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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

or

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-37823

 

Kintara Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

99-0360497

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

 

9920 Pacific Heights Blvd, Suite 150
San Diego, CA

92121

(Address of principal executive offices)

(zip code)

 

(858) 350-4364

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock

KTRA

The Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No

Number of shares of common stock outstanding as of November 13, 2023 was 3,387,808.

 

 


 

TABLE OF CONTENTS

 

Page No.

 

 

PART I. - FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements.

1

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

26

Item 4

Controls and Procedures.

26

 

 

PART II - OTHER INFORMATION

 

 

Item 1.

Legal Proceedings.

27

Item 1A.

Risk Factors.

27

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

27

Item 3.

Defaults Upon Senior Securities.

28

Item 4.

Mine Safety Disclosures.

28

Item 5.

Other Information.

28

Item 6.

Exhibits.

29

 

i


 

PART 1. - FINANCIAL INFORMATION

Item 1. Financial Statements.

Kintara Therapeutics, Inc.

Condensed Consolidated Interim Financial Statements

(Unaudited)

For the three months ended September 30, 2023

(expressed in US dollars unless otherwise noted)

1


 

Kintara Therapeutics, Inc.

Condensed Consolidated Interim Balance Sheets

(In thousands, except par value amounts)

 

 

 

 

 

 

September 30,
2023

 

 

June 30,
2023

 

 

 

Note

 

 

$

 

 

$

 

 

 

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

216

 

 

 

1,535

 

Prepaid expenses, deposits and other

 

 

 

 

 

567

 

 

 

660

 

Clinical trial deposit

 

 

3

 

 

 

 

 

 

1,075

 

Total current assets

 

 

 

 

 

783

 

 

 

3,270

 

Property and equipment, net

 

 

5

 

 

 

694

 

 

 

709

 

Total assets

 

 

 

 

 

1,477

 

 

 

3,979

 

Liabilities

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

 

 

 

2,998

 

 

 

2,784

 

Related party payables

 

 

6

 

 

 

338

 

 

 

298

 

Total current liabilities

 

 

 

 

 

3,336

 

 

 

3,082

 

Milestone payment liability

 

 

9

 

 

 

167

 

 

 

166

 

Total liabilities

 

 

 

 

 

3,503

 

 

 

3,248

 

Stockholders' equity (deficiency)

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

 

 

 

Authorized

 

 

 

 

 

 

 

 

 

5,000 shares, $0.001 par value

 

 

 

 

 

 

 

 

 

Issued and outstanding

 

 

 

 

 

 

 

 

 

279 Series A shares at September 30, 2023 (June 30, 2023 – 279)

 

 

7

 

 

 

279

 

 

 

279

 

14 Series C shares at September 30, 2023 (June 30, 2023 – 14)

 

 

7

 

 

 

10,329

 

 

 

10,366

 

Common stock

 

 

 

 

 

 

 

 

 

Authorized

 

 

 

 

 

 

 

 

 

75,000 shares at September 30, 2023 (June 30, 2023 - 75,000), $0.001 par value

 

 

 

 

 

 

 

 

 

Issued and outstanding

 

 

 

 

 

 

 

 

 

1,746 issued at September 30, 2023 (June 30, 2023 – 1,692)

 

 

7

 

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

7

 

 

 

141,855

 

 

 

141,438

 

Accumulated deficit

 

 

 

 

 

(154,512

)

 

 

(151,375

)

Accumulated other comprehensive income

 

 

 

 

 

21

 

 

 

21

 

Total stockholders’ equity (deficiency)

 

 

 

 

 

(2,026

)

 

 

731

 

Total liabilities and stockholders’ equity (deficiency)

 

 

 

 

 

1,477

 

 

 

3,979

 

Nature of operations, corporate history, going concern and management plans (note 1)

 

 

 

 

 

 

 

 

 

Subsequent events (note 10)

 

 

 

 

 

 

 

 

 

 

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

2


 

Kintara Therapeutics, Inc.

