For The Three and Nine Months Ended July 31, 2023
(Expressed in United States Dollars)
Condensed Interim Consolidated Statements of Financial Position
(Expressed in United States Dollars)
| | July 31,
2023 | | | October 31,
2022 | |
| Assets | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 3,847,259 | | | $ | 128,777 | |
| Other receivables | | | 108,255 | | | | 50,933 | |
| Short-term investment (Note 3) | | | 122,779 | | | | 193,750 | |
| Prepaid expenses | | | 150,844 | | | | 14,245 | |
| Related parties (Note 4b) | | | 126,661 | | | | 46,988 | |
| | | | | | | | |
| Total current assets | | | 4,355,798 | | | | 434,693 | |
| | | | | | | | |
| Non-current assets | | | | | | | | |
| | | | | | | | |
| Property and equipment | | | 7,299 | | | | 12,902 | |
| Intangible assets | | | 117,755 | | | | 130,264 | |
| Restricted cash | | | 7,589 | | | | 14,653 | |
| Right-of-use asset | | | – | | | | 35,730 | |
| Deferred offering costs | | | – | | | | 198,173 | |
| | | | | | | | |
| Total non-current assets | | | 132,643 | | | | 391,722 | |
| | | | | | | | |
| Total assets | | $ | 4,488,441 | | | $ | 826,415 | |
| | | | | | | | |
| Liabilities | | | | | | | | |
| | | | | | | | |
| Current liabilities | | | | | | | | |
| | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 306,011 | | | $ | 1,396,960 | |
| Due to related parties (Note 4) | | | 41,591 | | | | 206,494 | |
| Derivative warrants liability (Note 5) | | | 1,313,168 | | | | – | |
| Derivative liability (Note 6c (i)) | | | – | | | | 290,569 | |
| Lease liability | | | – | | | | 38,390 | |
| | | | | | | | |
| Total liabilities | | $ | 1,660,770 | | | $ | 1,932,413 | |
| | | | | | | | |
| Shareholders’ equity (deficit) | | | | | | | | |
| | | | | | | | |
| Share capital and share premium (Note 6) | | | 14,932,538 | | | | 6,706,644 | |
| RSU reserve (Note 9) | | | 287,883 | | | | 493,036 | |
| Warrants (Note 7) | | | 741,628 | | | | 459,110 | |
| Share-based payment reserve (Note 8) | | | 1,585,136 | | | | 1,403,688 | |
| Accumulated other comprehensive loss | | | (21,250 | ) | | | (21,250 | ) |
| Accumulated deficit | | | (14,698,264 | ) | | | (10,147,226 | ) |
| | | | | | | | |
| Total shareholders’ equity (deficit) | | | 2,827,671 | | | | (1,105,998 | ) |
| | | | | | | | |
| Total liabilities and shareholders’ equity (deficit) | | $ | 4,488,441 | | | $ | 826,415 | |
Approved and authorized for issuance on behalf of the Board of Directors on September 13, 2023:
| /s/ “Alan Rootenberg” | | /s/ “Adi Zuloff-Shani” |
| Alan Rootenberg, Director, CFO | | Adi Zuloff-Shani, Director, CEO |
(The accompanying notes are an integral part of these condensed interim consolidated financial statements)
Condensed Interim Consolidated Statements of Operations and Comprehensive Loss
(Expressed in United States Dollars)
| | Three months ended | | | Nine months ended | |
| | July 31, | | | July 31, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | |
| General and administrative | | $ | 838,925 | | | $ | 1,025,554 | | | $ | 3,422,798 | | | $ | 3,301,755 | |
| Research and development, net | | | 263,954 | | | | 325,321 | | | | 1,169,156 | | | | 1,796,916 | |
| Total operating expenses | | | 1,102,879 | | | | 1,350,875 | | | | 4,591,954 | | | | 5,098,671 | |
| | | | | | | | | | | | | | | | |
| Finance expenses | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Changes in fair value of warrants (Note 5) | | | 482,331 | | | | – | | | | 121,774 | | | | – | |
| Unrealized loss on short-term investment (Note 3) | | | (12,222 | ) | | | (181,807 | ) | | | (70,971 | ) | | | (277,619 | ) |
| Foreign exchange gain (loss) | | | 33,645 | | | | 60,797 | | | | (61,711 | ) | | | 46,727 | |
| Finance income (expense), net | | | 17,307 | | | | (11,127 | ) | | | 41,288 | | | | – | |
| Total finance incomes (expenses) | | | 521,061 | | | | (132,137 | ) | | | 30,380 | | | | (230,892 | ) |
| | | | | | | | | | | | | | | | |
| Other income | | | | | | | | | | | | | | | | |
| Dividend received | | | – | | | | – | | | | 16,555 | | | | – | |
| Total other income | | | – | | | | – | | | | 16,555 | | | | – | |
| | | | | | | | | | | | | | | | |
| Loss before taxes | | | (581,818 | ) | | | (1,483,012 | ) | | | (4,545,019 | ) | | | (5,329,563 | ) |
| Tax expenses | | | 6,631 | | | | – | | | | (6,019 | ) | | | – | |
| Net Loss and Comprehensive loss | | $ | (575,187 | ) | | $ | (1,483,012 | ) | | $ | (4,551,038 | ) | | $ | (5,329,563 | ) |
| Loss per share (*), basic and diluted | | $ | (0.08 | ) | | $ | (1.12 | ) | | $ | (1.04 | ) | | $ | (4.16 | ) |
| Weighted average number of shares (*) for the purposes of basic and diluted loss per share | | | 7,088,852 | | | | 1,319,745 | | | | 4,384,905 | | | | 1,279,977 | |
| (*) | On September 30, 2022, the Company effected a 1-for-30 share consolidation (reverse share split) of its issued and outstanding shares. All share amounts have been retroactively restated for all periods presented. |
(The accompanying notes are an integral part of these condensed interim consolidated financial statements)
Condensed Interim Statements of Changes in Shareholders’ Equity (Deficit)
(Expressed in United States Dollars)
| | Share capital and
share premium | | | RSU and | | | | | | Share-based | | | Accumulated
other | | | | | | Total | |
| | Number of
shares (*) | | | Amount | | | share
reserve | | | Warrants | | | payment
reserve | | | comprehensive
income | | | Accumulated
deficit | | | shareholders’
