Annual report pursuant to Section 13 and 15(d)

Share Capital

v3.10.0.1
Share Capital
12 Months Ended
Sep. 30, 2018
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
 
8.
Share Capital
 
The Company had the following transactions in share capital:
 
 
 
Years Ended
 
 
 
September 30,
 
 
September 30,
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
Number of common shares issued
 
 
3,827,845
 
 
 
54,834
 
 
 
 
 
 
 
 
 
 
Issuance of common shares
 
$
5,493,130
 
 
$
-
 
Issuance of common shares upon exercise of warrants
 
 
4,650,659
 
 
 
-
 
Issuance of performance shares
 
 
-
 
 
 
1,070,909
 
 
 
 
 
 
 
 
 
 
Share issuance costs
 
 
(1,371,621
)
 
 
 
 
Fair value of placement agent warrants
 
 
(470,912
)
 
 
 
 
 
Equity Offerings
 
On May 15, 2018, the Company completed a registered public offering of 1,388,396 units, with each unit consisting of (i) one common share, no par value, or common share equivalent, and (ii) one warrant to purchase one common share at a price of $2.65 per
unit. The registered public offering also included 687,076 pre-funded units, offered to certain purchasers in lieu of units that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or at the election of a purchaser, 9.99%) of outstanding common shares. The purchase price of each pre-funded unit was equal to the price per unit being sold to the public, minus $0.01, and the exercise price of each pre-funded warrant included in the pre-funded unit was $0.01 per common share. Net proceeds
 were $4.6 million, after deducting underwriting discounts and commissions and estimated offering expenses. The warrants were immediately exercisable at an aggregate price of $2.65 and expire five years from the date of issuance. In connection with the offering, the Company also issued warrants to purchase an aggregate of 145,283 common shares, at an exercise price of $3.3125, to certain affiliated designees of the placement agent as part of the placement agent’s compensation.
 
On May 24, 2018, the Company entered into a warrant exercise agreement with certain holders of our warrants, pursuant to which the holders agreed to exercise their warrants to purchase 1,122,076 common shares, in the aggregate, resulting in net proceeds of $2.5 million. In consideration, the Company agreed to issue to the holders new Series A Common Share Purchase Warrants to purchase up to 1,122,076 common shares at an exercise price of $2.65 per share, with an exercise period of five years, and new Series B Common Share Purchase Warrants to purchase up to 2,244,152 common shares at an exercise price of $2.65 per share, with an exercise period of seven months. In connection with the agreement, the Company also issued warrants to purchase an aggregate of 78,545 common shares to certain affiliated designees of the placement agent as part of the placement agent’s compensation, at an exercise price of $3.3125.
 
Reverse Share Split
 
On May 4, 2018, the Company effected a share consolidation (reverse split) of the Company's common shares at a ratio of 1-for-7. As a result of the reverse split, every seven shares of the issued and outstanding common shares, without par value, consolidated into one newly-issued outstanding common share, without par value. Each fractional share remaining after the reverse split that was less than one-half of a share was cancelled and each fractional share that was at least one-half of a share was changed to one whole share. The reverse split reduced the number of common shares outstanding from 10,520,096 to 1,502,870 after fractional share rounding. The number of warrants and options were proportionately adjusted by the split ratio and the exercise prices correspondingly increased by the same split ratio. All shares and exercise prices are presented on a post-split basis in these consolidated financial statements.
 
Performance Shares
 
Pursuant to a performance share plan approved by shareholders in 2010, 142,857 common shares were reserved for issuance to certain officers, directors and employees of the Company upon achievement of certain milestones related to completion of method development for commercial-scale manufacture of KLH, compilation and regulatory submittal of all required chemistry, manufacturing and control data and completion of preclinical toxicity and immunogenicity testing of products. Share-based compensation was recorded over the estimated vesting period ending in August 2012.
 
At September 30, 2017, all vested performance shares under the plan had been issued, and the performance share plan was terminated.
 
Black-Scholes option valuation model
 
The Company uses the Black-Scholes option valuation model to determine the fair value of warrants, broker units and share options. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company has used historical volatility to estimate the volatility of the share price. Changes in the subjective input assumptions can materially affect the fair value estimates, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s warrants, broker units and share options.
 
Warrants
 
A summary of the Company’s warrants activity is as follows:
 
 
 
Number of

Warrants
 
 
Weighted

Average

Exercise Price
 
 
 
 
 
 
 
 
Balance - September 30, 2017
 
 
180,805
 
 
$
31.50
 
 
 
 
 
 
 
 
 
 
Granted
 
 
5,665,528
 
 
 
2.68
 
Granted pre-funded warrants
 
 
687,076
 
 
 
.01
 
Exercised
 
 
(1,752,373
)
 
 
2.65
 
Exercised pre-funded warrants
 
 
(687,076
)
 
 
.01
 
 
 
 
 
 
 
 
 
 
Balance - September 30, 2018
 
 
4,093,960
 
 
$
3.96
 
 
The weighted average contractual life remaining on the outstanding warrants at September 30, 2018 is 28 months.
 
