. Experimental therapy through clinical
studies is recommended under NCCN guidelines for eligible patients. NCCN guidelines also recommend treatment with systemic chemotherapy,
such as lomustine (“CCNU”). For patients who are eligible for additional surgical debulking, local chemotherapy with
carmustine (“BCNU”) wafers may be employed. CCNU and BCNU target the same DNA-site as TMZ and are also subject to
MGMT-related resistance.
Avastin
(Avastin®, an anti-VEGF antibody) recently received full approval in the US, Canada, Australia, and Japan as a
single agent for patients with recurrent GBM following prior therapy. Avastin carries an FDA “black-box warning” related
to severe, sometimes fatal, side effects such as gastrointestinal perforations, wound healing complications and hemorrhage. There
are no data demonstrating an improvement in disease-related symptoms or increased survival for GBM patients treated with Avastin.
Recurrent
GBM patients, especially those whose tumors progress following treatment with Avastin, have limited or no treatment options and
a very poor prognosis. According to published literature, the median survival for GBM patients whose tumors progress following
Avastin is less than five months.
VAL-083
Mechanism of Action
Chemotherapy
forms the basis of treatment in nearly all cancers. We believe that VAL-083 may be effective in treating tumors exhibiting biological
features that cause resistance to currently available chemotherapy, particularly for patients who have failed, or become resistant
to, other treatment regimens.
Based
on published research and our own data, the cytotoxic functional groups, and the mechanism of action of VAL-083 are functionally
different from alkylating agents commonly used in the treatment of cancer. VAL-083 has previously demonstrated activity in cell-lines
that are resistant to other types of chemotherapy. No evidence of cross-resistance has been reported in published clinical studies.
Our
research suggests that VAL-083 attacks cancer cells via a unique mechanism of action which is distinct from other chemotherapies
used in the treatment of cancer. Our data indicate that VAL-083 forms inter-strand crosslinks at the N7 position of
guanine on the DNA of cancer cells. Our data also indicate that this crosslink forms rapidly and is not easily repaired by the
cancer cell resulting in cell-cycle arrest and lethal double-strand DNA breaks in cancer cells. VAL-083 readily crosses the blood
brain barrier. Published preclinical and clinical research demonstrate that VAL-083 is absorbed more readily in tumor cells than
in normal cells.
In
vitro, our data also demonstrate that VAL-083’s distinct mechanism may be able to overcome drug resistance against a
range of cancers. For example, VAL-083 is active against MGMT-unmethylated GBM cells which are resistant to treatment with temozolomide
and nitrosoureas. VAL-083 also retains a high level of activity in p53 mutated non-small cell lung cancer (“NSCLC”),
ovarian cancer and medulloblastoma cell lines that are resistant to platinum-based chemotherapy.
Importantly,
clinical activity against each of the tumors mentioned above was established in prior NCI-sponsored Phase 2 clinical studies.
We believe that these historical clinical data and our own research support the development of VAL-083 as a potential new treatment
for multiple types of cancer.
The
main dose-limiting toxicity (“DLT”) related to the administration of VAL-083 in previous NCI-sponsored clinical studies
and our own clinical studies is myelosuppression, particularly thrombocytopenia. Myelosuppression, including thrombocytopenia,
is a common side effect of chemotherapy. Myelosuppression is the decrease in cells responsible for providing immunity, carrying
oxygen, and causing normal blood clotting. Thrombocytopenia is a reduction in platelet counts which assist in blood clotting.
Modern medicine allows for better management of myelosuppressive side effects. We believe this offers the potential opportunity
to improve upon the drug’s already established efficacy profile by substantially increasing the dose of VAL-083 that can
be safely administered to cancer patients.
There
is no evidence of lung, liver, or kidney toxicity even with prolonged treatment by VAL-083. Data from the Chinese market where
the drug has been approved for more than 15 years supports the safety findings of the NCI studies.
Other
Indications for VAL-083 — Potential Future Opportunities
Ovarian
Cancer
Ovarian
cancer is the fifth most common cancer in women and is the leading cause of death among women diagnosed with gynecological malignancies.
In 2016, approximately 22,300 women in the US were diagnosed with ovarian cancer and 14,300 died from their disease.