equity (deficit) | |
| Balance, October 31, 2021 | | | 1,250,858 | | | $ | 5,792,009 | | | $ | 112,829 | | | $ | 250,567 | | | $ | 615,031 | | | $ | – | | | $ | (3,259,364 | ) | | $ | 3,511,072 | |
| Common shares issuable for vested RSU’s | | | – | | | | – | | | | 202,301 | | | | – | | | | – | | | | – | | | | – | | | | 202,301 | |
| Common shares issued and issuable for services | | | 2,667 | | | | 38,684 | | | | 72,854 | | | | – | | | | – | | | | – | | | | – | | | | 111,538 | |
| Units issued for cash | | | 39,747 | | | | 698,897 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 698,897 | |
| Issuance costs | | | – | | | | (69,890 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | (69,890 | ) |
| Units issued for short-term investment | | | 26,498 | | | | 372,745 | | | | – | | | | 82,742 | | | | – | | | | – | | | | – | | | | 455,487 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Share-based compensation | | | – | | | | – | | | | – | | | | – | | | | 690,497 | | | | – | | | | – | | | | 690,497 | |
| Net loss for the period | | | – | | | | | | | | – | | | | – | | | | – | | | | – | | | | (5,329,563 | ) | | | (5,329,563 | ) |
| Balance, July 31, 2022 | | | 1,319,770 | | | $ | 6,832,445 | | | $ | 387,984 | | | $ | 333,309 | | | $ | 1,305,528 | | | $ | – | | | $ | (8,588,927 | ) | | $ | 270,339 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, October 31, 2022 | | | 1,319,770 | | | $ | 6,706,644 | | | $ | 493,036 | | | $ | 459,110 | | | $ | 1,403,688 | | | $ | (21,250 | ) | | $ | (10,147,226 | ) | | $ | (1,105,998 | ) |
| Net loss for the period | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (4,551,038 | ) | | | (4,551,038 | ) |
| Issuance of common shares (Note 6c(i)) | | | 1,153,847 | | | | 6,081,619 | | | | – | | | | 282,287 | | | | – | | | | – | | | | – | | | | 6,363,906 | |
| Common shares and warrants issuable to Medigus (Note 6c(i)) | | | 44,829 | | | | 296,845 | | | | – | | | | 231 | | | | – | | | | – | | | | – | | | | 297,076 | |
| Issuance of common shares, pre-funded warrants and warrants (Note 6c(iii)) | | | 4,505,718 | | | | 1,501,200 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,501,200 | |
| Common shares issued from RSUs (Note 6c(ii,v)) | | | 24,167 | | | | 198,265 | | | | (198,265 | ) | | | – | | | | – | | | | – | | | | – | | | | – | |
| Common shares for services | | | 69,882 | | | | 147,965 | | | | (97,486 | ) | | | – | | | | – | | | | – | | | | – | | | | 50,479 | |
| RSU’s vested (Note 9(i)) | | | – | | | | – | | | | 90,598 | | | | – | | | | – | | | | – | | | | – | | | | 90,598 | |
| Share-based compensation (Note 8) | | | – | | | | – | | | | – | | | | – | | | | 181,448 | | | | – | | | | – | | | | 181,448 | |
| Balance, July 31, 2023 | | | 7,118,213 | | | $ | 14,932,538 | | | $ | 287,883 | | | $ | 741,628 | | | $ | 1,585,136 | | | $ | (21,250 | ) | | $ | (14,698,264 | ) | | $ | 2,827,671 | |
| (*) | On September 30, 2022, the Company effected a 1-for-30 share consolidation (reverse share split) of its issued and outstanding shares. All share amounts have been retroactively restated for all periods presented. |
(The accompanying notes are an integral part of these condensed interim consolidated financial statements)
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in United States Dollars)
| | Nine months ended | | | Nine months ended | |
| | July 31, | | | July 31, | |
| | 2023 | | | 2022 | |
| Operating activities | | | | | | | | |
| Net loss | | $ | (4,551,038 | ) | | $ | (5,329,563 | ) |
| | | | | | | | |
| Adjustments for: | | | | | | | | |
| Amortization of intangible assets | | | 12,509 | | | | 12,327 | |
| Amortization of right-of-use asset | | | 35,381 | | | | 40,188 | |
| Interest on lease liability | | | 2,907 | | | | 11,141 | |
| Exchange rate differences | | | (622 | ) | | | – | |
| Dividend received | | | 16,555 | | | | – | |
| Depreciation of property and equipment | | | 5,603 | | | | 4,282 | |
| Changes in fair value of warrants | | | (121,774 | ) | | | – | |
| Share-based compensation | | | 329,032 | | | | 1,004,336 | |
| Unrealized loss on short-term investment | | | 70,971 | | | | 277,619 | |
| Tax expenses | | | 6,019 | | | | – | |
| | | | | | | | |
| Movements in working capital: | | | | | | | | |
| Decrease (increase) in other receivables | | | (153,550 | ) | | | 82,845 | |
| Decrease (increase) in prepaid expenses | | | (136,599 | ) | | | 101,756 | |
| Increase (decrease) in accounts payable and accrued liabilities | | | (898,795 | ) | | | 181,621 | |
| Increase (decrease) in due to related parties | | | (164,903 | ) | | | 94,843 | |
| Net cash used in operating activities | | | (5,548,304 | ) | | | (3,518,605 | ) |
| | | | | | | | |
| Investing activities | | | | | | | | |
| Restricted Cash | | | 7,686 | | | | – | |
| | | | | | | | |
| Net cash provided by Investing activities | | | 7,686 | | | | – | |
| | | | | | | | |
| Financing activities | | | | | | | | |
| Proceeds from issuance of common shares, net of issuance costs (Note 6c (i)) | | | 6,363,906 | | | | – | |
| Proceeds from issuance of common shares, pre-funded warrants and warrants, net of issuance costs (Note 6c (iii)) | | | 2,936,142 | | | | – | |
| Proceeds from issuance of shares and warrants, net of issuance costs (Note 6d (iii)) | | | – | | | | 582,557 | |
| Repayment of lease liabilities | | | (40,922 | ) | | | (48,286 | ) |
| | | | | | | | |
| Net cash provided by financing activities | | | 9,259,126 | | | | 580,721 | |
