Stockholders' Equity

3 Months Ended

Sep. 30, 2023

Equity [Abstract]

Stockholders' Equity

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

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

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:

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		105

Stock options granted during the three months ended September 30, 2023, have been valued using a Black-Scholes pricing model with the following assumptions:

	September 30, 2023
Dividend rate		—	%
Estimated volatility		91.40	%
Risk-free interest rate		4.24	%
Expected term – years		6.08

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

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

	Three months ended September 30,
	2023 $		2022 $
Research and development		69		140
General and administrative		91		378
		160		518

All of the stock option expense for the periods ended September 30, 2023, and 2022, has been recognized as additional paid in capital. The aggregate intrinsic value of stock options outstanding as well as stock options exercisable was nil as of September 30, 2023, and 2022, respectively. As of September 30, 2023, there was $870 in unrecognized compensation expense that will be recognized over the next 2.58 years.

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

	Number of Options (in thousands)			Weighted average exercise price $
Unvested at June 30, 2023		118			24.12
Granted		89			4.66
Vested		(26	)		19.50
Forfeited		(11	)		11.10
Unvested at September 30, 2023		170			15.49

The aggregate intrinsic value of unvested stock options at September 30, 2023, was nil (2022 - nil). The unvested stock options have a remaining weighted average contractual term of 9.26 years (2022 – 9.37).

Restricted stock units

During the three months ended September 30, 2023, the Company recognized a total of $47 (2022 - nil) in compensation expense related to RSUs.

	Number of RSU (in thousands)
Balance – June 30, 2023		78
Issuance of restricted stock units		—
Vesting of restricted stock units		(4	)
Forfeiture of restricted stock units		(5	)
Balance – September 30, 2023		69

Common stock warrants

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

	Number of Warrants (in thousands)			Weighted average exercise price $
Balance – June 30, 2023		713			43.55
Expiry of warrants issued for services		(7	)		87.69
Balance – September 30, 2023		706			43.12

The following table summarizes the Company’s outstanding common stock warrants as of September 30, 2023:

Description of warrants	Number (in thousands)		Exercise price $		Expiry date
2022 April Investor warrants		325		20.50	April 14, 2027
2022 Investor warrants		240		62.50	March 28, 2025
2020 Investor warrants		65		50.00	August 16, 2024
2019 Investor warrants		15		155.00	June 5, 2024
NBTS Warrants		3		54.50	June 19, 2025
Warrants issued for services		13	32.00 to 450.00		October 11, 2023 to February 25, 2024
2022 April Agent warrants		32		33.12	October 14, 2026
2022 Agent warrants		12		78.12	March 28, 2025
2019 Agent warrants		1		193.75	June 3, 2024
		706

Series C Preferred Stock warrants

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

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

	Balance June 30, 2023		Number of Warrants Issued		Number of Warrants Exercised		Balance, September 30, 2023		Conversion price $
Preferred Series C-1 Agent Warrants		1,929		—		—		1,929		58.00
Preferred Series C-2 Agent Warrants		219		—		—		219		60.70
Preferred Series C-3 Agent Warrants		296		—		—		296		57.50
		2,444		—		—		2,444

The following table summarizes the Company’s outstanding Series C Agent Warrants as of September 30, 2023:

Series C Agent Warrants	Number		Conversion price $		Number of conversion shares (in thousands)		Cumulative common stock dividends (in thousands)
Series 1		1,929		58.00		33		23
Series 2		219		60.70		4		3
Series 3		296		57.50		5		4
		2,444				42		30