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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-40360

Mind Medicine (MindMed) Inc.

(Exact name of Registrant as specified in its Charter)

British Columbia, Canada

98-1582538

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

One World Trade Center, Suite 8500

New York, New York

10007

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 208-2454

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Shares, no par value per share

 

MNMD

 

The Nasdaq Stock Market LLC

(The Nasdaq Capital Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of July 24, 2023, the registrant had 39,716,868 Common Shares outstanding.

 


 

Table of Contents

 

Page

PART I

FINANCIAL INFORMATION

4

Item 1.

Financial Statements

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

5

 

Condensed Consolidated Statements of Shareholders' Equity

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

22

 

PART II

OTHER INFORMATION

23

 

 

 

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

Signatures

 

27

 

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

the timing, progress and results of our investigational programs for MM-120, a proprietary, pharmaceutically optimized form of lysergide D-tartrate, MM-402 or R(-)-MDMA (together, our “lead product candidates”), MM-110 or zolunicant and any other product candidates (together with our lead product candidates, our “product candidates”), including statements regarding the timing of initiation and completion of trials or studies and related preparatory work, the period during which the results of the trials will become available and our research and development programs;
our reliance on the success of our investigational MM-120 product candidate;
the timing, scope or likelihood of regulatory filings and approvals and ability to obtain and maintain regulatory approvals for product candidates for any indication;
our expectations regarding the size of the eligible patient populations for our lead product candidates;
our ability to identify third-party treatment sites to conduct our trials and our ability to identify and train appropriate qualified healthcare practitioners ("HCPs") to administer our treatments;
our ability to implement our business model and our strategic plans for our product candidates;
our ability to identify new indications for our lead product candidates beyond our current primary focuses;
our ability to identify, develop or acquire digital technologies to enhance our administration of our product candidates, if they should become approved and commercialized;
our ability to achieve profitability and then sustain such profitability;
our commercialization, marketing and manufacturing capabilities and strategy;
the pricing, coverage and reimbursement of our lead product candidates, if approved and commercialized;
the rate and degree of market acceptance and clinical utility of our lead product candidates, in particular, and controlled substances, in general;
future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;
our ability to establish or maintain collaborations or strategic relationships or to obtain additional funding;
our expectations regarding potential benefits of our lead product candidates;
our ability to maintain effective patent rights and other intellectual property protection for our product candidates or any future product candidates, and to prevent competitors from using technologies we consider important in our successful development and commercialization of our product candidates;
infringement or alleged infringement on the intellectual property rights of third parties;
legislative and regulatory developments in the United States, Canada, under the laws and regulations of the United Kingdom, and other jurisdictions;
the effectiveness of our internal control over financial reporting;
actions of activist shareholders against us have been and could be disruptive and costly and may result in litigation and have an adverse effect on our business and stock price;
the impact of adverse global economic conditions, including public health crises (such as the COVID-19 pandemic), fluctuations in interest rates, supply-chain disruptions and inflation, on our financial condition and operations;
our expectations regarding our revenue, expenses and other operating results;
the costs and success of our marketing efforts, and our ability to promote our brand;

 

 


 

our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;
our ability to effectively manage our growth; and
our ability to compete effectively with existing competitors and new market entrants.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q (this "Quarterly Report") primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” previously disclosed in Part I, Item 1A. in our Annual Report on Form 10-K, as filed with the SEC on March 9, 2023 (the “2022 Annual Report”) and in Part II, Item 1A in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

We may announce material business and financial information to our investors using our investor relations website (https://mindmed.co/investor-resources/). We therefore encourage investors and others interested in our company to review the information that we make available on our website. Our website and information included in or linked to our website are not part of this Quarterly Report.