| Effect of foreign exchange rate changes on cash and cash equivalents | | | (26 | ) | | | 355 | |
| Net increase (decrease) in cash and cash equivalents | | | 3,718,482 | | | | (2,983,979 | ) |
| Cash and cash equivalents at beginning of period | | | 128,777 | | | | 3,369,798 | |
| Cash and cash equivalents at end of period | | $ | 3,847,259 | | | $ | 385,819 | |
| | | | | | | | |
| Supplementary disclosure of cash flow information: | | | | | | | | |
| Cash received for interest | | $ | 40,636 | | | $ | – | |
| Non-cash financing and investing activities | | | | | | | | |
| Derivative liability converted to equity (Note 6c(i)) | | $ | 290,569 | | | $ | – | |
| Units issued for short-term investment | | | – | | | | 455,488 | |
| | | | | | | | |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| 1. | Nature of Operations and Going Concern |
| a. | Clearmind Medicine Inc. (formerly Cyntar Ventures Inc.) (the “Company”) was incorporated in the province of British Columbia on July 18, 2017. The Company changed its name from Cyntar Ventures Inc. to Clearmind Medicine Inc. on March 24, 2021. The Company’s previous business was carrying out mining exploration operations and was involved in the exploration of the Lorn mineral property located in the Clinton and Lillooet Mining Divisions of British Columbia. Effective May 18, 2021, the Company is in the business of researching, developing and marketing proprietary formulations of psychedelic designer therapeutics with an initial focus of developing products. The Company’s head office is located at Suite 101, 1220 West 6th Avenue, Vancouver, BC, V6H 1A5. The Company’s Israeli subsidiary (Clearmindmed Ltd.) provides research and development services to the Company. |
On November 14, 2022, the Company completed a public offering for aggregate gross proceeds of US$7.5 million and up listing to the Nasdaq Capital Market (“Nasdaq”), see note 6c (i). The Company trades under the symbol CMND on both the Nasdaq and the Canadian Securities Exchange (“CSE”) in Toronto.
On April 6, 2023, the Company completed an underwritten public offering for aggregate gross proceeds of US$3.5 million. Net proceeds of US$2.9 million. See note 6c (iii).
These condensed interim consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. For the nine months ended July 31, 2023, the Company has not generated any revenues and has negative cash flow from operations of $5,548,304. As of July 31, 2023, the Company has an accumulated deficit of $14,698,264. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing through debt or equity. As of the date of approval of these condensed interim consolidated financial statements, the Company anticipates that its cash and cash equivalents will provide sufficient liquidity for at least twelve months. The actual amount of cash that the Company will need to operate is subject to many factors, including, but not limited to, the timing, design and conduct of clinical trials. The Company is dependent upon significant future financing to provide the cash necessary to execute its current and future operations, including the commercialization of any of its drug candidates. These factors may cast substantial doubt on the Company’s ability to continue as a going concern. These condensed interim consolidated financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.
On September 30, 2022, the Company’s Board of Directors (the “Board”) approved a 1-for-30 reverse split of its issued and outstanding ordinary shares, effective as of September 30, 2022, pursuant to which holders of the Company’s ordinary shares received 0.0333 of a common share for every one ordinary share.
All issued and outstanding common shares or instruments convertible into common shares contained in these financial statements prior to the reverse share split have been retroactively adjusted to reflect the reverse share split for all periods presented, unless explicitly stated otherwise.
| d. | Functional Currency and Presentation Currency |
The financial statements of each company within the consolidated group are measured using their functional currency which is the currency of the primary economic environment in which an entity operates. The Company changed its functional currency from the Canadian dollar (C$) to the United States dollar (US$) as of November 1, 2022. The change in presentation currency is a voluntary change which is accounted for retrospectively. For comparative reporting purposes, historical financial information has been translated to United States dollars using the exchange rate as of November 1, 2022, which is the date of the change in the functional and presentation currency.
| e. | Translation of Foreign Currency |
These consolidated financial statements are presented in United States dollars. As of November 1, 2022, the Company’s functional currency is the Unites States dollar (as described above). The functional currency of Clearmindmed Ltd. is the United States dollar.
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| 2. | Significant Accounting Policies |
The accompanying condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board on a going concern basis.
These condensed interim consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Clearmindmed Ltd. and Clearmind Labs Corp. (inactive). All inter-company balances and transactions have been eliminated on consolidation.
