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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 September 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: (212) 220-6633

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 Global Select 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 October 19, 2023, the registrant had 40,094,708 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

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

28

Signatures

 

29

 

 

 

 


 

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, and MM-402, also referred to as 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 our 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, 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 Loan and Security Agreement contains certain covenants that could adversely affect our operations and, if an event of default were to occur, we could be forced to repay any outstanding indebtedness sooner than planned and possibly at a time when we do not have sufficient capital to meet this obligation;

 


 

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 U.S. Securities and Exchange Commission ("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)

 

 

September 30, 2023
(unaudited)

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

117,699

 

 

$

142,142

 

Prepaid and other current assets

 

 

2,387

 

 

 

3,913

 

Total current assets

 

 

120,086

 

 

 

146,055

 

Goodwill

 

 

19,918

 

 

 

19,918

 

Intangible assets, net

 

 

1,317

 

 

 

3,689

 

Other non-current assets

 

 

229

 

 

 

331

 

Total assets

 

$

141,550

 

 

$

169,993

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

7,686

 

 

$

2,111

 

Accrued expenses

 

 

9,957

 

 

 

5,877

 

2022 USD Financing Warrants

 

 

13,511

 

 

 

9,904

 

Total current liabilities

 

 

31,154

 

 

 

17,892

 

Credit facility, long-term

 

 

14,068

 

 

 

 

Other liabilities, long-term

 

 

349

 

 

 

1,184

 

Total liabilities

 

 

45,571

 

 

 

19,076

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

Common shares, no par value, unlimited authorized as of September 30, 2023 and December 31, 2022; 40,094,708 and 37,979,136 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

361,538

 

 

 

344,758

 

Accumulated other comprehensive income

 

 

777

 

 

 

627

 

Accumulated deficit

 

 

(266,336

)

 

 

(194,468

)

Total shareholders' equity

 

 

95,979

 

 

 

150,917

 

Total liabilities and shareholders' equity

 

$

141,550

 

 

$

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 September 30,

 

 

Nine Months
Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

13,203

 

 

$

7,772

 

 

$

40,578

 

 

$

27,339

 

General and administrative

 

 

8,413

 

 

 

9,211

 

 

 

31,083

 

 

 

25,092

 

Total operating expenses

 

 

21,616

 

 

 

16,983

 

 

 

71,661

 

 

 

52,431

 

Loss from operations

 

 

(21,616

)

 

 

(16,983

)

 

 

(71,661

)

 

 

(52,431

)

Other income/(expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

1,163

 

 

 

360

 

 

 

3,759

 

 

 

443

 

Foreign exchange (loss)/gain, net

 

 

(439

)

 

 

138

 

 

 

(244

)

 

 

94

 

Change in fair value of 2022 USD Financing Warrants

 

 

3,020

 

 

 

 

 

 

(3,671

)

 

 

 

Other (expense)/income

 

 

(51

)

 

 

 

 

 

(51

)

 

 

1

 

Total other income/(expense), net

 

 

3,693

 

 

 

498

 

 

 

(207

)

 

 

538

 

Net loss

 

 

(17,923

)

 

 

(16,485

)

 

 

(71,868

)

 

 

(51,893

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

Gain/(loss) on foreign currency translation

 

 

415

 

 

 

(107

)

 

 

150

 

 

 

(303

)

Comprehensive loss

 

$

(17,508

)

 

$

(16,592

)

 

$

(71,718

)

 

$

(52,196

)

Net loss per common share, basic and diluted

 

$

(0.45

)

 

$

(0.56

)

 

$

(1.85

)

 

$

(1.82

)

Weighted-average common shares, basic and diluted

 

 

39,720,007

 

 

 

29,296,333

 

 

 

38,798,374

 

 

 

28,566,161

 

 

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

 

 

1,402,598

 

 

 

 

 

 

4,943

 

 

 

 

 

 

 

 

 

4,943

 

Vesting of restricted share units

 

 

672,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of 2022 USD Financing Warrants