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

Mind Medicine (MindMed) Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

 

 

June 30, 2023
(unaudited)

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

116,895

 

 

$

142,142

 

Prepaid and other current assets

 

 

2,896

 

 

 

3,913

 

Total current assets

 

 

119,791

 

 

 

146,055

 

Goodwill

 

 

19,918

 

 

 

19,918

 

Intangible assets, net

 

 

2,108

 

 

 

3,689

 

Other non-current assets

 

 

268

 

 

 

331

 

Total assets

 

$

142,085

 

 

$

169,993

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

8,577

 

 

$

2,111

 

Accrued expenses

 

 

9,950

 

 

 

5,877

 

2022 USD Financing Warrants

 

 

16,594

 

 

 

9,904

 

Total current liabilities

 

 

35,121

 

 

 

17,892

 

Other liabilities, long-term

 

 

992

 

 

 

1,184

 

Total liabilities

 

 

36,113

 

 

 

19,076

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

Common shares, no par value, unlimited authorized as of
June 30, 2023 and December 31, 2022;
38,807,159 and 37,979,136 issued and
   outstanding as of June 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

354,023

 

 

 

344,758

 

Accumulated other comprehensive income

 

 

362

 

 

 

627

 

Accumulated deficit

 

 

(248,413

)

 

 

(194,468

)

Total shareholders' equity

 

 

105,972

 

 

 

150,917

 

Total liabilities and shareholders' equity

 

$

142,085

 

 

$

169,993

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

Mind Medicine (MindMed) Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited; in thousands, except share and per share amounts)

 

 

Three Months
Ended June 30,

 

 

Six Months
Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

14,777

 

 

$

9,326

 

 

$

27,375

 

 

$

19,567

 

General and administrative

 

 

14,407

 

 

 

7,617

 

 

 

22,670

 

 

 

15,881

 

Total operating expenses

 

 

29,184

 

 

 

16,943

 

 

 

50,045

 

 

 

35,448

 

Loss from operations

 

 

(29,184

)

 

 

(16,943

)

 

 

(50,045

)

 

 

(35,448

)

Other income/(expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

1,311

 

 

 

82

 

 

 

2,595

 

 

 

83

 

Foreign exchange gain/(loss), net

 

 

247

 

 

 

(89

)

 

 

195

 

 

 

(44

)

Change in fair value of 2022 USD Financing Warrants

 

 

(1,504

)

 

 

 

 

 

(6,690

)

 

 

 

Other income/(expense)

 

 

 

 

 

(7

)

 

 

 

 

 

1

 

Total other income/(expense), net

 

 

54

 

 

 

(14

)

 

 

(3,900

)

 

 

40

 

Net loss

 

 

(29,130

)

 

 

(16,957

)

 

 

(53,945

)

 

 

(35,408

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

Loss on foreign currency translation

 

 

(279

)

 

 

(147

)

 

 

(265

)

 

 

(196

)

Comprehensive loss

 

$

(29,409

)

 

$

(17,104

)

 

$

(54,210

)

 

$

(35,604

)

Net loss per common share, basic and diluted

 

$

(0.76

)

 

$

(0.60

)

 

$

(1.41

)

 

$

(1.26

)

Weighted-average common shares, basic and diluted

 

 

38,576,394

 

 

 

28,242,026

 

 

 

38,329,919

 

 

 

28,196,789

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


 

Mind Medicine (MindMed) Inc.

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited; in thousands, except share amounts)

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Accumulated OCI

 

 

Accumulated Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2022

 

 

37,979,136

 

 

 

 

 

 

344,758

 

 

 

627

 

 

 

(194,468

)

 

 

150,917

 

Issuance of common shares, net of share issuance costs

 

 

601,898

 

 

 

 

 

 

1,857

 

 

 

 

 

 

 

 

 

1,857

 

Vesting of restricted share units

 

 

226,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,408

 

 

 

 

 

 

 

 

 

7,408

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(265

)

 

 

(53,945

)

 

 

(54,210

)

Balance, June 30, 2023

 

 

38,807,159

 

 

 

 

 

 

354,023

 

 

 

362

 

 

 

(248,413

)

 

 

105,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2021

 

 

28,126,414

 

 

 

 

 

 

288,290

 

 

 

1,046

 

 

 

(137,672

)

 

 

151,664

 

Exercise of warrants

 

 

76,021

 

 

 

 

 

 

708

 

 

 

 

 

 

 

 

 

708

 

Exercise of stock options

 

 

29,514

 

 

 

 

 

 

164

 

 

 

 

 

 

 

 

 

164

 

Settlement of restricted share unit awards

 

 

213,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Withholding taxes paid on vested restricted share units

 

 

 

 

 

 

 