VAL-083’s
activity against ovarian epithelial adenocarcinoma (“OEA”) and squamous cell carcinoma of the cervix (“SCC”)
was reported in prior NCI-sponsored clinical studies. Importantly, NCI-researchers recommended VAL-083 for further advanced studies
in the treatment of ovarian cancer.
We
have presented data demonstrating that VAL-083’s distinct mechanism of action allows activity in tumors that are resistant
to other therapies. We have shown that cytotoxicity of VAL-083 against ovarian cancer is independent of sensitivity to cisplatin
or p53 status in vitro. We have demonstrated that VAL-083 is active in Pt-resistant ovarian cells harboring a range of
p53-mutations.
In
April 2016, the FDA granted orphan drug designation for the use of VAL-083 in the treatment of ovarian cancer.
In
September 2017, we filed an IND for the use of VAL-083 in ovarian cancer, along with a protocol for a Phase 1/2, open-label, multicenter,
study of VAL-083 in patients with Recurrent Platinum Resistant Ovarian
Cancer (the REPROVe study).
The
FDA has allowed this study to begin enrolling patients, but based on ongoing evaluation and input from our ovarian clinical advisory
board, we are reassessing the ovarian cancer program. We are in the process of evaluating the best path forward in ovarian cancer
and are looking at various strategic options including combination with PARP inhibitors. As a result, we have inactivated the
IND while we explore alternative study designs.
Lung
Cancer
Lung
cancer is a leading cause of cancer death around the world and effective treatment for lung cancer remains a significant global
unmet need despite advances in therapy. Incidence of lung cancer in the United States is approximately 47 per 100,000 with the
majority (85%) being NSCLC, the most common type of lung cancer. Globally, the market for lung cancer treatment may exceed $24
billion by 2033 according to a report published by Evaluate Pharma.
The
activity of VAL-083 against solid tumors, including lung cancer, has been established in both preclinical and human clinical studies
conducted by the NCI. DelMar has developed new nonclinical data to support the utility of VAL-083 in the modern treatment of lung
cancer. In an established murine xenograft model of NSCLC, the activity of VAL-083 was compared to standard platinum-based therapy
with cisplatin against human NSCLC cell lines A549 (TKI-sensitive) and H1975 (TKI-resistant). In the study, VAL-083 demonstrated
superior efficacy and safety in the treatment of TKI-susceptible (A549) tumors and in TKI-resistant (H1975) tumors.
Central
Nervous System Metastases of Solid Tumors
The
successful management of systemic tumors by modern targeted therapies has led to increased incidence of mortality due to CNS metastases
of lung cancer and other solid tumors. In June 2013, we split our Phase 1/2 clinical study protocol into two separate studies:
one focusing solely on refractory GBM and the other focusing on secondary brain cancers caused by other tumors that have spread
to the brain.
Based
on historical clinical activity and our own research, we believe that VAL-083 may be suitable for the treatment of patients with
central nervous system metastases who currently have limited treatment options. Subject to the availability of financial and operating
resources, we may develop a separate protocol for the continued exploration of VAL-083 in patients with secondary brain cancer
caused by a solid tumor spreading to the brain.
Pediatric
Brain Tumors
Tumors
of the brain and spine make up approximately 20% of all childhood cancers and they are the second most common form of childhood
cancer after leukemia.
The
activity of VAL-083 against childhood and adolescent brain tumors has been established in both preclinical and human clinical
studies conducted by the NCI. We have presented data indicating that VAL-083 offers potential therapeutic alternatives for the
treatment of pediatric brain tumors including SHH-p53 mutated medulloblastoma. In March 2016, the FDA granted orphan drug designation
for the use of VAL-083 in the treatment of medulloblastoma. Subject to the availability of resources, we intend to collaborate
with leading academic researchers for the continued exploration of VAL-083 as a potential treatment of childhood brain tumors.
Corporate
History
We are a Nevada corporation formed on June 24, 2009 under the
name Berry Only, Inc. (“Berry’). Prior to a reverse acquisition undertaken on January 25, 2013 Berry did not have any
significant assets or operations. We are the parent company of Del Mar Pharmaceuticals (BC) Ltd. (“Del Mar (BC)”),
a British Columbia, Canada corporation incorporated on April 6, 2010, that is focused on the development of drugs for the treatment
of cancer. We are also the parent company to 0959454 B.C. Ltd., a British Columbia corporation (“Callco”), and 0959456
B.C. Ltd., a British Columbia, Canada corporation (“Exchangeco”). Callco and Exchangeco were formed to facilitate the
reverse acquisition.