These condensed interim consolidated financial statements have been prepared on a historical cost basis, except for financial assets and liabilities (including derivatives) which are presented at fair value through profit or loss, and are presented in United States dollars, which is the Company’s functional currency.
| b. | Unaudited Interim Financial Information |
Certain information and footnote disclosures normally included in financial statements prepared in accordance with IFRS have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed financial statements should be read in conjunction with the audited financial statements as of and for the year ended October 31, 2022 and the notes thereto (the “2022 Annual Report”).
The unaudited condensed financial statements have been prepared on the same basis as the audited financial statements, except for the change in functional and presentational currency (Note 1d). In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments that are necessary to present fairly the Company’s financial position and results of operations for the interim periods presented. The results for the nine months ended July 31, 2023 are not necessarily indicative of the results for the year ending October 31, 2023, or for any future period.
As of July 31, 2023, there have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2022 Annual Report, except for the change in functional and presentational currency (Note 1d).
| c. | Significant Accounting Estimates and Judgments |
The preparation of consolidated financial statements in accordance with IFRS requires management to make judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| 2. | Significant Accounting Policies (continued) |
| c. | Significant Accounting Estimates and Judgments (continued) |
Fair values are determined using the Black-Scholes option pricing model. Estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. Option-pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates and, therefore, existing models do not necessarily provide reliable measurement of the fair value of the Company’s stock options.
The Company uses the Black-Scholes option-pricing model to estimate fair value of options and the warrant liability at each reporting date. The key assumptions used in the model are the expected future volatility in the price of the Company’s shares and the expected life of the options and warrants.
The critical judgments that the Company’s management has made in the process of applying the Company’s accounting policies that have the most significant effect on the amounts recognized in the Company’s consolidated financial statements are as follows:
The application of the going concern assumption requires management to take into account all available information about the future, which is at least but not limited to, 12 months from the year end of the reporting period. The Company is aware that material uncertainties related to events or conditions may cast significant doubt upon the Company’s ability to continue as a going concern.
As of July 31, 2023, the Company holds 27,778 common shares of Medigus Ltd (“Medigus”) (approximately 0.11%) with a total fair value of $122,779. The fair value of common shares held was determined by reference to public price quotations in an active market.
| | October 31,
2022 | | | Additions | | | Unrealized
loss | | | July 31,
2023 | |
| Medigus Ltd. – Shares | | $ | 193,750 | | | $ | – | | | $ | (70,971 | ) | | $ | 122,779 | |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| 4. | Related Party Transactions |
| a. | Compensation to key management personnel |
| (i) | The compensation to key management personnel for employment services they provide to the Company is as follows: |
| | Three months ended | | | Three months ended | | | Nine months ended | | | Nine months ended | |
| | July 31, | | | July 31, | | | July 31, | | | July 31, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| | | | | | | | | | | | |
| Officers: | | | | | | | | | | | | |
| Consulting fees | | $ | 79,950 | | | $ | 82,934 | | | $ | 282,668 | | | $ | 278,438 | |
| Share based compensation | | | 28,368 | | | | 437,715 | | | | 107,089 | | | | 667,916 | |
| | $ | 108,318 | | | $ | 520,648 | | | $ | 389,757 | | | $ | 946,354 | |
| Directors: | | | | | | | | | | | | | | | | |
| Directors’ fees | | $ | 41,021 | | | $ | 84,548 | | | $ | 121,998 | | | $ | 119,909 | |
| Share based compensation | | | 28,558 | | | | 6,236 | | | | 106,682 | | | | 24,978 | |
| | $ | 69,579 | | | $ | 90,785 | | | $ | 228,680 | | | $ | 144,887 | |
| (ii) | Balances with related parties |
| | July 31, | | | October 31, | |
| | 2023 | | | 2022 | |
| Amounts owed to officers | | $ | 27,834 | | | $ | 136,149 | |
| Amounts owed to directors | | | 13,757 | | | | 70,345 | |
| | $ | 41,591 | | | $ | 206,494 | |
| b. | On March 7, 2022, the Company signed an agreement with SciSparc Ltd (“SciSparc”), pursuant to which the Company and SciSparc agreed to cooperate in conducting a feasibility study using certain molecules developed by each party (the “Cooperation Agreement”). Certain of the Company’s officers and directors currently operate, manage or are engaged as officers and/or directors of SciSparc, which may have similar or different objectives than the Company’s. Such activities could detract from the time these people have to allocate to the Company’s affairs. To date, no determination has been made to pursue the joint venture and the development of the research activities with SciSparc remains in a very early stage. For the nine months ended July 31, 2023, the Company received $0 as a reimbursement for research and development expenses conducted within the framework of the Cooperation Agreement. As of July 31, 2023, $126,661 is owed to the Company by SciSparc. |
| c. | On July 1, 2021, the Company entered into a lease agreement (“2021 Lease”) with SciSparc, a related party,and a third party for a total area of approximately 240m2 , of which the Company occupies approximately 120m2 for the Company’s offices, in Tel Aviv, Israel. The lease expired on June 30, 2023. The Company, SciSparc and the third party have an option to extend the 2021 Lease for an additional three-year period. The Company’s base rent was ILS11,000 per month ($3,080) during the term of the 2021 Lease. The lease liability was discounted using the Company’s estimated incremental borrowing rate of 20%. On December 31, 2021, the third party elected to leave the office space, and a new lease agreement was signed with the Company and the related party. As a result, the Company’s base rent was increased to ILS 18,200 per month ($5,094).As of July 31, 2023 the Company and SciSparc are in the process of negotiating the terms of a new lease contract. As of the balance sheet date no definitive agreement has been entered into. |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
On April 6, 2023, the Company issued 4,505,718 warrants in connection with its April 2023 Public Offering. At the time of the grant, these warrants were recorded at their fair value as a derivative liability as the terms of the warrant include a cashless exercise provision and repricing provisions, under certain circumstances, and are therefore revalued at the end of each reporting period. During the three and nine month periods ended July 31, 2023, the Company recorded a gain on the revaluation of the total warrant liability of $482,331 and $121,774 respectively, in the Condensed Interim Consolidated Statements of Operations and Comprehensive Loss.