 

(407

)

 

 

 

 

 

 

 

 

(407

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,979

 

 

 

 

 

 

 

 

 

7,979

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

(35,408

)

 

 

(35,604

)

Balance, June 30, 2022

 

 

28,445,948

 

 

$

 

 

$

296,734

 

 

$

850

 

 

$

(173,080

)

 

$

124,504

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Accumulated OCI

 

 

Accumulated Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2023

 

 

38,290,111

 

 

 

 

 

 

348,986

 

 

 

641

 

 

 

(219,283

)

 

 

130,344

 

Issuance of common shares, net of share issuance costs

 

 

403,785

 

 

 

 

 

 

1,274

 

 

 

 

 

 

 

 

 

1,274

 

Vesting of restricted share units

 

 

113,263

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,763

 

 

 

 

 

 

 

 

 

3,763

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(279

)

 

 

(29,130

)

 

 

(29,409

)

Balance June 30, 2023

 

 

38,807,159

 

 

 

 

 

 

354,023

 

 

 

362

 

 

 

(248,413

)

 

 

105,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2022

 

 

28,160,118

 

 

 

 

 

 

291,931

 

 

 

997

 

 

 

(156,123

)

 

 

136,805

 

Exercise of warrants

 

 

63,498

 

 

 

 

 

 

590

 

 

 

 

 

 

 

 

 

590

 

Exercise of stock options

 

 

8,333

 

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

41

 

Settlement of restricted share unit awards

 

 

213,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,172

 

 

 

 

 

 

 

 

 

4,172

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(147

)

 

 

(16,957

)

 

 

(17,104

)

Balance, June 30, 2022

 

 

28,445,948

 

 

$

 

 

$

296,734

 

 

$

850

 

 

$

(173,080

)

 

$

124,504

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

6


 

Mind Medicine (MindMed) Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited; in thousands)

 

 

Six Months
Ended June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(53,945

)

 

$

(35,408

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

7,592

 

 

 

8,045

 

Amortization of intangible assets

 

 

1,581

 

 

 

1,600

 

Unrealized foreign exchange gain

 

 

(337

)

 

 

 

Non-cash lease expense

 

 

28

 

 

 

17

 

Change in fair value of 2022 USD Financing Warrants

 

 

6,690

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid and other current assets

 

 

1,017

 

 

 

541

 

Other noncurrent assets

 

 

35

 

 

 

 

Accounts payable

 

 

6,466

 

 

 

(3,429

)

Accrued expenses

 

 

3,889

 

 

 

792

 

Other liabilities, long-term

 

 

(192

)

 

 

(151

)

Net cash used in operating activities

 

 

(27,176

)

 

 

(27,993

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of common shares, net of issuance costs

 

 

1,857

 

 

 

 

Proceeds from exercise of warrants

 

 

 

 

 

708

 

Proceeds from exercise of options

 

 

 

 

 

123

 

Withholding taxes paid on vested restricted share units

 

 

 

 

 

(407

)

Net cash provided by financing activities

 

 

1,857

 

 

 

424

 

Effect of exchange rate changes on cash

 

 

72

 

 

 

(229

)

Net decrease in cash and cash equivalents

 

 

(25,247

)

 

 

(27,798

)

Cash and cash equivalents, beginning of year

 

 

142,142

 

 

 

133,539

 

Cash and cash equivalents, end of year

 

$

116,895

 

 

$

105,741

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

7


 

Mind Medicine (MindMed) Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

1.
DESCRIPTION OF THE BUSINESS

Mind Medicine (MindMed) Inc. (the “Company” or “MindMed”) is incorporated under the laws of the Province of British Columbia. Its wholly owned subsidiaries, Mind Medicine, Inc. (“MindMed US”), HealthMode, Inc., MindMed Pty Ltd., and MindMed GmbH are incorporated in Delaware, Delaware, Australia and Switzerland respectively. MindMed US was incorporated on May 30, 2019.

MindMed is a clinical stage biopharmaceutical company developing novel product candidates to treat brain health disorders. The Company’s mission is to be the global leader in the development and delivery of treatments that unlock new opportunities to improve patient outcomes. The Company is developing a pipeline of innovative product candidates, with and without acute perceptual effects, targeting neurotransmitter pathways that play key roles in brain health disorders. This specifically includes pharmaceutically optimized product candidates derived from the psychedelic and empathogen drug classes, including MM-120 and MM-402, the Company’s lead product candidates.