Condensed Consolidated Interim Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

 

 

 

 

 

 

Three months ended
September 30,

 

 

 

Note

 

 

2023

 

 

2022

 

Expenses

 

 

 

 

 

 

 

 

 

Research and development

 

 

 

$

 

1,859

 

$

 

3,171

 

General and administrative

 

 

 

 

 

1,103

 

 

 

1,475

 

 

 

 

 

 

(2,962

)

 

 

(4,646

)

Other income (loss)

 

 

 

 

 

 

 

 

 

Foreign exchange

 

 

 

 

 

(2

)

 

 

11

 

Interest, net

 

 

 

 

 

2

 

 

 

39

 

 

 

 

 

 

 

 

 

50

 

Net loss for the period

 

 

 

 

 

(2,962

)

 

 

(4,596

)

Computation of basic loss per share

 

 

 

 

 

 

 

 

 

Net loss for the period

 

 

 

 

 

(2,962

)

 

 

(4,596

)

Series A Preferred cash dividend

 

 

7

 

 

 

(2

)

 

 

(2

)

Series C Preferred stock dividend

 

 

7

 

 

 

(173

)

 

 

(362

)

Net loss for the period attributable to common stockholders

 

 

 

$

 

(3,137

)

$

 

(4,960

)

Basic and fully diluted loss per share

 

 

 

$

 

(1.83

)

$

 

(3.39

)

Basic and fully diluted weighted average number of shares

 

 

 

 

 

1,718

 

 

 

1,464

 

 

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

3


 

Kintara Therapeutics, Inc.

Condensed Consolidated Interim Statements of Stockholders’ Equity (Deficiency)

(Unaudited)

For the three months ended September 30, 2023

(In thousands)

 

 

 

Number
of
shares

 

 

Common
stock
$

 

 

Additional
paid-in
capital
$

 

 

Accumulated
other
comprehensive
income
$

 

 

Preferred
stock
$

 

 

Accumulated
deficit
$

 

 

Total stockholders'
equity (deficiency)
$

 

Balance - June 30, 2023

 

 

1,692

 

 

 

2

 

 

 

141,438

 

 

 

21

 

 

 

10,645

 

 

 

(151,375

)

 

 

731

 

Issuance of shares on vesting of restricted stock units

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series C Preferred stock to common stock

 

 

1

 

 

 

 

 

 

37

 

 

 

 

 

 

(37

)

 

 

 

 

 

 

Stock option expense

 

 

 

 

 

 

 

 

160

 

 

 

 

 

 

 

 

 

 

 

 

160

 

Restricted stock unit expense

 

 

 

 

 

 

 

 

47

 

 

 

 

 

 

 

 

 

 

 

 

47

 

Series A Preferred cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Series C Preferred stock dividend

 

 

49

 

 

 

 

 

 

173

 

 

 

 

 

 

 

 

 

(173

)

 

 

 

Loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,962

)

 

 

(2,962

)

Balance - September 30, 2023

 

 

1,746

 

 

 

2

 

 

 

141,855

 

 

 

21

 

 

 

10,608

 

 

 

(154,512

)

 

 

(2,026

)

 

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

4


 

Kintara Therapeutics, Inc.

Condensed Consolidated Interim Statements of Stockholders’ Equity

(Unaudited)

For the three months ended September 30, 2022

(In thousands)

 

 

 

Number
of
shares

 

 

Common
stock
$

 

 

Additional
paid-in
capital
$

 

 

Accumulated
other
comprehensive
income
$

 

 

Preferred
stock
$

 

 

Accumulated
deficit
$

 

 

Total stockholders'
equity
$

 

Balance - June 30, 2022

 

 

1,311

 

 

 

66

 

 

 

135,510

 

 

 

21

 

 

 

12,554

 

 

 

(136,356

)

 

 

11,795

 

Issuance of shares - net of issue costs

 

 

262

 

 

 

13

 

 

 

1,890

 

 

 

 

 

 

 

 

 

 

 

 

1,903

 

Stock option expense

 

 

 

 

 

 

 

 

518

 

 

 

 

 

 

 

 

 

 

 

 

518

 

Series A Preferred cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Series C Preferred stock dividend

 

 

43

 

 

 

2

 

 

 

360

 

 

 

 

 

 

 

 

 

(362

)

 

 

 

Loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,596

)

 

 

(4,596

)

Balance - September 30, 2022

 

 

1,616

 

 

 

81

 

 

 

138,278

 

 

 

21

 

 

 

12,554

 

 

 

(141,316

)

 

 

9,618

 

 

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

5


 

Kintara Therapeutics, Inc.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

 

 

 

Three months ended
September 30,

 

 

 

 

 

 