The Black-Scholes option pricing model was used to measure the derivative warrant liability with the following assumptions:
| | July 31,
2023 | |
| | | |
| Share Price | | $ | 0.44 | |
| Exercise Price | | $ | 0.78 | |
| Expected life | | | 4.68 years | |
| Risk-free interest rate | | | 4.21 | % |
| Dividend yield | | | 0.00 | % |
| Expected volatility | | | 99 | % |
| Value of warrants | | $ | 1,313,168 | |
The following table presents the changes in the warrants liability during the period:
| Balance as of November 1, 2022 | | $ | – | |
| Issuance of April 2023 Warrants | | | 1,434,942 | |
| Changes in fair value | | | 121,774 | |
| Balance as of July 31, 2023 | | $ | 1,313,168 | |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| a. | The Company’s authorized share capital is unlimited common shares without par value share. As of July 31, 2023, the number of common shares issued and outstanding are 7,118,213 (October 31, 2022 – 1,319,770). |
| b. | On September 30, 2022, the Company effected a 1-for-30 share consolidation (reverse share split) of its issued and outstanding common shares. All share amounts and instruments convertible into common shares prior to the date of the reverse share split have been retroactively restated for all periods presented. |
| c. | Share transactions during the nine months ended July 31, 2023: |
| (i) | On November 14, 2022, the Company completed an underwritten public offering of 1,153,847 common shares at a price to the public of US$6.50 per share, for aggregate gross proceeds of US$7.5 million, prior to deducting underwriting discounts and offering expenses. The offering closed on November 17, 2022. Net proceeds received were $6,363,906. |
In addition, the Company granted Aegis Capital Corp. (“Aegis”), who acted as the underwriters for the deal, a 45-day option to purchase up to 173,077 additional common shares, equal to 15% of the number of common shares sold in the offering solely to cover over-allotments, if any (“Over-Allotment”). The public purchase price per additional common share would have been US$6.50 per share. The Over-Allotment was not exercised.
Aegis received 57,692 underwriter warrants, each such warrant entitling the agents to receive one common share upon payment of US $8.125 per share, exercisable six months after the commencement of sales of this offering and expiring on a date which is no more than five years after the commencement of sales of the offering. The fair value for underwriter warrants total of $282,287 and have been credited to the warrant reserve. The fair value has been estimated using the Black-Scholes option pricing model assuming no expected dividends or forfeitures and the following weighted average assumptions:
| Risk-free interest rate | | | 1.43 | % |
| Expected life (in years) | | | 5 | |
| Expected volatility | | | 107 | % |
In connection with the offering, the Company’s common shares were approved for listing on the Nasdaq and began trading on the Nasdaq (in addition to the CSE) under the symbol “CMND” on November 15, 2022.
Following the public offering, Medigus were entitled to receive 44,829 common shares and 2,241 warrants pursuant to an anti-dilution clause included in the agreement signed between the Company and Medigus on June 29, 2022. On May 23, 2023, the Company issued the 44,829 common shares and 2,241 warrants.
The anti-dilution feature was recorded as a derivative liability as of October 31, 2022 and has been classified to equity upon completion of the IPO.
| (ii) | On January 16, 2023, 4,824 common shares were issued in respect of restricted share units (“RSUs”) that had been fully vested. The RSU’s had a fair value of $39,975 at the time of issuance.On February 22, 2023, 12,006 common shares were issued in respect of fully vested RSU’s that had been fully vested. The RSU’s had a fair value of $110,096 at the time of issuance. |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| 6. | Share Capital (continued) |
| (iii) | On April 6, 2023 the Company completed an underwritten public offering of 3,097,459 common shares at a price to the public of US$0.78 per share and pre-funded warrants to purchase 1,398,959 common shares at a price to the public of US$0.779 per pre-funded warrant (“Pre-Funded Warrants”), for aggregate gross proceeds of US$3.5 million (the “April 2023 Public Offering”). The Pre-Funded Warrants were exercisable at $0.001 into one common share, and all the Pre-Funded Warrants were exercised by April 30, 2023. In addition, each April 2023 Public Offering shareholder and each Pre-Funded Warrant holder received a common warrant, which is immediately exercisable, will expire five years from the date of issuance and have an exercise price of US$0.78 per common share (“April 2023 Public Offering Warrant”). Net proceeds received were $2,909,459. |
| (iv) | On May 23, 2023, 7,166 common shares with a fair value of $27,965 were issued to consultants and 44,817 common shares with a fair value of $110,000 were issued to providers of investor services in respect of services. |
| (v) | On June 1, 2023, 7,337 common shares were issued in respect of RSU’s that had been fully vested. The RSU’s had a fair value of $48,194 at the time of issuance. |
| (vi) | On July 10, 2023, 17,899 common shares with a fair value of $10,000 were issued to providers of investor services in respect of services. |
| d. | Share transactions during the nine months ended July 31, 2022: |
| (i) | On November 26, 2021, the Company issued 1,333 common shares with a fair value of $21,100 to the Chief Scientific Officer. |
| (ii) | On February 14, 2022, the Company issued 1,334 common shares with a fair value of $17,584 to the Chief Scientific Officer. |
| (iii) | On February 14, 2022, the Company completed a share purchase agreement with Medigus, whereby the Company issued a total of 66,244 units to Medigus in consideration for US$750,000 (“Cash Financing”) and 27,778 common shares of Medigus (“Share Exchange”). Each unit is comprised of one common share and one warrant, with each warrant exercisable for a period of 18 months at CAD$60.00 per share. |
Pursuant to the Cash Financing, the Company issued 39,747 units at $24.00 per unit for proceeds of $698,897.
