Quarterly report pursuant to Section 13 or 15(d)

Derivative Liability

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Derivative Liability
3 Months Ended
Sep. 30, 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 three months ended September 30, 2015 the exercise price of all of the 2013 Investor Warrants was reduced from $3.20 to $3.14. As a result of the financing completed by the Company during the three months ended September 30, 2017 the exercise price of the un-amended 2013 Investor Warrants was further reduced from $3.14 to $2.68. The change in exercise price did not result in a material change in the fair value of the derivative liability.

 

2013 Investor Warrant exercises

 

During the three months ended September 30, 2016, 42,907 of the 2013 Investor Warrants were exercised at an exercise price of $3.14 per share. The Company received proceeds of $134,900 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 $181,008 of the derivative liability being reclassified to equity.

 

There were no exercises of 2013 Investor Warrants during the three months ended September 30, 2017.

 

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 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 months ended September 30, 2016, 15,944 of the 2013 Investor Warrants were amended. The warrants that have been amended were revalued at their respective amendment dates and then the reclassification to equity was recorded resulting in $53,006 of the derivative liability being reclassified to equity.

 

There were no amendments of the 2013 Investor Warrants during the three months ended September 30, 2017.

 

2015 Agent Warrants

 

As part of the Company’s financing completed during the year ended September 30, 2016, 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 three months ended September 30, 2016, 680 of the 2015 Agent Warrants were exercised for cash proceeds of $2,040 and 1,000 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 exercises of the 2015 Agent Warrants during the three months ended September 30, 2017.

 

The Company’s derivative liability is summarized as follows:

 

      Three months ended  
      September 30,  
      2017     2016  
      $     $  
               
  Opening balance     61,228       693,700  
  Change in fair value of warrants     (56,568 )     140,594  
  Reclassification to equity upon amendment of warrants     -       (53,006 )
  Reclassification to equity upon exercise of warrants     -       (190,943 )
                   
  Closing balance     4,660       590,345  
  Less current portion     (589 )     -  
                   
  Long term portion     4,071       590,345  

 

The derivative liability consists of the following warrants:

 

      September 30, 2017  
               
      Number of warrants     $  
               
  2013 Investor Warrants     105,129       549  
  Warrants issued for services     43,750       40  
  2015 Agent Warrants     21,768       4,071  
                   
  Closing balance     170,647       4,660  
  Less current portion     (148,879 )     (589 )
                   
  Long-term portion     21,768       4,071