2023

 

 

2022

 

 

 

Note

 

 

$

 

 

$

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Loss for the period

 

 

 

 

 

(2,962

)

 

 

(4,596

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

5

 

 

 

15

 

 

 

15

 

Change in fair value of milestone liability

 

 

 

 

 

1

 

 

 

(87

)

Stock option expense

 

 

7

 

 

 

160

 

 

 

518

 

Restricted stock units and shares issued for services

 

 

7

 

 

 

47

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

 

Prepaid expenses, deposits and other

 

 

 

 

 

93

 

 

 

(40

)

Clinical trial deposit

 

 

 

 

 

1,075

 

 

 

(1,700

)

Accounts payable and accrued liabilities

 

 

 

 

 

214

 

 

 

(331

)

Related party payables

 

 

 

 

 

40

 

 

 

(148

)

Net cash used in operating activities

 

 

 

 

 

(1,317

)

 

 

(6,369

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

5

 

 

 

 

 

 

(232

)

Net cash used in investing activities

 

 

 

 

 

 

 

 

(232

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

Net proceeds from the issuance of shares and warrants

 

 

7

 

 

 

 

 

 

1,908

 

Series A Preferred cash dividend

 

 

6

 

 

 

(2

)

 

 

(2

)

Net cash provided by (used in) financing activities

 

 

 

 

 

(2

)

 

 

1,906

 

Decrease in cash and cash equivalents

 

 

 

 

 

(1,319

)

 

 

(4,695

)

Cash and cash equivalents – beginning of period

 

 

 

 

 

1,535

 

 

 

11,780

 

Cash and cash equivalents – end of period

 

 

 

 

 

216

 

 

 

7,085

 

Supplementary information (note 7)

 

 

 

 

 

 

 

 

 

 

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

6


 

Kintara Therapeutics, Inc.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

September 30, 2023

(expressed in US dollars and in thousands, except par value and per share amounts, unless otherwise noted)

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

Nature of operations

Kintara Therapeutics, Inc. (the “Company”) is a clinical-stage drug development company with a focus on the development of novel cancer therapies for patients with unmet medical needs. The Company is developing two late-stage therapeutics - VAL-083 for glioblastoma and REM-001 for cutaneous metastatic breast cancer. 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 candidates.

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”).

On August 19, 2020, the Company completed its merger with Adgero Biopharmaceuticals Holdings, Inc., a Delaware corporation (“Adgero”) in which Adgero continued its existence under Delaware law and became a direct, wholly-owned subsidiary of the Company. Following the completion of the merger, the Company changed its name from DelMar Pharmaceuticals, Inc. to Kintara Therapeutics, Inc. and began trading on The Nasdaq Capital Market LLC (“Nasdaq”) under the symbol “KTRA”.

Kintara Therapeutics, Inc. is the parent company of Del Mar (BC), a British Columbia, Canada corporation and Adgero which are clinical-stage companies 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. In connection with the Adgero merger, the Company also became the parent company of Adgero Biopharmaceuticals, Inc. (“Adgero Bio”), formerly a wholly-owned subsidiary of Adgero.

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

Going concern and management plans

 

These condensed consolidated interim financial statements have been prepared on a going concern basis which assumes that the Company will continue its operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.

For the three months ended September 30, 2023, the Company reported a loss of $2,962 and a negative cash flow from operations of $1,317. The Company had an accumulated deficit of $154,512 and had cash and cash equivalents of $216 as of September 30, 2023. The Company is in the clinical stage and has not generated any revenues to date. The Company does not have the prospect of achieving revenues until such time that its product candidates are commercialized, or partnered, which may not ever occur. On August 2, 2022, the Company entered into a stock purchase agreement under which the Company ultimately received approximately $1,903 in net proceeds as of September 30, 2023, which is the current maximum available under the stock purchase agreement. In addition, on June 28, 2023, the Company announced that it had been awarded approximately $2.0 million in grant funding to be received over a two year period for its REM-001 project. Subsequent to September 30, 2023, the Company raised net proceeds of $968 from its at-the-market (“ATM”) facility and announced that it is suspending the development of VAL-083. Even with the proceeds from the grant funding, the stock purchase financing, and the ATM sales, the Company will require additional funding to maintain its clinical trials, research and development projects, and for general operations. These circumstances indicate substantial doubt exists about the Company’s ability to continue as a going concern within one year from the date of filing of these condensed consolidated interim financial statements.