Outstanding
Securities
As of February 12, 2020, we had 11,412,338 shares of common
stock issued and outstanding, 5,000 shares of common stock issuable upon exchange of the Exchangeable Shares of Exchangeco (which
entitle the holder to require Exchangeco to redeem (or, at our option or Callco’s, to have us or Callco purchase) the Exchangeable
Shares, and upon such redemption or purchase to receive an equal number of shares of our common stock) (the Exchangeable Shares
are recognized on an as-exchanged for common stock basis for financial statement purposes), outstanding warrants to purchase 10,213,596
shares of common stock, 648,613 outstanding shares of Series B Preferred Stock that are convertible into 162,177 shares of common
stock, and outstanding stock options to purchase 1,577,949 shares of common stock (of which 799,199 options are subject to stockholder
approval of the increase in the number of shares authorized for issuance under the 2017 Plan at the next annual meeting of stockholders).
All Exchangeable Shares, warrants, and stock options are convertible, or exercisable into, one share of common stock. Each Series
B convertible preferred share is convertible into 0.25 shares of common stock.
On
May 8, 2019, we effected a one-for-ten reverse stock split (the “Reverse Stock Split”) of our issued and outstanding
and authorized common stock. All per share amounts and number of shares of common stock in the MD&A and condensed consolidated
interim financial statements reflect the Reverse Stock Split. The Reverse Stock Split does not affect the our authorized preferred
stock of 5,000,000 shares; except that, pursuant to the terms of the Certificate of Designations of Series B Convertible Preferred
Stock for the issued and outstanding shares of our Series B Convertible Preferred Stock, par value $0.001 per share (the
“Series B Preferred Stock”), the conversion price at which shares of Series B Preferred Stock may be converted into
shares of common stock will be proportionately adjusted to reflect the Reverse Stock Split.
On
June 26, 2019, we amended our articles of incorporation, as amended, to increase the number of authorized shares of common stock
from 7,000,000 to 95,000,000 shares.
Related
Parties
We
acquired our initial patents and technology rights from Valent, an entity owned by Dr. Dennis Brown, our Chief Scientific Officer.
As a result, Valent is a related party to us.
Selected
Quarterly Information
The
financial information reported herein has been prepared in accordance with accounting principles generally accepted in the United
States. Our functional currency at December 31, 2019 and June 30, 2019 is the US$. The following tables represent selected financial
information for us for the periods presented.
Selected
Balance Sheet Data
|
|
December 31,
2019
$
|
|
|
June
30,
2019
$
|
|
Cash
and cash equivalents
|
|
|
6,348,038
|
|
|
|
3,718,758
|
|
Working
capital
|
|
|
5,474,182
|
|
|
|
1,955,468
|
|
Total
assets
|
|
|
6,508,067
|
|
|
|
4,037,255
|
|
Total
stockholders’ equity
|
|
|
5,480,642
|
|
|
|
1,967,530
|
|
Selected
Statement of operations data
For
the three months ended:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Research
and development
|
|
|
712,193
|
|
|
|
947,249
|
|
General
and administrative
|
|
|
1,053,747
|
|
|
|
874,884
|
|
Change
in fair value of derivative liability
|
|
|
-
|
|
|
|
(1,261
|
)
|
Foreign
exchange loss
|
|
|
2,254
|
|
|
|
5,097
|
|
Interest
income
|
|
|
(28,143
|
)
|
|
|
(16,272
|
)
|
Net
loss for the period
|
|
|
1,740,051
|
|
|
|
1,809,697
|
|
Series
B preferred stock dividend
|
|
|
2,552
|
|
|
|
16,190
|
|
Net
loss attributable to common stockholders
|
|
|
1,742,603
|
|
|
|
1,825,887
|
|
Basic
weighted average number of shares outstanding
|
|
|
11,407,744
|
|
|
|
2,424,222
|
|
Basic
loss per share
|
|
|
0.15
|
|
|
|
0.75
|
|
For
the six months ended:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Research
and development
|
|
|
