DiaMedica Therapeutics(DMAC) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the reporting period Financial Statements The unaudited condensed consolidated financial statements for the period ended September 30, 2023, show a significant increase in total assets and shareholders' equity, primarily due to proceeds from a private placement, while the net loss widened due to increased research and development expenses, with no revenue from product sales Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,232 | $4,728 | | Total current assets | $47,886 | $33,835 | | Total assets | $58,139 | $34,395 | | Total current liabilities | $2,170 | $2,168 | | Total shareholders' equity | $55,629 | $31,827 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,272 | $1,640 | $9,433 | $5,569 | | General and administrative | $1,885 | $1,488 | $5,986 | $4,459 | | Operating loss | ($5,157) | ($3,128) | ($15,419) | ($10,028) | | Net loss | ($4,471) | ($3,059) | ($14,220) | ($9,925) | | Basic and diluted net loss per share | ($0.12) | ($0.12) | ($0.46) | ($0.38) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($14,916) | ($8,745) | | Net cash (used in) provided by investing activities | ($24,423) | $6,814 | | Net cash provided by (used in) financing activities | $36,843 | ($5) | | Net decrease in cash and cash equivalents | ($2,496) | ($1,936) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on developing its lead candidate, DM199, for acute ischemic stroke (AIS) and cardio-renal disease (CRD), highlighting the recent lifting of the FDA clinical hold on the ReMEDy2 trial, the financial impact of increased R&D and G&A expenses, and the significant boost to liquidity from private placements in April and June 2023, providing sufficient capital for at least the next 12 months - The company's primary focus is advancing its lead candidate DM199, a recombinant form of human tissue kallikrein-1 (KLK1), for the treatment of acute ischemic stroke (AIS) and cardio-renal disease (CRD)[67] - In June 2023, the FDA lifted the clinical hold on the Phase 2/3 ReMEDy2 trial for DM199 in AIS, allowing the company to resume preparations for the trial[70] Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,272 | $1,640 | $9,433 | $5,569 | | General and administrative | $1,885 | $1,488 | $5,986 | $4,459 | - The company raised $36.8 million in net proceeds from private placements in April and June 2023, which is expected to fund planned operations for at least the next 12 months[74][94] Liquidity and Capital Resources Summary (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents and marketable securities | $56,212 | $33,502 | | Working capital | $45,716 | $31,667 | Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, DiaMedica Therapeutics Inc. is not required to provide disclosure for this item - The company is not required to provide disclosure pursuant to this item as it qualifies as a smaller reporting company[99] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2023, with no material changes to the company's internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[100] - No changes in internal control over financial reporting occurred during the third quarter of 2023 that have materially affected, or are reasonably likely to materially affect, these controls[101] PART II. OTHER INFORMATION This section details legal proceedings, new risk factors related to financial institution stability, unregistered equity sales, and a list of exhibits filed with the report Legal Proceedings The company is involved in litigation with Pharmaceutical Research Associates Group B.V. (ICON/PRA Netherlands), where a Dutch court ruled in DiaMedica's favor affirming its ownership of clinical study documents, a decision that ICON/PRA Netherlands has appealed with a primary case hearing scheduled for December 2023 - The company is in a legal dispute with ICON/PRA Netherlands regarding the possession of clinical study documents[103] - On April 21, 2023, the Netherlands Commercial Court (NCC) issued a judgment affirming DiaMedica's ownership of the documents; ICON/PRA Netherlands filed an appeal on June 15, 2023, and a hearing for the primary case is scheduled for December 7, 2023[104] Risk Factors A new risk factor has been added regarding the potential impact of financial institution instability, acknowledging that disruptions in the banking sector could adversely affect the company's ability to access cash deposits, obtain financing, and meet liquidity requirements following bank failures in early 2023 - A new risk factor was disclosed concerning the stability of financial institutions, prompted by the bank failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in early 2023[106] - The risk highlights that future disruptions could adversely affect the company's ability to access its cash, obtain financing, or meet liquidity requirements, and could also impact its suppliers and vendors[106] Unregistered Sales of Equity Securities and Use of Proceeds The company reported that it did not sell any unregistered equity securities during the third quarter ended September 30, 2023 - No unregistered equity securities were sold during the quarter ended September 30, 2023[107] Exhibits This section lists all exhibits filed with the quarterly report, including corporate governance documents, material contracts, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - The report includes a list of exhibits filed, such as the Notice of Articles, Amended and Restated Articles, a Consulting Services Agreement, a Separation Agreement, and various officer certifications[111][112]