Consequently, management is pursuing various financing alternatives to fund the Company’s operations so it can continue as a going concern. Management plans to continue to pursue opportunities to secure the necessary financing through the issue of new equity, debt, and/or entering into strategic partnership arrangements. However, the Company’s ability to raise additional capital could be affected by various risks and uncertainties including, but not limited to, global unrest. The Company may not be able to raise

7


 

sufficient additional capital and may tailor its drug candidate development programs 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 condensed consolidated interim 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 November 10, 2022, the Company filed a Certificate of Change to the Company’s Articles of Incorporation, as amended, in order to effectuate a 1:50 reverse stock split (the "Reverse Stock Split") of its issued and outstanding common stock as well as its authorized shares of common stock. As a result of the Reverse Stock Split, every 50 shares of issued and outstanding common stock were converted into one share of common stock with a proportionate reduction in the Company's authorized shares of common stock. Any fractional shares of common stock resulting from the Reverse Stock Split were rounded up to the nearest whole post-Reverse Stock Split share. The Reverse Stock Split did not change the par value of the Company's common stock. All outstanding securities entitling their holders to acquire shares of common stock were adjusted as a result of the Reverse Stock Split. All common share and per share data are retrospectively restated to give effect to the Reverse Stock Split for all periods presented herein.

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, Adgero, Adgero Bio, 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.

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 (the "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 June 30, 2023 audited consolidated financial statements of the Company included in the Company’s Form 10-K filed with the SEC on September 18, 2023. In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation. The results for three months ended September 30, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2024, 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 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.

Loss per share

Income or loss per share is calculated based on the weighted average number of common shares outstanding. For the three-month periods ended September 30, 2023, and 2022, diluted loss per share does not differ from basic loss per share since the effect of the Company’s warrants, stock options, restricted stock units, and convertible preferred shares is anti-dilutive. As of September 30, 2023, potential common shares of 706 (2022 – 714) related to outstanding common share warrants, 42 (2022 – 42) related to outstanding Series C preferred stock warrants, 275 (2022 – 246) related to stock options, 69 (2022 - nil) related to restricted stock

8


 

units, and 244 (2022 – 290) relating to outstanding Series C convertible preferred shares were excluded from the calculation of net loss per common share.

Government assistance

Government grants, including grants from similar bodies, are recognized when there is reasonable assurance that the Company has met the requirements of the approved grant program and there is reasonable assurance that the grant will be received. Grants that compensate the Company for expenses incurred are recognized in income or loss in reduction thereof in the same period in which the expenses are recognized. The Company uses a net presentation basis whereby the grant offsets the research and development expenses as it is being recovered under the grant program.

Recently issued accounting standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated interim financial statements.

3 Clinical trial deposit

In October 2020, the Company announced that it had entered into a final agreement with a contract research organization (“CRO”) for the management of the Company’s registrational study of VAL-083 for glioblastoma. Under the agreement, the Company will supply the drug for the study and the CRO will manage all operational aspects of the study including site activation and patient enrollment. The Company is required to make certain payments under the agreement related to patient enrollment milestones. For the three months ended September 30, 2023, the Company has recognized $1,075 (2022 - $1,840) of expenses for this study in relation to clinical site initiation and patient enrollment.

As of September 30, 2023, the Company has made aggregate deposit payments of $4,300 to the CRO and has recognized the $3,225 as an expense in fiscal year 2023. In the three months ended September 30, 2023, the remaining deposit of $1,075 was offset against amounts owing to the CRO. The Company can terminate the study at any time. Upon termination, the Company will be liable for any payments due to the effective date of the termination as well as any non-refundable costs incurred by the CRO prior to the date of termination.

On October 31, 2023, the Company announced preliminary topline results from this registrational study for VAL-083 did not perform better than the current standards of care in glioblastoma. As a result, the Company announced that it is suspending the development of VAL-083. Please see footnote 10 – Subsequent events.