1,433,668
|
|
|
|
1,966,369
|
|
General
and administrative
|
|
|
1,967,375
|
|
|
|
1,861,354
|
|
Change
in fair value of derivative liability
|
|
|
-
|
|
|
|
(1,041
|
)
|
Foreign
exchange loss
|
|
|
1,880
|
|
|
|
10,935
|
|
Interest
income
|
|
|
(57,001
|
)
|
|
|
(36,116
|
)
|
Net
loss for the period
|
|
|
3,345,922
|
|
|
|
3,801,501
|
|
Series
B Preferred stock dividend
|
|
|
4,598
|
|
|
|
52,275
|
|
Net
loss attributable to common stockholders
|
|
|
3,350,520
|
|
|
|
3,853,776
|
|
Basic
weighted average number of shares outstanding
|
|
|
9,473,153
|
|
|
|
2,360,566
|
|
Basic
loss per share
|
|
|
0.35
|
|
|
|
1.63
|
|
Expenses
net of non-cash, share-based compensation expense – non-GAAP
The
following table discloses research and development, and general and administrative expenses net of non-cash, share-based compensation
payment expense. The disclosure has been provided to reconcile the total operational expenses on a GAAP basis and the non-GAAP
operational expenses net of non-cash, stock-based compensation in order to provide an estimate of cash used in research and development,
and general and administrative expense. Management uses the cash basis of expenses for forecasting and budget purposes to determine
the allocation of resources and to plan for future financing opportunities.
For
the three months ended:
|
|
December 31,
2019
$
|
|
|
December 31,
2018
$
|
|
Research
and development - GAAP
|
|
|
712,193
|
|
|
|
947,249
|
|
Less:
non-cash, share-based compensation expense
|
|
|
(27,495
|
)
|
|
|
(25,744
|
)
|
Research
and development net of non-cash, share-based, compensation expense – Non-GAAP
|
|
|
684,698
|
|
|
|
921,505
|
|
|
|
|
|
|
|
|
|
|
General
and administrative - GAAP
|
|
|
1,053,747
|
|
|
|
874,884
|
|
Less:
non-cash, share-based compensation expense
|
|
|
(170,373
|
)
|
|
|
(158,279
|
)
|
General
and administrative net of non-cash, share-based, compensation expense – Non-GAAP
|
|
|
883,374
|
|
|
|
716,605
|
|
For
the six months ended:
|
|
December 31,
2019
$
|
|
|
December 31,
2018
$
|
|
Research
and development - GAAP
|
|
|
1,433,668
|
|
|
|
1,966,369
|
|
Less:
non-cash, share-based compensation expense
|
|
|
(40,491
|
)
|
|
|
(58,334
|
)
|
Research
and development net of non-cash, share-based, compensation expense – Non-GAAP
|
|
|
1,393,177
|
|
|
|
1,908,035
|
|
|
|
|
|
|
|
|
|
|
General
and administrative - GAAP
|
|
|
1,967,375
|
|
|
|
1,861,354
|
|
Less:
non-cash, share-based compensation expense
|
|
|
(213,205
|
)
|
|
|
(354,905
|
)
|
General
and administrative net of non-cash, share-based, compensation expense – Non-GAAP
|
|
|
1,754,170
|
|
|
|
1,506,449
|
|
Results
of Operations
Comparison
of the three months ended December 31, 2019 and December 31, 2018
|
|
Three
months Ended
|
|
|
|
|
|
|
|
|
|
December 31,
2019
$
|
|
|
December 31,
2018
$
|
|
|
Change
$
|
|
|
Change
%
|
|
Research
and development
|
|
|
712,193
|
|
|
|
947,249
|
|
|
|
(235,056
|
)
|
|
|
(25
|
)
|
General
and administrative
|
|
|
1,053,747
|
|
|
|
874,884
|
|
|
|
178,863
|
|
|
|
20
|
|
Change
in fair value of derivative liability
|
|
|
-
|
|
|
|
(1,261
|
)
|
|
|
1,261
|
|
|
|
(100
|
)
|
Foreign
exchange loss
|
|
|
2,254
|
|
|
|
5,097
|
|
|
|
(2,843
|
)
|
|
|
(56
|
)
|
Interest
income
|
|
|
(28,143
|
)
|
|
|
(16,272
|
)
|
|
|
(11,871
|
)
|
|
|
73
|
|
Net
loss
|
|
|
1,740,051
|
|
|
|
1,809,697
|
|
|
|
(69,646
|
)
|
|
|
|
|
Research
and Development
Research
and development expenses decreased to $712,193 for the three months ended December 31, 2019 from $947,249 for the
three months ended December 31, 2018. The decrease was largely attributable to lower clinical development, intellectual
property, preclinical research, and personnel expenses. With respect to non-cash, share-based compensation expense, we
recognized $27,495 and $25,744 for the three months ended December 31, 2019 and 2018 respectively. For both periods, the
amount recognized related to stock option expense and shares issued for services.
