Quarterly report pursuant to Section 13 or 15(d)

Derivative Liability

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Derivative Liability
9 Months Ended
Mar. 31, 2017
Derivative Liability [Abstract]  
Derivative liability
5 Derivative liability

 

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 consolidated condensed interim statement of loss and comprehensive loss.

  

2013 Investor Warrants

 

During the quarter ended March 31, 2013 the Company issued an aggregate of 3,281,250 units at a purchase price of $3.20 per unit, for aggregate gross proceeds of $10,500,000 (the “Private Offering”). Each unit consisted of one share of common stock and one five-year warrant (the “2013 Investor Warrants”) to purchase one share of common stock at an initial exercise price of $3.20. The exercise price of the 2013 Investor Warrants is subject to adjustment in the event that the Company issues common stock at a price lower than the exercise price, subject to certain exceptions. The 2013 Investor Warrants are redeemable by the Company at a price of $0.004 per 2013 Investor Warrant at any time subject to the conditions that (i) the Company’s common stock has traded for twenty (20) consecutive trading days with a closing price of at least $6.40 per share with an average trading volume of 50,000 shares per day, and (ii) the underlying shares of common stock are registered for resale.

 

As a result of the financing completed by the Company during the nine months ended March 31, 2016 the exercise price of the 2013 Investor Warrants was reduced from $3.20 to $3.144.

 

2013 Investor Warrant exercises

 

During the nine months ended March 31, 2017, 65,095 (2016 – 128,875) of the 2013 Investor Warrants were exercised at an exercise price of $3.144 per share. The Company received proceeds of $204,659 (2016 - $405,183) from these exercises. The warrants that have been exercised were revalued at their respective exercise dates and then the reclassification to equity was recorded resulting in $238,474 (2016 - $247,440) of the derivative liability being reclassified to equity.

 

There were no exercises of 2013 Investor Warrants during the three months ended March 31, 2017 and 2016.

 

2013 Investor Warrant amendments

 

During the three and nine months ended March 31, 2016, the Company entered into amendments (the “2013 Investor Warrant Amendments”) with the holders of certain 2013 Investor Warrants to extend the expiration date to March 31, 2019 and remove the provision requiring an adjustment of the warrant exercise price in the event the Company sells common stock at a purchase price lower than the current warrant exercise price. During the three and nine months ended March 31, 2016, 62,500 of the 2013 Investor Warrants were amended resulting in the recognition of a loss of $7,000 and a reclassification of $65,750 from the derivative liability to equity.

 

During the nine months ended March 31, 2017 pursuant to the 2013 Investor Warrant Amendments, 15,944 of the 2013 Investor Warrants were amended. As a result, the Company has reclassified $53,006 from the derivative liability to equity. The 2013 Investor Warrants were revalued to their respective amendment dates and were then reclassified to equity.

 

During the three months ended March 31, 2017 there were no amendments to the 2013 Investor Warrants.

  

2013 Placement Agent Warrants

 

On December 30, 2015, the Company entered into amendments (the “2013 Placement Agent Warrant Amendments”) with the holders of warrants the Company issued to the placement agent for the Private Offering (the “2013 Placement Agent Warrants”). Pursuant to the 2013 Placement Agent Warrant Amendments, 1,262,500 of the 2013 Placement Agent Warrants were amended to extend the expiration date to June 30, 2019 and remove the provision requiring an adjustment of the exercise price in the event the Company sells common stock at a purchase price lower than the current warrant exercise price. As a result of the 2013 Placement Agent Warrant Amendments, for the nine months ended March 31, 2016 the Company has recognized a loss of $242,400 and has reclassified $2,277,550 from the derivative liability to equity. The 2013 Placement Agent Warrants were revalued to the date of the amendment and were then reclassified to equity.

 

2015 Agent Warrants

 

As part of the Company’s financing completed during the nine months ended December 31, 2015, the Company issued warrants to purchase 23,477 shares of common stock to certain placement agents (“2015 Agent Warrants”) and recognized them as a derivative liability of $29,594 at the time of issuance. The 2015 Agent Warrants are exercisable at a per share price equal to $3.00 until July 15, 2020. During the nine months ended March 31, 2017, 680 (2016 – 0) of the 2015 Agent Warrants were exercised for cash proceeds of $2,040 and 1,000 (2016 – 0) of the 2015 Agent Warrants were exercised on a cashless basis for 594 shares of common stock. The total reclassification to equity subsequent to revaluation at the respective exercise dates was $9,935.

 

There were no 2015 Agent Warrant exercises during the three months ended March 31, 2017 and 2016.

 

The Company’s derivative liability is summarized as follows:

 

      Three months ended  
      March 31,  
      2017     2016  
      $     $  
               
  Opening balance     171,211       1,352,584  
  Change in fair value of warrants     77,479       (276,584 )
  Change in fair value due to change in warrant terms     -       7,000  
  Reclassification to equity upon amendment of warrants     -       (65,750 )
                   
  Closing balance     248,690       1,017,250  
  Less current portion     (157,145 )     -  
                   
  Long term portion     91,545       1,017,250  

 

 

      Nine months ended  
      March 31,  
      2017     2016  
      $     $  
               
  Opening balance     693,700       2,364,381  
  Change in fair value of warrants     (143,595 )     943,050  
  Change in fair value due to change in warrant terms     -       270,965  
  Reclassification to equity upon amendment of warrants     (53,006 )     (2,343,300 )
  Issuance of 2015 Agent Warrants     -       29,594  
  Reclassification to equity upon exercise of warrants     (248,409 )     (247,440 )
                   
  Closing balance     248,690       1,017,250  
  Less current portion     (157,145 )     -  
                   
  Long term portion     91,545       1,017,250