Annual report pursuant to Section 13 and 15(d)

Derivative Liability

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Derivative Liability
12 Months Ended
Jun. 30, 2017
Derivative Liability [Abstract]  
Derivative liability
4 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 remeasured at fair value each reporting period with the changes in fair value recorded in the consolidated statement of operations 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. 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 year ended June 30, 2016 (note 5) the exercise price of the 2013 Investor Warrants was reduced from $3.20 to $3.144 resulting in the recognition of a loss of $8,098.

 

Year ended June 30, 2016

 

2013 Investor Warrant exercises

 

During the year ended June 30, 2016, 144,500 of the 2013 Investor Warrants were exercised for cash at an exercise price of $3.144 per share. The Company received proceeds of $454,308 from these exercises. The warrants that have been exercised were revalued at their exercise date and then the reclassification to equity was recorded resulting in $285,895 of the derivative liability being reclassified to equity.

 

2013 Investor Warrant amendments

 

During the year ended June 30, 2016, the Company entered into amendments (the “2013 Investor Warrant Amendments”) with the holders of certain of the 2013 Investor Warrants. Pursuant to the 2013 Investor Warrant Amendments, 767,560 of the 2013 Investor Warrants were amended to extend the expiration date to March 31, 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 Investor Warrant Amendments, the Company has recognized a loss of $31,491 and has reclassified $1,319,480 from the derivative liability to equity. The 2013 Investor Warrants were revalued to the date of the amendment and were then reclassified to equity.

 

Year ended June 30, 2017

 

2013 Investor Warrant exercises

 

During the year ended June 30, 2017, 60,095 of the 2013 Investor Warrants were exercised at an exercise price of $3.144 per share. Also, 5,000 of the previously amended 2013 Investor Warrants were exercised. The Company received proceeds of $204,659 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 of the derivative liability being reclassified to equity.

 

2013 Investor Warrant amendments

 

During the year ended June 30, 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.

 

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 financing completed during the quarter ended March 31, 2013 (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 issues common stock at a price lower than the current warrant exercise price. As a result of the 2013 Placement Agent Warrant Amendments, for the year ended June 30, 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 year ended June 30, 2016 (note 5), 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 year ended June 30, 2017, 680 (2016 – 0) of the 2015 Agent Warrants were exercised for cash proceeds of $2,040 and 1,000 (2016 – 31) of the 2015 Agent Warrants were exercised on a cashless basis for 594 (2016 – 21) shares of common stock. The total reclassification to equity subsequent to revaluation at the respective exercise dates was $9,935 (2016 – $133).

 

Warrants issued for services

 

In prior periods, the Company has issued 75,000 warrants for services that have been treated as a derivative liability. During the year ended June 30, 2016, 31,250 of these warrants were exercised on a cashless basis for 9,383 shares of common stock and the reclassification to equity of $76,406. There were no exercises of these warrants during the year ended June 30, 2017.

 

The Company’s derivative liability is summarized as follows:

 

      Years ended  
      June 30,  
      2017     2016  
      $     $  
               
  Opening balance     693,700       2,364,381  
  Change in fair value of warrants     (331,057 )     1,963,733  
  Change in fair value due to change in warrant terms     -       295,456  
  Reclassification to equity upon amendment of warrants     (53,006 )     (3,597,030 )
  Issuance of 2015 Agent Warrants     -       29,594  
  Reclassification to equity upon exercise of warrants     (248,409 )     (362,434 )
                   
  Closing balance     61,228       693,700  
  Less current portion     (33,091 )     -  
                   
  Long-term portion     28,137       693,700  

 

The derivative liability consists of the following warrants as at June 30, 2017 and 2016:

 

      Year ended
June 30, 2017
 
      Number of warrants     $  
               
  2013 Investor Warrants     105,129       33,091  
  Warrants issued for services     43,750       4,468  
  2015 Agent Warrants     21,768       23,669  
                   
  Closing balance     170,647       61,228  
  Less current portion     (105,129 )     (33,091 )
                   
  Long-term portion     65,518       28,137  


      Year ended
June 30, 2016
 
      Number of warrants     $  
               
  2013 Investor Warrants     181,156       503,796  
  Warrants issued for services     43,750       103,906  
  2015 Agent Warrants     23,448       85,998  
                   
        248,354       693,700