The following table summarizes information about the warrants outstanding at September 30, 2018:
 
Exercise Price
 
 
Number of

Warrants
 
 
Expiry Date
 
 
 
 
 
 
 
$
2.65
 
 
 
2,044,152
 
 
December 2018
 
31.50
 
 
 
180,805
 
 
January 2022
 
2.65
 
 
 
1,645,175
 
 
May 2023
 
3.31
 
 
 
223,828
 
 
May 2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,093,960
 
 
 
 
The fair value of placement agent warrants granted was determined using the Black-Scholes option valuation model, using the following weighted average assumptions at the date of the grant: 
 
 
 
Year Ended
 
 
 
 
September 30,
 
 
 
 
2018
 
 
Risk free interest rate
 
 
2.21
%
 
Expected life (years)
 
 
5.0
 
 
Expected share price volatility
 
 
173
%
 
Expected dividend yield
 
 
0
%
 
 
The weighted average fair value of placement agent warrants granted during the year ended September 30, 2018 was $1.98.
 
Share Options
 
The Company adopted an incentive compensation plan in 2017 (the Incentive Plan), which amended and restated the 2013 fixed share option plan and is administered by the Board of Directors. Options, restricted shares and restricted share units are eligible for grants under the Incentive Plan. The number of shares available for issuance under the Incentive Plan is 228,143, including shares available for the exercise of outstanding options under the 2013 fixed share option plan. No restricted shares or restricted share units have been granted as of September 30, 2018.
 
The exercise price of an option is set at the closing price of the Company’s common shares on the date of grant. Share options granted to directors, officers, employees and certain individual consultants for past service are subject to the following vesting schedule: (a) one-third shall vest immediately, (b) one-third shall vest at 12 months from the date of grant and (c) one-third shall vest at 18 months from the date of grant.
 
Share options granted to directors, officers, employees and certain individual consultants for future service are subject to the following vesting schedule: (x) one-third shall vest at 12 months from the date of grant, (y) one-third shall vest at 24 months from the date of grant and (z) one-third shall vest at 36 months from the date of grant.
 
Share options granted to certain individual investor relations consultants are subject to the following vesting schedule: (aa) 25% shall vest at 3 months from the date of grant, (bb) 25% shall vest at 6 months from the date of grant, (cc) 25% shall vest at 12 months from the date of grant and (dd) 25% shall vest at 15 months from the date of grant.
 
Options have been granted under the Incentive Plan allowing the holders to purchase common shares of the Company as follows:
 
 
 
Number of

Options
 
 
Weighted

Average

Exercise Price
 
 
 
 
 
 
 
 
 
 
 
 
Balance - September 30, 2017
 
 
58,711
 
 
$
40.18
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
 
29,426
 
 
 
5.88
 
 
 
Expired
 
 
(2,266
)
 
 
84.87
 
 
 
Expired
 
 
(15,373
)
 
 
42.07
 
 
CDN $
 
 
 
 
 
 
 
 
 
 
 
Balance - September 30, 2018
 
 
70,498
 
 
$
25.42
 
 
 
 
The weighted average contractual life remaining on the outstanding options is 49 months.
 
The following table summarizes information about the options under the Incentive Plan outstanding and exercisable at September 30, 2018:
 
Number of 

Options
   
Exercisable at 

September 30, 2018
   
Range of exercise prices
 
Expiry Dates
  13,479       13,479     CDN$15.00 - 35.00  
Apr 2019
-
Dec 2019
  40,046       17,326     $5.00 - 20.00  
Sep 2023
-
Mar 2025
  7,571       7,571     CDN$40.00 - 70.00  
May 2020
-
Jun 2022
  2,114       2,114     $50.00 - 60.00  
Dec 2022
  3,073       3,073     CDN$105.00 - 140.00  
Nov 2018
-
Nov 2021
  4,215       4,215     $120.00 - 130.00  
Nov 2020
  70,498       47,778          
 
The estimated fair value of the share options granted was determined using a Black-Scholes option valuation model with the following weighted average assumptions:
 
 
 
Years Ended
 
 
 
September 30,
 
 
September 30,
 
 
 
2018
 
 
2017
 
Risk free interest rate
 
 
2.13
%
 
 
1.44
%
Expected life (years)
 
 
7.00
 
 
 
7.00
 
Expected share price volatility
 
 
155
%
 
 
166
%
Expected dividend yield
 
 
0
%
 
 
0
%
  
The weighted average fair value of share options granted during the years ended September 30, 2018 and 2017 was $5.67, and $12.88, respectively.
 
As of September 30, 2018, the Company had approximately $72,000 of unrecognized share-based compensation expense, which is expected to be recognized over a period of 28 months.
 
There were no options exercised during the years ended September 30, 2018 and 2017. There was no intrinsic value of the vested options at September 30, 2018.