In connection with the Cash Financing, the Company incurred finder’s fees of $69,890, which have been charged to the condensed interim statement of changes in equity.
Pursuant to the Share Exchange, the Company issued 26,498 units with a fair value of $455,487, consisting of common shares with a fair value of $372,745 and warrants with a fair value of $82,742. The fair value of the warrants was determined using the Black-Scholes option pricing model with the following assumptions: Risk-free rate of 1.43%, expected life of 1.5 years, and volatility of 107.46%.
In connection with the Share Exchange, the Company incurred finder’s fees of $50,000, which were allocated to the base cost of the shares in Medigus.
In addition, Medigus will be entitled to 10% of the initial equity of a potential venture in the area of psychedelics, in connection with a research project currently conducted according to an agreement between the Company and the commercialization arm of a leading Israeli academic institution.
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| 7. | Share Purchase Warrants |
The following table summarizes the changes in the Company’s share purchase warrants:
| | Number of
warrants | | | Weighted
average
exercise price
(US$) | |
| | | | | | |
| Balance, October 31, 2021 and July 31, 2022 | | | 526,666 | | | $ | 16.08 | |
| | | | | | | | |
| Issued | | | 66,245 | | | | 44.19 | (*) |
| | | | | | | | |
| Balance, October 31, 2022 | | | 592,911 | | | $ | 19.22 | |
| | | | | | | | |
| Issuance of underwriter warrants (note 6c (i)) | | | 57,692 | | | | 8.125 | |
| Issuance of April 2023 warrants (note 5) | | | 4,505,718 | | | | 0.78 | |
| Issuance of Medigus warrants (note 6c (i)) | | | 2,241 | | | | 45.53 | (*) |
| Expiration of warrants | | | (276,667 | ) | | | 27.46 | |
| | | | | | | | |
| Balance, July 31, 2023 | | | 4,881,895 | | | $ | 1.63 | |
| (*) | Warrants issued with an exercise price of CAD$60.00. |
As of July 31, 2023, the following share purchase warrants were outstanding:
Number of warrants
outstanding | | | Exercise price | | | Exercise price (USD) | | | Expiry date | |
| | | | | | | | | | |
| 66,245 | | | C$ | 60.00 | | | $ | 45.53 | | | August 14, 2023 | |
| 250,000 | | | C$ | 4.50 | | | $ | 3.42 | | | April 22, 2024 | |
| 57,692 | | | $ | 8.125 | | | $ | 8.125 | | | November 17, 2027 | |
| 4,505,718 | | | $ | 0.78 | | | $ | 0.78 | | | April 6, 2028 | |
| 2,241 | | | C$ | 60.00 | | | $ | 45.53 | | | November 23, 2024 | |
| 4,881,895 | | | | | | | | | | | | |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| (a) | On September 1, 2021, the Company implemented a stock option plan pursuant to which stock options may be granted to directors, officers, employees, and consultants of the Company. The Board is authorized to grant the maximum number of common shares reserved for issuance in any 12-month period to anyone, optionee, other than a consultant may not exceed 5% of the issued and outstanding common shares at the date of the grant. The maximum number of common shares reserved for issuance in any 12-month period to any consultant may not exceed 2% of the issued and outstanding common shares at the date of the grant and the maximum number of common shares reserved for issuance in any 12-month period to all persons engaged in investor relations activities may not exceed 2% of the issued and outstanding number of common shares at the date of the grant. |
| (b) | The following table summarizes the changes in the Company’s stock options for the periods ended July 31, 2023 and October 31, 2022: |
| | Number of
options | | | Weighted
average
exercise price
(C$) | | | Weighted
average
exercise price
(USD$) | |
| | | | | | | | | |
| Outstanding, October 31, 2021 | | | 111,889 | | | C$ | 20.67 | | | $ | 15.18 | |
| | | | | | | | | | | | |
| Granted | | | 86,333 | | | | 20.68 | | | | 15.19 | |
| | | | | | | | | | | | |
| Cancelled | | | (40,556 | ) | | | 21.56 | | | | 15.84 | |
| | | | | | | | | | | | |
| Outstanding, October 31, 2022 | | | 157,666 | | | C$ | 20.45 | | | $ | 15.06 | |
| | | | | | | | | | | | |
| Cancelled | | | (23,333 | ) | | | 20.14 | | | | 15.29 | |
| Granted (i, ii, iii) | | | 10,000 | | | | 14.72 | | | | 11.17 | |
| | | | | | | | | | | | |
| Outstanding, July 31, 2023 | | | 144,333 | | | C$ | 20.10 | | | $ | 15.25 | |
| | | | | | | | | | | | |
| Exercisable, July 31, 2023 | | | 85,810 | | | C$ | 20.24 | | | $ | 15.36 | |
| (i) | On May 23, 2023, the Company granted 1,832 stock options to a consultant of the Company. The options are exercisable at CAD$10.5 per share. The options expire on May 23, 2033. |
| (ii) | On June 26, 2023, the Company granted 6,668 stock options to a consultant of the Company. The 4,668 options are exercisable at CAD$16.8 per share and the 2,000 options are exercisable at CAD$24.0 per share. The options expire on June 26, 2033. |
| (iii) | On July 6, 2023 the, Company granted 1,500 stock options to a consultant of the Company. The options are exercisable at $0.78 per share. The options expire on July 6, 2033. |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| 8. | Stock Options (continued) |
| (c) | Additional information regarding stock options outstanding as of July 31, 2023, is as follows: |
| Outstanding | | | | | | Exercisable | | | | |
Number of
stock options | | | Weighted
average
remaining
contractual
life
(years) | | | Weighted
average
exercise price
(C$) | | | Weighted
average
exercise