Excluding
the impact of non-cash, share-based compensation expense, research and development expenses decreased to $684,698 during the
current quarter from $921,505 for the prior quarter due to lower clinical development, intellectual property, preclinical
research, and personnel expenses. The decrease in clinical development costs for the three months ended December 31, 2019
compared to the three months ended December 31, 2018 was primarily due to the timing of the completion of the manufacturing
of our first lot of GMP drug product which was completed during the three months ended December 31, 2018. Clinical
development costs can vary significantly period-to-period due to the timing of manufacturing activities, patient enrollment,
how a patient reacts to treatment, and the number of treatment cycles a patient receives.
Intellectual property costs decreased in the three months ended
December 31, 2019 compared to the three months ended December 31, 2018 as we have refined our patent portfolio by focusing on our
most important patent claims in the most strategic jurisdictions. Patent costs can vary considerably depending on the filing of
new patents, conversion of the provisional applications to PCT applications, foreign office actions, and actual filing costs. Preclinical
research costs have decreased in the current quarter due to the completion, or deferral, of studies that were ongoing in the prior
period. Personnel costs have decreased in three months ended December 31, 2019 compared to the three months ended December 31,
2018 due to a reduction in full-time employee head count.
General
and Administrative
General and administrative expenses increased to $1,053,747
for the three months ended December 31, 2019 from $874,884 for the three months ended December 31, 2018. A significant portion
of the increase was due to higher professional fees and office and sundry expenses. In relation to general and administrative expenses
during the three months ended December 31, 2019, we incurred non-cash, share-based compensation expense of $170,373 relating to
warrants issued for services and stock option expense while during the three months ended December 31, 2018, we incurred non-cash,
share-based compensation expense of $158,279 relating to stock option and performance stock unit expenses, and warrants issued
for services. All performance share units were canceled on April 30, 2019 so there was no related expense incurred during the three
months ended December 31, 2019.
Excluding the impact of non-cash, share-based compensation expense,
general and administrative expenses increased in the three months ended December 31, 2019 to $883,374 from $716,605 for the three
months ended December 31, 2018. The increase was primarily due to increased professional fees and office and sundry expenses in
the current period compared to the prior period. Professional fees increased due to higher accounting and legal fees and increased
investor outreach expenses during the three months ended December 31, 2019 compared to the three months ended December 31, 2018.
Office and sundry has increased in the three months ended December 31, 2019 compared to the three months ended December 31, 2018
due primarily to higher costs of directors’ and officers’ liability insurance.
Preferred
Share Dividends
For
each of the three months ended December 31, 2019 and 2018 we recorded $2,089 related to the dividend payable to Valent on
the Series A preferred stock. The dividend has been recorded as a direct increase in accumulated deficit for both
periods.
We
issued 3,700 (2018 – 4,735) shares of common stock on December 31, 2019 as a dividend on the Series B Preferred stock and
recognized $2,552 (2018 - $16,190) as a direct increase in accumulated deficit.