4 Clinical trials grant

Effective July 1, 2023, the Company was awarded a $2,000 Small Business Innovation Research grant from the National Institutes of Health ("NIH") to support the clinical development of REM-001 for the treatment of cutaneous metastatic breast cancer. The grant will be received in two tranches: approximately $1,250 for the period July 1, 2023, to June 30, 2024, and approximately $750 for the period July 1, 2024, to June 30, 2025. As a result of receiving the grant, the REM-001, 15-patient clinical trial will be re-started. The grant is expended to the Company as a reimbursement of expenditures incurred. During the three months ended September 30, 2023, the Company received $13 (2022 - nil) for grants received against research and development expenditures in the period.

The grant is subject to various performance conditions and funding risk where the financial conditions of the NIH may change from time to time. The Company recognizes the grant only to the extent there is reasonable assurance the grant will be funded to the Company.

5 Property and equipment, net

 

 

 

$
(thousands)

 

Balance, June 30, 2023

 

 

709

 

Less depreciation

 

 

(15

)

Balance, September 30, 2023

 

 

694

 

 

9


 

At September 30, 2023, the total capitalized cost of property and equipment was $859 (June 30, 2023 - $859), of which $679 is not in use. The Company has recognized $15 in depreciation expense, respectively, for each of the three months ended September 30, 2023, and 2022, on equipment in use.

6 Related party transactions

Valent Technologies, LLC Agreements

One of the Company’s officers is a principal of Valent Technologies, LLC (“Valent”) and as a result Valent is a related party to the Company.

On September 12, 2010, the Company entered into a Patent Assignment Agreement (the “Valent Assignment Agreement”) with Valent pursuant to which Valent transferred to the Company all its right, title and interest in, and to, the patents for VAL-083 owned by Valent. The Company now owns all rights and title to VAL-083 and is responsible for further development and commercialization. In accordance with the terms of the Valent Assignment Agreement, Valent is entitled to receive a future royalty on all revenues derived from the development and commercialization of VAL-083. In the event that the Company terminates the agreement, the Company may be entitled to receive royalties from Valent’s subsequent development of VAL-083 depending on the development milestones the Company has achieved prior to the termination of the Valent Assignment Agreement.

On September 30, 2014, the Company entered into an exchange agreement (the “Valent Exchange Agreement”) with Valent and Del Mar (BC). Pursuant to the Valent Exchange Agreement, Valent exchanged its loan payable in the outstanding amount of $279 (including aggregate accrued interest to September 30, 2014, of $29), issued to Valent by Del Mar (BC), for 279 shares of the Company’s Series A Preferred Stock. The Series A Preferred Stock has a stated value of $1.00 per share (the “Series A Stated Value”) and is 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. For the three months ended September 30, 2023, and 2022, respectively, the Company recorded $2 related to the dividend paid to Valent. The dividends have been recorded as a direct increase in accumulated deficit.

Related party payables

As of September 30, 2023, there is an aggregate amount of $338 (June 30, 2023 - $298) payable to the Company’s officers and directors for fees, expenses, and accrued bonuses and other liabilities.

7 Stockholders’ equity

Preferred stock

Series C Preferred Stock

 

 

 

Series C Preferred Stock

 

 

 

Number
of shares

 

 

$
(in thousands)

 

Balance – June 30, 2023

 

 

14,208

 

 

 

10,366

 

Conversion of Series C Preferred stock to common stock

 

 

(50

)

 

 

(37

)

Balance – September 30, 2023

 

 

14,158

 

 

 

10,329

 

 

In August 2020, the Company issued 25,028 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) in three separate closings of a private placement (Series C-1, C-2, and C-3). Each share of Series C Preferred Stock was issued at a purchase price of $1,000 per share and is convertible into shares of common stock based on the respective conversion prices which were determined at the closing of each round of the private placement. The conversion prices for the Series C-1 Preferred Stock, Series C-2 Preferred Stock, and the Series C-3 Preferred Stock are $58.00, $60.70, and $57.50, respectively. Subject to ownership limitations, the owners of the Series C-1 Preferred Stock, the Series C-2 Preferred Stock, and the Series C-3 Preferred Stock are entitled to receive dividends, payable in shares of common stock at a rate of 10%, 15%, 20% and 25%, respectively, of the number of shares of common stock issuable upon conversion of the Series C Preferred Stock, on the 12th, 24th, 36th and 48th month, anniversary of the initial closing of the private placement. The Company paid the 12th, 24th, and 36th month anniversary dividends of 10%, 15%, and 20% common stock dividends on August 19, 2021, 2022, and 2023, respectively.