price (USD$) | | | Number of
stock
options | | | Weighted
average
exercise price
(C$) | | | Weighted
average
exercise
price (USD$) | |
| | | | | | | | | | | | | | | | | | | |
| 16,000 | | | | 2.82 | | | C$ | 5.55 | | | $ | 4.21 | | | | 10,667 | | | C$ | 5.55 | | | $ | 4.21 | |
| 22,667 | | | | 8.51 | | | | 16.80 | | | | 12.75 | | | | 18,167 | | | | 16.80 | | | | 12.75 | |
| 35,000 | | | | 2.82 | | | | 22.50 | | | | 17.08 | | | | 24,583 | | | | 22.50 | | | | 17.08 | |
| 6,000 | | | | 5.75 | | | | 23.40 | | | | 17.76 | | | | 3,750 | | | | 23.40 | | | | 17.76 | |
| 31,333 | | | | 8.51 | | | | 24.00 | | | | 18.21 | | | | 15,667 | | | | 24.00 | | | | 18.21 | |
| 20,000 | | | | 2.92 | | | | 25.20 | | | | 19.12 | | | | 13,333 | | | | 25.20 | | | | 19.12 | |
| 3,333 | | | | 8.36 | | | | 30.00 | | | | 22.77 | | | | 1,944 | | | | 30.00 | | | | 22.77 | |
| 1,832 | | | | 9.82 | | | | 10.50 | | | | 7.97 | | | | 687 | | | | 10.50 | | | | 7.97 | |
| 2,000 | | | | 9.91 | | | | 24.00 | | | | 18.21 | | | | 831 | | | | 24.00 | | | | 18.21 | |
| 4,668 | | | | 9.91 | | | | 16.80 | | | | 12.75 | | | | 2,723 | | | | 16.80 | | | | 12.75 | |
| 1,500 | | | | 9.94 | | | | 1.03 | | | | 0.78 | | | | 125 | | | | 0.78 | | | | 0.78 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 144,333 | | | | 5.70 | | | C$ | 20.10 | | | $ | 15.25 | | | | 85,810 | | | C$ | 20.24 | | | $ | 15.36 | |
The fair value for stock options previously granted to certain consultants for ongoing services measured during the period have been estimated using the Black-Scholes option pricing model assuming no expected dividends or forfeitures and the following weighted average assumptions:
| | 2023 | | | 2022 | |
| | | | | | |
| Risk-free interest rate | | | 3.83% | | | | 2.68% | |
| Expected life (in years) | | | 5.86 | | | | 5.88 | |
| Expected volatility | | | 111%-116% | | | 92%-97% | |
| (d) | The portion of the total fair value of stock options expensed during the nine months ended July 31, 2023, was $181,448 (2022 – $690,497) which was recorded as share-based payment reserve and charged to operations. The weighted average fair value of stock options granted during the nine months ended July 31, 2023 was CAD$0.27 per share (weighted average fair value of stock options granted during the nine months ended July 31, 2022 was CAD$0.23). |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| (a) | On August 4, 2021, the Company approved an RSU plan, which is designed to provide certain directors, officers, employees, and consultants of the Company with the opportunity to acquire RSU’s of the Company. Each unit is equivalent in value to a common share and upon vesting results in the holder thereof being issued, at the discretion of the Board, either (i) a common share, or (ii) an amount of cash equal to the fair market value of a common share. |
| (b) | The following table summarizes the continuity of RSUs: |
| | Number of
RSUs | | | Weighted
average
issue price (C$) | | | Weighted
average
issue price (USD$) | |
| | | | | | | | | |
| Balance, October 31, 2021 | | | – | | | $ | – | | | $ | – | |
| | | | | | | | | | | | |
| Granted | | | 35,328 | | | | 10.55 | | | | 7.75 | |
| Vested | | | (35,328 | ) | | | 10.55 | | | | 7.75 | |
| | | | | | | | | | | | |
| Balance, October 31, 2022 | | | – | | | $ | – | | | $ | – | |
| | | | | | | | | | | | |
| Granted (i) | | | 60,260 | | | | 2.03 | | | | 1.54 | |
| Vested | | | (60,260 | ) | | | 2.03 | | | | 1.54 | |
| | | | | | | | | | | | |
| Balance, July 31, 2023 | | | – | | | $ | – | | | $ | – | |
| (i) | During the nine months ended July 31, 2023, the Company issued 60,260 RSU’s with a fair value of $90,598 to consultants. |
| (c) | During the nine months ended July 31, 2023, the Company recognized share-based compensation of $(107,667), being the fair value of the RSU’s vesting during the period. This amount was charged against the RSU reserve in the Condensed Interim Consolidated Statement of Changes in Shareholders’ Equity (2022 – $202,301). |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| 10. | Financial Instruments and Risk Management |
Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s statement of financial position as of July 31, 2023, as follows:
| | Fair Value Measurements Using | | | | |
| | Quoted prices
in active markets
for identical
instruments
(Level 1) | | | Significant
other
observable
inputs
(Level 2) | | | Significant
unobservable
inputs
(Level 3) | | | Balance
July 31,
2023 | |
| Short-term investment | | $ | 122,779 | | | $ | – | | | $ | – | | | $ | 122,779 | |
| Derivative warrants liability | | | – | | | | 1,313,168 | | | | – | | | | 1,313,168 | |
Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s statement of financial position as of October 31, 2022, as follows:
| | Fair Value Measurements Using | | | | |
| | Quoted prices
in active markets
for identical
instruments
(Level 1) | | | Significant
other
observable
inputs
(Level 2) | | | Significant
unobservable
inputs
(Level 3) | | | Balance
October 31,
2022 | |
| Short-term investment | | $ | 193,750 | | | $ | – | | | $ | – | | | $ | 193,750 | |
| Derivative liability | | | – | | | | 290,569 | | | | – | | | | 290,569 | |
The fair value of other assets and liabilities, which include cash, amounts receivable, accounts payable and accrued liabilities, and amounts due to related parties, approximate their carrying values due to the relatively short-term maturity of these instruments.