 

 

27,000

 

 

 

 

 

 

178

 

 

 

 

 

 

 

 

 

178

 

Exercise of stock options

 

 

13,333

 

 

 

 

 

 

49

 

 

 

 

 

 

 

 

 

49

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

11,610

 

 

 

 

 

 

 

 

 

11,610

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

150

 

 

 

(71,868

)

 

 

(71,718

)

Balance, September 30, 2023

 

 

40,094,708

 

 

$

 

 

$

361,538

 

 

$

777

 

 

$

(266,336

)

 

$

95,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2021

 

 

28,126,414

 

 

$

 

 

$

288,290

 

 

$

1,046

 

 

$

(137,672

)

 

$

151,664

 

Issuance of common shares and warrants, net of share issuance costs

 

 

9,014,371

 

 

 

 

 

 

41,350

 

 

 

 

 

 

 

 

 

41,350

 

Exercise of warrants

 

 

76,021

 

 

 

 

 

 

708

 

 

 

 

 

 

 

 

 

708

 

Exercise of stock options

 

 

38,276

 

 

 

 

 

 

206

 

 

 

 

 

 

 

 

 

206

 

Settlement of restricted share unit awards

 

 

286,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Withholding taxes paid on vested restricted share units

 

 

 

 

 

 

 

 

(407

)

 

 

 

 

 

 

 

 

(407

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

12,268

 

 

 

 

 

 

 

 

 

12,268

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(303

)

 

 

(51,893

)

 

 

(52,196

)

Balance, September 30, 2022

 

 

37,541,115

 

 

$

 

 

$

342,415

 

 

$

743

 

 

$

(189,565

)

 

$

153,593

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Accumulated OCI

 

 

Accumulated Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2023

 

 

38,807,159

 

 

$

 

 

$

354,023

 

 

$

362

 

 

$

(248,413

)

 

$

105,972

 

Issuance of common shares, net of share issuance costs

 

 

800,700

 

 

 

 

 

 

3,086

 

 

 

 

 

 

 

 

 

3,086

 

Vesting of restricted share units

 

 

446,516

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of 2022 USD Financing Warrants

 

 

27,000

 

 

 

 

 

 

178

 

 

 

 

 

 

 

 

 

178

 

Exercise of stock options

 

 

13,333

 

 

 

 

 

 

49

 

 

 

 

 

 

 

 

 

49

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,202

 

 

 

 

 

 

 

 

 

4,202

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

415

 

 

 

(17,923

)

 

 

(17,508

)

Balance September 30, 2023

 

 

40,094,708

 

 

$

 

 

$

361,538

 

 

$

777

 

 

$

(266,336

)

 

$

95,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2022

 

 

28,445,948

 

 

$

 

 

$

296,734

 

 

$

850

 

 

$

(173,080

)

 

$

124,504

 

Issuance of common shares and warrants, net of share issuance costs

 

 

9,014,371

 

 

 

 

 

 

41,350

 

 

 

 

 

 

 

 

 

41,350

 

Exercise of stock options

 

 

8,762

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

42

 

Settlement of restricted share unit awards

 

 

72,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,289

 

 

 

 

 

 

 

 

 

4,289

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(107

)

 

 

(16,485

)

 

 

(16,592

)

Balance, September 30, 2022

 

 

37,541,115

 

 

$

 

 

$

342,415

 

 

$

743

 

 

$

(189,565

)

 

$

153,593

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

6


 

Mind Medicine (MindMed) Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited; in thousands)

 

 

Nine Months
Ended September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(71,868

)

 

$

(51,893

)

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

 

 

 

 

 

 

Stock-based compensation

 

 

11,818

 

 

 

12,331

 

Amortization of intangible assets

 

 

2,372

 

 

 

2,390

 

Change in fair value of 2022 USD Financing Warrants

 

 

3,671

 

 

 

 

Issuance costs on liability classified warrants

 

 

 

 

 

1,500

 

Other non-cash adjustments

 

 