The Series C Preferred Stock dividends do not require declaration by the board of directors and are accrued annually as of the date the dividend is earned in an amount equal to the fair value of the Company’s common stock on the dates the respective dividends are paid. The fair value of the Series C Preferred Stock dividend paid on August 19, 2023, was determined by multiplying the dividends paid of 49 shares of common stock by the Company’s closing share price on August 18, 2023, of $3.53 per share for a total

10


 

fair value of $173. Any outstanding shares of Series C Preferred Stock will automatically convert to shares of common stock on August 19, 2024. In addition, as part of the Series C Preferred financing, the Company issued warrants to the placement agent (“Series C Agent Warrants”).

The Series C Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock and (ii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series C Preferred Stock. The Series C Preferred Stock is pari passu in liquidation to the Company’s Series A Preferred Stock. The liquidation value of the Series C Preferred Stock at September 30, 2023, is the stated value of $10,329 (June 30, 2023 - $10,366).

The Company’s Series C Preferred Stock outstanding, conversion shares, and aggregate dividends as of September 30, 2023, are as follows:

 

Series

 

Number

 

 

Conversion
price
$

 

 

Number of
conversion
shares
(in
thousands)

 

 

Dividend Shares (in thousands)

 

Series 1

 

 

11,415

 

 

 

58.00

 

 

 

197

 

 

 

153

 

Series 2

 

 

898

 

 

 

60.70

 

 

 

15

 

 

 

10

 

Series 3

 

 

1,845

 

 

 

57.50

 

 

 

32

 

 

 

25

 

 

 

 

14,158

 

 

 

 

 

 

244

 

 

 

188

 

 

Series C Dividends

 

Dividend Shares
(in thousands)

 

10% - August 19, 2021 (actual)

 

 

34

 

15% - August 19, 2022 (actual)

 

 

43

 

20% - August 19, 2023 (actual)

 

 

49

 

25% - August 19, 2024 (estimated)

 

 

62

 

 

 

 

188

 

Series A Preferred Stock

Effective September 30, 2014, the Company filed a Certificate of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of Nevada. Pursuant to the Series A Certificate of Designation, the Company designated 279 shares of preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have a stated value of $1.00 per share (the “Series A Stated Value”) and are not convertible into common stock. The holder of the Series A Preferred Stock is entitled to dividends at the rate of 3% of the Series A Stated Value per year, payable quarterly in arrears. Upon any liquidation of the Company, the holder of the Series A Preferred Stock will be entitled to be paid, out of any assets of the Company available for distribution to stockholders, the Series A Stated Value of the shares of Series A Preferred Stock held by such holder, plus any accrued but unpaid dividends thereon, prior to any payments being made with respect to the common stock. The Series A Preferred Stock is held by Valent (note 6).

The Series A Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a liquidation, rank (i) senior to the Company’s common stock, and (ii) senior to any other class or series of capital stock of the Company hereafter created which does not expressly rank pari passu with, or senior to, the Series A Preferred Stock. The Series A Preferred Stock is pari passu in liquidation to the Company’s Series C Preferred Stock. The liquidation value of the Series A Preferred stock at September 30, 2023, is its stated value of $279 (June 30, 2023 - $279).

There was no change to the Series A Preferred stock for the three months ended September 30, 2023, or 2022.

Common stock

Common stock issuances during the three months ended September 30, 2023

During the three months ended September 30, 2023, the Company issued 4 shares of common stock on vesting of restricted stock units during the period.

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

11


 

On August 2, 2022, the Company entered into a stock purchase agreement, dated as of August 2, 2022, (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park committed to purchase up to a maximum of $20,000 of shares of the Company’s common stock (the “Purchase Shares”). Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to take certain actions relating to the registration of the offer and sale of the Purchase Shares available for issuance under the Purchase Agreement. Upon execution of the Purchase Agreement, the Company issued 33 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the Purchase Agreement.

Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to present Lincoln Park with a purchase notice directing Lincoln Park to purchase up to 10 Purchase Shares provided that the closing sale price of the common stock on the purchase date is not below a threshold price set forth in the Purchase Agreement (a “Regular Purchase”). The Company and Lincoln Park may mutually agree to increase the Regular Purchase amount with respect to any Regular Purchase under the Purchase Agreement, provided that Lincoln Park’s maximum committed purchase obligation under any single Regular Purchase shall not exceed $2,000. The purchase price per share for each Regular Purchase is based on prevailing market prices of the common stock immediately preceding the time of sale as computed in accordance with the terms set forth in the Purchase Agreement. There are no upper limits on the price per share that Lincoln Park must pay for the Purchase Shares under the Purchase Agreement.