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions. The carrying amount of financial assets represents the maximum credit exposure.
| c. | Foreign Exchange Rate Risk |
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company is exposed to foreign currency risk to the extent that monetary assets and liabilities are denominated in a foreign currency. The Company’s subsidiary operates in Israel and has certain monetary financial instruments denominated in New Israeli Shekel and CAD. The Company has not entered into foreign exchange rate contracts to mitigate this risk.
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
| 10. | Financial Instruments and Risk Management (continued) |
| c. | Foreign Exchange Rate Risk (continued) |
The following table indicates the impact of foreign currency exchange risk on net working capital as of July 31, 2023. The table below also provides a sensitivity analysis of a 10% strengthening of the foreign currency against functional currencies identified which would have increased (decreased) the Company’s net loss by the amounts shown in the table below. A 10% weakening of the foreign currency against the functional currencies would have had the equal but opposite effect as of July 31, 2023.
| Cash and cash equivalents | | $ | 253,952 | |
| Other receivables | | | 108,255 | |
| Accounts payable and accrued liabilities | | | (218,499 | ) |
| Due to related parties | | | (41,591 | ) |
| Total foreign currency financial assets and liabilities | | $ | (102,117 | ) |
| | | | |
| Impact of a 10% strengthening or weakening of foreign exchange rate | | $ | 10,212 | |
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to significant interest rate risk as it does not have any liabilities with variable rates.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s objective to managing liquidity risk is to ensure that it has sufficient liquidity available to meet its liabilities when due. The Company relies on raising debt or equity financing in a timely manner.
The following amounts are the contractual maturities of financial liabilities as of July 31, 2023 and October 31, 2022:
| July 31, 2023 | | Total | | | Within
1 year | | | Within
2-5 years | |
| | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 306,011 | | | $ | 306,011 | | | $ | – | |
| Due to related parties | | | 41,591 | | | | 41,591 | | | | – | |
| Derivative warrants liability | | | 1,313,168 | | | | 1,313,168 | | | | – | |
| | $ | 1,660,770 | | | $ | 1,660,770 | | | $ | – | |
| October 31, 2022 | | Total | | | Within
1 year | | | Within
2-5 years | |
| | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 1,396,960 | | | $ | 1,396,960 | | | $ | – | |
| Due to related parties | | | 206,494 | | | | 206,494 | | | | – | |
| Derivative liability | | | 290,569 | | | | 290,569 | | | | – | |
| Lease liability | | | 38,390 | | | | 38,390 | | | | – | |
| | $ | 1,932,413 | | | $ | 1,932,413 | | | $ | – | |
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in United States Dollars)
The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of cash and equity comprised of issued share capital, RSU reserve, warrants reserve, and options reserve.
The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its Board, will balance its overall capital structure through new share issuances or by undertaking other activities as deemed appropriate under the specific circumstances.
The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the nine months ended July 31, 2023.
As of July 31, 2023, the Company has one operating segment, research and development of psychedelic medicine, which takes place primarily in Israel.
The Company’s non-current assets by geographical location are as follows:
| July 31, 2023 | | Canada | | | United
States | | | Europe | | | Asia | | | Total | |
| | | | | | | | | | | | | | | |
| Intangible assets | | $ | – | | | $ | 35,327 | | | $ | 35,327 | | | $ | 47,101 | | | $ | 117,755 | |
| Property and equipment | | | – | | | | – | | | | – | | | | 7,299 | | | | 7,299 | |
| Restricted cash | | | 7,589 | | | | – | | | | – | | | | – | | | | 7,589 | |
| | $ | 7,589 | | | $ | 35,327 | | | $ | 35,327 | | | $ | 54,400 | | | $ | 132,643 | |
| October 31, 2022 | | Canada | | | United
States | | | Europe | | | Asia | | | Total | |
| | | | | | | | | | | | | | | |
| Intangible assets | | $ | – | | | $ | 39,079 | | | $ | 39,079 | | | $ | 52,106 | | | $ | 130,264 | |
| Property and equipment | | | – | | | | – | | | | – | | | | 12,902 | | | | 12,902 | |
| Restricted cash | | | 14,653 | | | | – | | | | – | | | | – | | | | 14,653 | |
| ROU asset | | | – | | | | – | | | | – | | | | 35,730 | | | | 35,730 | |
| Deferred offering costs | | | – | | | | 198,173 | | | | – | | | | – | | | | 198,173 | |
| | $ | 14,653 | | | $ | 237,252 | | | $ | 39,079 | | | $ | 100,738 | | | $ | 391,722 | |