128

 

 

 

30

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid and other current assets

 

 

1,575

 

 

 

1,837

 

Other noncurrent assets

 

 

60

 

 

 

 

Accounts payable

 

 

5,535

 

 

 

(3,329

)

Accrued expenses

 

 

3,742

 

 

 

622

 

Other liabilities, long-term

 

 

(835

)

 

 

(778

)

Net cash used in operating activities

 

 

(43,802

)

 

 

(37,290

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from credit facility

 

 

15,000

 

 

 

 

Payment of credit facility issuance costs

 

 

(802

)

 

 

 

Proceeds from issuance of common shares, net of issuance costs

 

 

4,943

 

 

 

41,567

 

Proceeds from issuance of 2022 USD Financing Warrants

 

 

 

 

 

17,747

 

Payment of 2022 USD Financing Warrants issuance costs

 

 

 

 

 

(1,186

)

Proceeds from exercise of warrants

 

 

114

 

 

 

708

 

Proceeds from exercise of options

 

 

 

 

 

206

 

Withholding taxes paid on vested restricted share units

 

 

 

 

 

(407

)

Net cash provided by financing activities

 

 

19,255

 

 

 

58,635

 

Effect of exchange rate changes on cash

 

 

104

 

 

 

(365

)

Net (decrease)/increase in cash and cash equivalents

 

 

(24,443

)

 

 

20,980

 

Cash and cash equivalents, beginning of year

 

 

142,142

 

 

 

133,539

 

Cash and cash equivalents, end of year

 

$

117,699

 

 

$

154,519

 

 

 

 

 

 

 

 

Supplemental Noncash Disclosures

 

 

 

 

 

 

Unpaid issuance costs for credit facility

 

$

170

 

 

$

-

 

Conversion of 2022 USD Financing Warrants to common stock upon exercise of warrants

 

$

64

 

 

$

-

 

Proceeds from exercise of options in prepaid and other current assets

 

$

49

 

 

$

-

 

Unpaid issuance costs for common shares

 

$

-

 

 

$

217

 

Unpaid issuance costs for 2022 USD Financing Warrants

 

$

-

 

 

$

314

 

Right-of-use assets obtained in exchange of operating lease liabilities

 

$

-

 

 

$

194

 

 

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 for brain health disorders 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 September 30, 2023, the Company had an accumulated deficit of $266.3 million. Through September 30, 2023, all the Company’s financial support has primarily been provided by proceeds from the issuance of the Company’s common shares (the “Common Shares”) and warrants to purchase Common Shares and the credit facility.

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 ("FASB") 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 emerging growth company.

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 the Company's significant accounting policies.

The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“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 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.

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 September 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 $115.3 million as of September 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.

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 September 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.

 

 

September 30, 2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

115,339

 

 

$

 

 

$

 

 

$

115,339

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Directors' Deferred Share Unit Liability

 

$

284

 

 

$

 

 

$

 

 

$

284

 

2022 USD Financing Warrant Liability

 

$

 

 

$

 

 

$

13,511

 

 

$

13,511

 

 

 

December 31, 2022

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

131,702

 

 

$

 

 

$

 

 

$

131,702

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Directors' Deferred Share Unit Liability

 

$

124

 

 

$

 

 

$

 

 

$

124

 

2022 USD Financing Warrant Liability

 

$

 

 

$

 

 

$

9,904

 

 

$

9,904

 

 

The Company evaluates transfers between fair value levels at the end of each reporting period. There were no transfers into or out of Level 1, Level 2, or Level 3 during the nine months ended September 30, 2023 and the year ended December 31, 2022.

9


 

The fair value of the warrant liability is measured at fair value on a recurring basis. The warrants to purchase 7,058,823 Common Shares issued in our underwritten public offering that closed on September 30, 2022 (the “2022 USD Financing Warrants”) are classified as Level 3 in the fair value hierarchy and are determined using the Black-Scholes option pricing model using the following assumptions:

 

 

As of September 30, 2023