Comparison
of the six months ended December 31, 2019 and December 31, 2018
|
|
Six
months ended
|
|
|
|
|
|
|
|
|
|
December 31,
2019
$
|
|
|
December 31,
2018
$
|
|
|
Change
$
|
|
|
Change
%
|
|
Research
and development
|
|
|
1,433,668
|
|
|
|
1,966,369
|
|
|
|
(532,701
|
)
|
|
|
(27
|
)
|
General
and administrative
|
|
|
1,967,375
|
|
|
|
1,861,354
|
|
|
|
106,021
|
|
|
|
6
|
|
Change
in fair value of derivative liability
|
|
|
-
|
|
|
|
(1,041
|
)
|
|
|
1,041
|
|
|
|
(100
|
)
|
Foreign
exchange loss
|
|
|
1,880
|
|
|
|
10,935
|
|
|
|
(9,055
|
)
|
|
|
(83
|
)
|
Interest
income
|
|
|
(57,001
|
)
|
|
|
(36,116
|
)
|
|
|
(20,885
|
)
|
|
|
58
|
|
Net
loss and comprehensive loss
|
|
|
3,345,922
|
|
|
|
3,801,501
|
|
|
|
(455,579
|
)
|
|
|
|
|
Research
and Development
Research
and development expenses decreased to $1,433,668 for the six months ended December 31, 2019 from $1,966,369 for the six
months ended December 31, 2018. The decrease was largely attributable to lower clinical development, preclinical research,
intellectual property, and personnel expenses. Regarding non-cash, share-based compensation, we recognized $40,491and $58,334
for the six months ended December 31, 2019 and 2018, respectively. For both periods, non-cash, share-based compensation
related to stock option expense and shares issued for services.
Excluding
the impact of non-cash, share-based compensation expense, research and development expenses decreased to $1,393,177 during
the current period from $1,908,035 for the prior period. The decrease in clinical development costs for the six months ended
December 31, 2019 compared to the six months ended December 31, 2018 was primarily due to the timing of the manufacturing,
and related costs, of our first lot of GMP API and drug product which was completed during the six months ended December 31,
2018. Also, we incurred higher patient costs in certain areas such as sampling analysis as the number of total enrolled
patients in our Phase 2 studies has increased over time. In addition, the formation of our Scientific Advisory Board occurred
in June 2019 resulting in fees incurred in 2019 that were not incurred in 2018. Clinical development costs can vary
significantly period-to-period due to the timing of manufacturing activities, patient enrollment, how a patient reacts to
treatment, and the number of treatment cycles a patient receives.
Preclinical research costs have decreased in
the period due to the completion, or deferral, of studies that were ongoing in the prior period. Intellectual property costs decreased
in the six months ended December 31, 2019 compared to the six months ended December 31, 2018 as we have refined our patent portfolio
by focusing on our most important patent claims in the most strategic jurisdictions. Patent costs can vary considerably depending
on the filing of new patents, conversion of the provisional applications to PCT applications, foreign office actions, and actual
filing costs. Personnel costs have decreased in six months ended December 31, 2019 compared to the six months ended December 31,
2018 due to a reduction in full-time employee head count in the current period compared to the prior period.
General
and Administrative
General
and administrative expenses were $1,967,375 for the six months ended December 31, 2019 compared to $1,861,354 for the six
months ended December 31, 2018. A significant portion of the increase was due to higher professional fees, office and sundry,
and personnel expenses partially offset by lower non-cash, share-based compensation expense in the current period compared to
the prior period. In relation to general and administrative expenses during the six months ended December 31, 2019, we
incurred non-cash, share-based compensation expense $213,205 relating to warrants issued for services and stock option
expense while during the six months ended December 31, 2018, we incurred non-cash, share-based compensation expense of
$354,905 relating to performance share units, warrants issued for services, and stock option expense All performance share
units were canceled on April 30, 2019 so there was no related expense incurred during the six months ended December 31,
2019.
Excluding the impact of non-cash, share-based compensation expense,
general and administrative expenses increased in the six months ended December 31, 2019 to $1,754,170 from $1,506,449 for the six
months ended December 31, 2018. The increase was largely due to higher professional fees, office and sundry, and personnel expenses
in the current period compared to the prior period. Professional fees increased due to a variety of factors including accounting
and legal fees and increased investor outreach expenses during the six months ended December 31, 2019 compared to the six months
ended December 31, 2018. Office and sundry has increased in the six months ended December 31, 2019 compared to the six months ended
December 31, 2018 due primarily to costs of higher directors’ and officers’ liability insurance.
Preferred
Share Dividends
For
each of the six month periods ended December 31, 2019 and 2018 we recorded $4,178 related to the dividend payable to Valent
on the Series A preferred stock. The dividend has been recorded as a direct increase in accumulated deficit for both
periods.
During
the six months ended December 31, 2019, we issued 7,400 (2018 – 9,695) shares of common stock as a dividend on the
Series B Preferred stock and recognized $4,598 (2018 - $52,275) as a direct increase in accumulated deficit.