Clearmind Medicine (CMND) - 2024 Q2 - Quarterly Report

Condensed Interim Consolidated Financial Statements The Company's financial position improved significantly by April 30, 2024, with increased assets and equity, while net loss decreased for the six months ended April 30, 2024, driven by financing activities and fair value adjustments Condensed Interim Consolidated Statements of Financial Position Total assets significantly increased to $8.85 million by April 30, 2024, driven by cash, while liabilities decreased and shareholders' equity substantially rose to $4.65 million Condensed Interim Consolidated Statements of Financial Position | Metric | April 30, 2024 (USD) | October 31, 2023 (USD) | | :------------------------------------- | :------------------- | :--------------------- | | Cash and cash equivalents | $8,305,927 | $5,427,739 | | Total current assets | $8,691,064 | $5,794,576 | | Total assets | $8,845,718 | $5,953,288 | | Accounts payable and accrued liabilities | $421,156 | $617,004 | | Derivative warrant liabilities | $3,731,799 | $4,310,379 | | Total current liabilities | $4,199,964 | $4,969,816 | | Total liabilities | $4,199,964 | $4,969,816 | | Total shareholders' equity | $4,645,754 | $983,472 | Condensed Interim Consolidated Statements of Operations and Comprehensive Loss Net loss significantly improved to $2.28 million for the six months ended April 30, 2024, driven by fair value gains on derivative warrants and unrealized investment gains Condensed Interim Consolidated Statements of Operations and Comprehensive Loss | Metric | Six months ended April 30, 2024 (USD) | Six months ended April 30, 2023 (USD) | | :------------------------------------------------- | :------------------------------------ | :------------------------------------ | | General and administrative | $2,137,062 | $2,583,873 | | Research and development, net | $550,434 | $905,202 | | Total operating expenses | $2,687,496 | $3,489,075 | | Changes in fair value of derivative warrant liabilities | $560,145 | $(360,557) | | Unrealized gain (loss) on short-term investment | $415,826 | $(58,749) | | Realized loss on short-term investment | $(423,438) | $0 | | Total finance income (expenses) | $649,735 | $(490,681) | | Loss before taxes | $(2,037,761) | $(3,963,201) | | Tax expenses | $(238,256) | $(12,650) | | Net Loss and Comprehensive loss | $(2,276,017) | $(3,975,851) | | Loss per share, basic and diluted | $(0.96) | $(39.62) | Condensed Interim Statements of Changes in Shareholders' Equity (Deficit) Shareholders' equity substantially increased to $4.65 million by April 30, 2024, primarily due to $5.6 million in new capital from share and warrant issuances and exercises Condensed Interim Statements of Changes in Shareholders' Equity (Deficit) | Metric | October 31, 2023 (USD) | April 30, 2024 (USD) | | :------------------------------------------------- | :--------------------- | :------------------- | | Balance, October 31, 2023 | $983,472 | | | Net loss for the period | | $(2,276,017) | | Issuance of common shares, pre-funded warrants and warrants | | $1,459,815 | | Exercise of warrants | | $4,154,389 | | Issuance of common shares upon vesting of restricted stock units | | $11,935 | | Share-based compensation | | $324,095 | | Balance, April 30, 2024 | | $4,645,754 | - On November 28, 2023, the Company effected a 1-for-30 reverse split of its issued and outstanding common shares, retroactively adjusting all share amounts for periods presented[12][16][43] Condensed Interim Consolidated Statements of Cash Flows Net cash used in operations decreased to $2.65 million, while financing activities provided $5.46 million, leading to a $2.88 million cash increase and $8.31 million total cash Condensed Interim Consolidated Statements of Cash Flows | Metric | Six months ended April 30, 2024 (USD) | Six months ended April 30, 2023 (USD) | | :------------------------------------------------- | :------------------------------------ | :------------------------------------ | | Net loss | $(2,276,017) | $(3,975,851) | | Changes in fair value of derivative warrant liability | $(560,145) | $360,557 | | Share-based compensation | $324,095 | $246,446 | | Net cash used in operating activities | $(2,654,773) | $(4,172,649) | | Net cash generated in investing activities | $78,500 | $0 | | Proceeds from issuance of common shares and warrants, net of issuance costs | $1,824,773 | $9,321,796 | | Proceeds received from exercise of warrants | $3,655,950 | $0 | | Net cash provided by financing activities | $5,461,636 | $9,290,812 | | Net increase in cash and cash equivalents | $2,878,188 | $5,116,930 | | Cash and cash equivalents at end of period | $8,305,927 | $5,245,707 | Notes to the Condensed Interim Consolidated Financial Statements These notes provide critical details on the Company's operations, accounting policies, financial instruments, and risk management, highlighting its going concern status and capital structure 1. Nature of Operations and Going Concern Clearmind Medicine Inc., a clinical pharmaceutical R&D company, faces going concern risks due to no revenue and negative cash flows, despite management's financing plans - Clearmind Medicine Inc. is a clinical pharmaceutical company engaged in phase I/IIa clinical trials of novel psychedelic medicines, with its R&D arm in Israel[40] - The Company trades under the symbol 'CMND' on Nasdaq and 'CWY' on the Frankfurt Stock Exchange, having voluntarily delisted from the Canadian Securities Exchange on March 14, 2024[20] - The Company has not generated any revenues for the six months ended April 30, 2024, and has negative cash flows from operations of $2,654,773, with an accumulated deficit of $21,044,080. Its continued operations depend on obtaining additional financing, which raises substantial doubt about its ability to continue as a going concern[42] a. Company Overview and Listing b. Going Concern Assessment c. Reverse Share Split 2. Material Accounting Policy Information Financial statements adhere to IFRS, using USD as functional currency, with key estimates for warrant liabilities and critical judgments on going concern status - The financial statements are prepared under IFRS on a historical cost basis, with financial assets and liabilities (including derivatives) presented at fair value through profit or loss (FVTPL), and are presented in United States dollars[24] - The Company adopted amendments to IAS 1, replacing 'significant accounting policies' with 'material accounting policy information', emphasizing disclosure of information that can reasonably influence user decisions[26][47] - Significant estimates include warrant liability valuation using the Black-Scholes option pricing model, which relies on subjective assumptions like expected stock price volatility, expected life of warrants, and probability of future adjustment events[29][49][50][72] - A critical judgment is the application of the going concern assumption, acknowledging material uncertainties that raise substantial doubt about the Company's ability to continue[30][51] a. Basis of Presentation b. Unaudited Interim Financial Information c. Significant Accounting Estimates and Judgments 3. Short-term Investment The Company fully disposed of its XYLO short-term investment for $78,500, incurring a net realized loss of $7,612 during the period - The Company sold all XYLO shares for $78,500, recording a net realized loss of $7,612 during the six months ended April 30, 2024[31] Short-term Investment | Metric | October 31, 2023 (USD) | Disposals (USD) | Net realized loss (USD) | April 30, 2024 (USD) | | :---------------- | :--------------------- | :-------------- | :---------------------- | :------------------- | | XYLO – Shares | $86,112 | $78,500 | $(7,612) | $0 | 4. Related Party Transactions Related party transactions include $501,244 in key management compensation, R&D cooperation with SciSparc, and an early terminated office lease Compensation to Key Management Personnel | Metric | Six months ended April 30, 2024 (USD) | Six months ended April 30, 2023 (USD) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Officers: Consulting fees | $248,274 | $220,501 | | Officers: Share based compensation | $41,555 | $75,380 | | Directors: Directors' fees | $125,525 | $80,976 | | Directors: Share based compensation | $85,890 | $78,124 | | Total compensation | $501,244 | $454,981 | - The Company has a cooperation agreement with SciSparc Ltd. for a feasibility study using certain molecules, which has resulted in nine patent applications. Certain officers and directors of the Company also operate or manage SciSparc[54][55] - For the six months ended April 30, 2024, the Company incurred $22,808 in R&D expenses under the Cooperation Agreement, and $105,022 is owed to the Company by SciSparc[77] - The office lease agreement with SciSparc in Tel Aviv was terminated early on March 31, 2024, resulting in approximately $15,000 in early termination fees and $3,600 to a broker, recorded as general and administrative expenses[56][78] a. Compensation to Key Management Personnel b. Cooperation Agreement with SciSparc Ltd c. Office Lease Agreement with SciSparc Ltd 5. Derivative Warrant Liabilities Derivative warrant liabilities decreased to $3.73 million by April 30, 2024, driven by a $560,145 revaluation gain and warrant exercises, despite new issuances - The Company recorded a gain on the revaluation of total derivative warrant liabilities of $560,145 for the six months ended April 30, 2024[85] Derivative Warrant Liabilities | Metric | Amount (USD) | | :------------------------------------ | :------------- | | Balance as of October 31, 2023 | $4,310,379 | | Issuance of January 2024 Warrants | $480,004 | | Exercise of warrants | $(498,439) | | Changes in fair value of warrants | $(560,145) | | Balance as of April 30, 2024 | $3,731,799 | - Exercise prices for April 2023 and September 2023 Warrants were reduced to $1.077 following the January 2024 Public Offering, which included common shares at a lower price. This led to increased common shares per warrant[58][60] - During the period, 2,219 April 2023 Warrants were exercised into 20,245 common shares, 16,334 September 2023 Warrants into 81,469 common shares, and 30,200 January 2024 Warrants into 30,200 common shares[59][61][62] 6. Share Capital Common shares outstanding significantly increased to 3,310,528 after a 1-for-30 consolidation, with $1.82 million from offerings and $3.66 million from warrant exercises - As of April 30, 2024, the number of common shares issued and outstanding was 3,310,528, a substantial increase from 607,337 on October 31, 2023[65] - On November 28, 2023, the Company effected a 1-for-30 share consolidation, retroactively restating all share amounts[107] - On January 16, 2024, the Company completed a registered direct offering and private placement, issuing 1,468,000 Common Shares, 32,000 pre-funded warrants, and 1,500,000 unregistered common warrants, generating net proceeds of $1,824,773[87] - Between November 29, 2023, and March 2, 2024, various warrants were exercised into a total of 1,194,102 shares, generating gross proceeds of $3,655,950[108][109][19] a. Authorized Share Capital b. Share Consolidation c. Share Transactions (Six Months Ended April 30, 2024) d. Share Transactions (Six Months Ended April 30, 2023) 7. Warrants Warrants outstanding increased to 1,673,625 by April 30, 2024, with a lower weighted average exercise price of $1.53, allowing conversion into 2,925,075 common shares Warrants Outstanding Summary | Metric | October 31, 2023 | April 30, 2024 | | :------------------------------------------------ | :--------------- | :------------- | | Balance, Number of warrants outstanding | 384,369 | 1,673,625 | | Balance, Weighted average exercise price (USD) | $7.90 | $1.53 | | Issuance of January 2024 warrants | | 1,500,000 | | Exercise of warrants | | (202,411) | | Expiration of warrants | | (8,333) | | Number of shares to be issued from exercise of warrants | 826,781 | 2,925,075 | Warrants Outstanding Details | Number of warrants outstanding | Number of shares to be issued from the exercise of warrants | Exercise price (USD) | Expiry date | | :----------------------------- | :-------------------------------------------------------- | :------------------- | :--------------------- | | 1,923 | 1,923 | $243.75 | November 17, 2027 | | 50,299 | 697,520 | $1.077 | April 5, 2028 | | 75 | 75 | $1,309.47 | November 23, 2024 | | 151,528 | 755,757 | $1.077 | September 17, 2028 | | 1,469,800 | 1,469,800 | $1.60 | January 15, 2025 | | Total: 1,673,625 | Total: 2,925,075 | | | 8. Stock Options The Omnibus Equity Incentive Plan governs 5,521 outstanding stock options with a $437.73 weighted average exercise price, incurring $56,870 in expense - The Omnibus Equity Incentive Plan allows for granting options or RSUs up to 20% of issued and outstanding Common Shares to officers, directors, employees, and consultants[116] Stock Options Summary | Metric | October 31, 2023 | April 30, 2024 | | :------------------------------------ | :--------------- | :------------- | | Outstanding, Number of options | 5,588 | 5,521 | | Outstanding, Weighted average exercise price (USD$) | $434.81 | $437.73 | | Expired | | (67) | | Exercisable, Number of options | | 4,803 | | Exercisable, Weighted average exercise price (USD$) | | $439.41 | - The portion of total fair value of stock options expensed for the six months ended April 30, 2024, was $56,870, compared to $121,935 in the prior year[98] Stock Option Valuation Assumptions | Assumption | Six months ended April 30, 2024 | Six months ended April 30, 2023 | | :-------------------------- | :------------------------------ | :------------------------------ | | Risk-free interest rate | 3.89% | 3.89% | | Expected life (in years) | 5.11 | 5.13 | | Expected volatility | 150.79%-161.87% | 113%-118% | 9. Restricted Share Units 236,981 RSUs were outstanding by April 30, 2024, with 437,765 granted and 200,784 vested, totaling $267,346 in fair value Restricted Share Units Summary | Metric | October 31, 2023 | April 30, 2024 | | :------------------------------------ | :--------------- | :------------- | | Balance, Number of RSUs | 0 | 236,981 | | Balance, Weighted average issue price (USD$) | $0 | $1.28 | | Granted | | 437,765 | | Vested | | (200,784) | - During the six months ended April 30, 2024, 437,765 RSUs were issued to consultants, directors, and officers, and 200,784 RSUs vested with a fair value of $267,346[120] 10. Financial Instruments and Risk Management Financial instruments include Level 3 derivative warrant liabilities, with credit, foreign currency, and liquidity risks managed through various strategies Fair Value Measurements | Financial Instrument | April 30, 2024 (Level 3) | | :--------------------------- | :----------------------- | | Derivative warrants liability | $3,731,799 | - The Company's exposure to credit risk is primarily from cash, which is mitigated by placing it with high credit quality financial institutions[129] - The Company is exposed to foreign currency risk from monetary assets and liabilities denominated in New Israeli Shekel and CAD. A 10% strengthening or weakening of foreign currency against functional currencies would impact net loss by $12,086[3][103][131] - The Company is not exposed to significant interest rate risk as it does not have any liabilities with variable rates[4] - Liquidity risk is managed by ensuring sufficient liquidity to meet financial obligations, relying on timely debt or equity financing[132] Current Liabilities | Liability Type | April 30, 2024 (Within 1 year) | October 31, 2023 (Within 1 year) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Accounts payable and accrued liabilities | $421,156 | $617,004 | | Due to related parties | $47,009 | $42,433 | | Total | $468,165 | $659,437 | a. Fair Value Measurements b. Credit Risk c. Foreign Exchange Rate Risk d. Interest Rate Risk e. Liquidity Risk 11. Capital Management Capital management focuses on maintaining going concern status and shareholder returns, with a consistent strategy and no externally imposed capital requirements - 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[6] - The capital structure consists of cash and equity, including issued share capital, RSU reserve, warrants reserve, and options reserve[6] - The Company is not subject to externally imposed capital requirements, and its capital risk management strategy remains unchanged[133] 12. Segmented Information The Company operates as a single R&D segment in Israel, securing exclusive licensing agreements for psychedelic compounds in addiction and mental health - As of April 30, 2024, the Company has one operating segment: the research and development of novel psychedelic medicine, primarily in Israel[7] - On January 15, 2024, the Company signed an exclusive long-term licensing agreement with BIRAD for a dedicated cocaine addiction treatment, involving milestone payments and 2.5% royalties for 15 years post-commercial sale[127] - On March 19, 2024, the Company signed an exclusive global patent licensing agreement with Yissum for psychedelic compounds, involving 3% royalties on sales, annual license fees starting at $25,000, and milestone payments of $400,000 upon Phase III clinical trial enrollment and $600,000 upon first commercial sale[8][138] 13. Commitments Commitments primarily involve lease obligations, specifically the early termination of an office lease agreement with SciSparc Ltd - The Company's lease commitment is detailed in Note 4c, which describes the early termination of an office lease agreement with SciSparc Ltd[135]