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

Subsequent to September 30, 2023, the Company received stockholder approval to issue 20% or more of its outstanding shares as of the date the Company entered into the Purchase Agreement with Lincoln Park. The Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the Purchase Agreement.

During the three months ended September 30, 2022, the Company sold 229 shares of common stock for total net proceeds of approximately $1,903 under this Purchase Agreement. As of September 30, 2023, the sales made under the Purchase Agreement are the maximum amounts available due to ownership limitations under Nasdaq rules.

2017 Omnibus Incentive Plan

As subsequently approved by the Company’s stockholders at an annual meeting of stockholders, on April 11, 2018, the Company’s board of directors approved the adoption of the Company’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”), as amended. The board of directors also approved a form of Performance Stock Unit Award Agreement to be used in connection with grants of performance stock units (“PSUs”) as well as a Restricted Stock Unit ("RSU") award under the 2017 Plan. As approved by the Company’s stockholders on June 21, 2022, the number of common shares available under the 2017 Plan as of September 30, 2023, is 440 shares, less the number of shares of common stock issued under the Del Mar (BC) 2013 Amended and Restated Stock Option Plan (the “Legacy Plan”), or that are subject to grants of stock options made, or that may be made, under the Legacy Plan, or that have been previously exercised.

 

The following table sets forth the aggregate information on all equity compensation plans as of September 30, 2023:

 

12


 

Plan (in thousands, except per share amounts)

 

Number of shares of common stock to be issued upon exercise of outstanding stock options and rights
(a)

 

 

Weighted-average exercise price of stock options and rights
$

 

 

Number of shares of common stock remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(2)

 

Equity compensation plans approved by security holders - 2017 Plan(1)

 

 

274

 

 

 

19.18

 

 

 

87

 

Equity compensation plans not approved by security holders - Del Mar (BC) 2013 Amended and Restated Stock Option Plan

 

 

1

 

 

 

2,207.18

 

 

 

 

Totals

 

 

275

 

 

 

33.76

 

 

 

87

 

 

(1) The Del Mar (BC) 2013 Amended and Restated Stock Option Plan refers to the Company’s previous equity compensation plan.

(2) The balance of 91 shares of common stock available for issuance under the 2017 Plan as of September 30, 2023, is net of stock options previously exercised.

 

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

Stock options

During the three months ended September 30, 2023, a total of 89 stock options to purchase shares of common stock at an exercise price of $4.655 were granted to directors and officers of the Company. The 26 options granted to non-employee directors vest pro rata monthly over 12 months commencing on September 30, 2023. The remaining 63 options granted to executive officers, employees and consultants vest as to 25% on the first anniversary of grant with the remaining portion vesting pro rata monthly thereafter over 36 months. All of the options to purchase shares of common stock granted have a 10-year term and are subject to cancellation upon the grantees’ termination of service for the Company, with certain exceptions.

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

 

 

 

Number of
stock options
outstanding
(in thousands)

 

 

Weighted
average
exercise
price

 

Balance – June 30, 2023

 

 

198

 

 

 

51.71

 

Granted

 

 

89

 

 

 

4.66

 

Expired

 

 

(1

)

 

 

2,100.00

 

Forfeited

 

 

(11

)

 

 

11.10

 

Balance – September 30, 2023

 

 

275

 

 

 

33.76

 

 

The following table summarizes stock options outstanding and exercisable under all plans at September 30, 2023:

 

Exercise price
$

 

Number
Outstanding at
September 30, 2023
(in thousands)

 

Weighted
average remaining
contractual life
(years)

 

Number
exercisable at
September 30, 2023
(in thousands)

4.66

 

89

 

9.92

 

2

6.04

 

9

 

9.39

 

8.79

 

52

 

8.25

 

17

12.75 to 16.25

 

6

 

9.04

 

6

30.50 to 48.00

 

83

 

7.61

 

44

62.00 to 68.50

 

14

 

7.62

 

14

85.00

 

21

 

3.07

 

21

1,055.00 to 2,660.00

 

1

 

1.97

 

1

 

 

275