As of June 30, 2023, the Company had an accumulated deficit of $248.4 million. Through June 30, 2023, all the Company’s financial support has primarily been provided by proceeds from the issuance of Common Shares and warrants to purchase Common Shares.

As the Company continues its expansion, it may seek additional financing and/or strategic investments; however, there can be no assurance that any additional financing or strategic investments will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans and/or certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern. Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date of the issuance of these financial statements.
 

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use the extended transition period for complying with new or revised accounting standards, and as a result of this election, the condensed consolidated financial statements may not be comparable to companies that comply with public company Financial Accounting Standards Board standards’ effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of an initial public offering or such earlier time that it is no longer an EGC.

2.
BASIS OF pRESENTATION AND Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2022, which are included in the Company’s 2022 Annual Report on Form 10-K filed with the SEC on March 9, 2023 (the “2022 Annual Report”). The Company’s significant accounting policies are disclosed in the audited financial statements for the periods ended December 31, 2022 and 2021, included in the 2022 Annual Report. Since the date of those financial statements, there have been no changes to its significant accounting policies.

The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification and as amended by Accounting Standards Updates of the Financial Accounting Standards Board (“FASB”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the

8


 

financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates under different assumptions or conditions.

Intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the condensed consolidated financial statements.

The Company’s Board of Directors approved a reverse share split of the Company’s common shares, no par value per share (the “Common Shares”) on a 15-for-1 basis, which was effected on August 26, 2022 and which brought the bid price of the Company’s Common Shares above the minimum bid price requirement under the Nasdaq Listing Rules ("2022 Share Split"). No fractional Common Shares were issued as a result of the 2022 Share Split. Each fractional Common Share remaining upon the 2022 Share Split that was less than 1/2 of a Common Share was cancelled and each fractional Common Share that was at least 1/2 of a Common Share was changed to one whole Common Share. The 2022 Share Split affected all Common Shares outstanding immediately prior to the effective time of the 2022 Share Split, as well as the number of Common Shares available under the Company’s stock option plan and equity incentive plan. In addition, the 2022 Share Split effected a reduction in the number of Common Shares issuable upon exercise of stock options, vesting of restricted share units and exercise of warrants outstanding immediately prior to the effectiveness of the 2022 Share Split. All references to Common Shares, options to purchase Common Shares, share data, per share data, and related information in the accompanying unaudited condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the 2022 Share Split for all periods presented.

Foreign Currency

The Company’s reporting currency is the U.S. dollar. The Company's functional currency is the Canadian dollar (“CAD”). The local currency of the Company’s foreign affiliates is generally their functional currency. Accordingly, the assets and liabilities of the foreign affiliates and the parent entity are translated from their respective functional currency to U.S. dollars using fiscal year-end exchange rates, income and expense accounts are translated at the average rates in effect during the fiscal year and equity accounts are translated at historical rates. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the exchange rate on the transaction date. Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured at period-end using the period-end exchange rate.

Cash and Cash Equivalents

The Company considers all investments with an original maturity date at the time of purchase of three months or less to be cash and cash equivalents. As of June 30, 2023, the Company’s cash equivalents consisted of U.S. government money market funds at a high-credit quality and federally insured financial institution. The Company’s accounts, at times, may exceed federally insured limits. The Company had cash equivalents of $110.7 million as of June 30, 2023, and $131.7 million as of December 31, 2022.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations, or cash flows upon adoption.

9


 

3.
FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, and the fair value hierarchy of the valuation techniques utilized. The Company classifies its assets and liabilities as either short- or long-term based on maturity and anticipated realization dates.

 

 

June 30, 2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

110,650

 

 

$

 

 

$

 

 

$

110,650

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Directors' Deferred Share Unit Liability

 

$

308

 

 

$

 

 

$

 

 

$

308

 

2022 USD Financing Warrant Liability

 

$

 

 

$

 

 

$

16,594

 

 

$

16,594

 

 

 

December 31, 2022

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets: