10-Q 1 tmb-20220630x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

or

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

For the transition period fromto

Commission file number: 001-37410

ESSA Pharma Inc.

(Exact name of registrant as specified in its charter)

British Columbia, Canada

98-1250703

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

Suite 720, 999 West Broadway

Vancouver, BC V5Z 1K5

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (778) 331-0962

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

EPIX

Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No

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, a 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 Securities Exchange Act of 1934). Yes No

The number of outstanding common shares of the registrant, no par value per share, as of August 4, 2022 was 44,073,076.

ESSA PHARMA INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2022

Table of Contents

PART I. FINANCIAL INFORMATION

8

Item 1.

Financial Statements and Supplementary Data

8

Condensed Consolidated Interim Balance Sheets as of June 30, 2022 and September 30, 2021

9

Condensed Consolidated Interim Statements of Operations and Comprehensive Loss for the three and nine months ended June 30, 2022 and 2021

10

Condensed Consolidated Interim Statements of Cash Flows for the nine months ended June 30, 2022 and 2021

11

Condensed Consolidated Interim Statement of Changes in Shareholders’ Equity for the three and nine months ended June 30, 2022 and 2021

12

Notes to Condensed Consolidated Interim Financial Statements

13

Item 2.

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

24

Item 3.

Controls and Procedures

47

PART II. OTHER INFORMATION

48

Item 1.

Legal Proceedings

48

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3.

Defaults Upon Senior Securities

48

Item 4.

Mine Safety Disclosures

48

Item 5.

Other Information

48

Item 6.

Exhibits, Financial Statement Schedules

49

SIGNATURES

50

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of Canadian securities laws, or collectively, forward-looking statements. Forward-looking statements include statements that may relate to our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, in particular, under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Forward-looking statements can often be identified by the use of terminology such as “subject to”, “believe,” “anticipate,” “plan,” “expect,” “intend,” “estimate,” “project,” “may,” “will,” “should,” “would,” “could,” “hope,” “can,” the negatives thereof, variations thereon and similar expressions, or by discussions of strategy. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Examples of such forward looking statements include, but are not limited to statements related to:

our ability to maintain operations, development programs, preclinical studies, clinical trials and raise capital as a result of the coronavirus disease 2019 outbreak (“COVID 19”);
our ability to advance our product candidate and potential future product candidates through, and successfully complete, clinical trials;
our ability to recruit sufficient numbers of patients in a timely manner for current and future clinical trials, and the benefits expected therefrom;
our ability to establish and maintain relationships with collaborators with acceptable development, regulatory and commercialization expertise and the benefits to be derived from such collaborative efforts;
our ability to obtain funding for operations, including research funding, and the timing and potential sources of such funding;
the initiation, timing, cost, location, progress and success of, strategy and plans with respect to our research and development programs (including research programs and related milestones with regards to next-generation drug candidates and compounds), preclinical studies and clinical trials;
the therapeutic benefits, properties, effectiveness, pharmacokinetic profile and safety of our product candidate and potential future product candidates, if any, including the expected benefits, properties, effectiveness, pharmacokinetic profile and safety of our next-generation aniten compounds;
our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
developments relating to our competitors and our industry, including the success of competing therapies that are or may become available;
our ability to achieve profitability;
the grant (“CPRIT Grant”) under the Cancer Prevention and Research Institute of Texas (“CPRIT”) and payments thereunder, including any residual obligations;
our intended use of proceeds from past and future offerings of our securities;
the implementation of our business model and strategic plans, including strategic plans with respect to patent applications and strategic collaborations and partnerships;
our ability to identify, develop and commercialize product candidates;
our commercialization, marketing and manufacturing capabilities and strategy;
our expectations regarding federal, state, provincial and foreign regulatory requirements, including our plans with respect to anticipated regulatory filings;
whether we will receive, and the timing and costs of obtaining, regulatory approvals in the United States, Canada and other jurisdictions;
the accuracy of our estimates of the size and characteristics of the markets that may be addressed by our product candidate and potential future product candidates, if any;
the rate and degree of market acceptance and clinical utility of our potential future product candidates, if any;

3

the timing of, and our ability and our collaborators’ ability, if any, to obtain and maintain regulatory approvals for our product candidate and potential future product candidates, if any;
our expectations regarding market risk, including inflation, interest rate changes and foreign currency fluctuations;
our ability to engage and retain the employees required to grow our business;
the compensation that is expected to be paid to our employees;
our future financial performance and projected expenditures; and
estimates of our financial condition, expenses, future revenue, capital requirements and our need for additional financing and potential sources of capital and funding.

Such statements reflect our current views with respect to future events, are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that are inherently subject to significant medical, scientific, business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including those described under “Risk Factors” in our Annual Report on Form 10-K. All forward-looking statements included in this Quarterly Report on Form 10-Q, are based upon our current expectations and various assumptions. Certain assumptions made in preparing the forward-looking statements include, but are not limited to:

our ability to maintain operations as a result of the COVID-19 outbreak;
our ability to conduct a clinical study involving our product candidate and to identify any future product candidates;
our ability to obtain regulatory and other approvals to commence a clinical trial involving any future product candidates;
our ability to obtain positive results from research and development activities, including clinical trials;
the availability of sufficient financing on reasonable terms;
our ability to obtain required regulatory approvals;
our ability to protect patents and proprietary rights;
our ability to successfully out-license or sell future products, if any, and in-license and develop new products;
the absence of material adverse changes in our industry or the global economy;
our ability to attract and retain key personnel;
our continued compliance with third party license terms and non-infringement of third-party intellectual property rights;
our ability to maintain good business relationships with our strategic partners; and
our ability to understand and predict market competition.

We believe there is a reasonable basis for our current expectations, views and assumptions, but they are inherently uncertain. We may not realize our expectations and our views and assumptions may not prove correct. Actual results could differ materially from those described or implied by such forward-looking statements.  In evaluating forward-looking statements, investors should specifically consider the following uncertainties and factors, among others (including those set forth under the heading “Risk Factors” in our Annual Report on Form 10-K), that could affect future performance and cause actual results to differ materially from those matters expressed in or implied by forward-looking statements

risks related to our ability to maintain operations and execute on our business plan within projected timelines as a result of the COVID-19 outbreak or other health epidemics;
risks related to clinical trial development and our ability to conduct the clinical trial of our product candidate and the predictive value of our current or planned clinical trials;
risks related to clinical trials being conducted by third parties under collaboration and clinical supply agreements, including combination studies, using the Company’s product candidate, studies which the Company may not control, and ensuing reputational risk related to clinical trial results;
risks related to our future success being dependent primarily on identification through preclinical studies, clinical studies, regulatory approval for commercialization of a single product candidate;
risks related to our license agreement with third parties;
uncertainty related to our ability to obtain required regulatory approvals for our proposed products;

4

risks related to the Company’s ability to conduct a clinical trial or submit a future NDA/NDS or IND/CTA (each, as defined herein);
risks related to our ability to successfully commercialize future product candidates;
risks related to the possibility that our product candidate and potential future product candidates, if any, may have undesirable side effects;
risks related to our ability to enroll subjects in clinical trials, including enrollment delays that may be the result of the impact of Covid at clinical trial sites;
risks that the FDA may not accept data from trials conducted in locations outside the United States;
risks related to our ongoing obligations and continued regulatory review;
risks related to potential administrative or judicial sanctions;
the risk of increased costs associated with prolonged, delayed or terminated clinical trials;
the risk that third parties may not carry out their contractual duties;
risks related to the possibility that our relationships with clinical research organizations or academic institutions may terminate;
risks related to our lack of experience manufacturing product candidates on a large clinical or commercial scale and our lack of manufacturing facility;
risks inherent in foreign operations, including related to foreign sourced raw materials, manufacturing or clinical trials;
risks related to disruptions in domestic and foreign supply chains that the Company relies on for the production and shipment of raw materials and clinical trial materials, including disruptions in suppliers ability to deliver related to Covid;
risks related to our failure to obtain regulatory approval in international jurisdictions;
risks related to recently enacted and future legislation in the United States that may increase the difficulty and cost for us to obtain marketing approval of, and commercialize, our product candidate and potential future products, if any, and affect the prices we may obtain;
risks related to new legislation, new regulatory requirements, and the continuing efforts of governmental and third-party payors to contain or reduce the costs of healthcare;
uncertainty as to our ability to raise additional funding;
risks related to our ability to raise additional capital on favorable terms and the impact of dilution from incremental financing;
risks of a deemed default on any residual obligations of the agreement providing for the CPRIT Grant and having to reimburse all of the CPRIT Grant, if such deemed default is not waived by CPRIT;
risks related to our incurrence of significant losses in every quarter since inception and our anticipation that it will continue to incur significant losses in the future;
risks related to our limited operating history;
risks related to our reliance on proprietary technology;
risks related to our ability to protect our intellectual property rights throughout the world;
risks related to claims by third parties asserting that we, or our employees or consultants have misappropriated their intellectual property, or claiming ownership of what we regard as our intellectual property;
risks related to our ability to comply with governmental patent agency requirements in order to maintain patent protection;
risks related to computer system failures or security breaches and increasing cyber threats;
risks related to business disruptions that could seriously harm our future revenues and financial condition and increase our costs and expenses;
risks related to our dependence on the use of information technologies;
risks related to our ability to attract and maintain highly qualified personnel;
risks relating to the possibility that third-party coverage and reimbursement and health care cost containment initiatives and treatment guidelines may constrain our future revenues;
risks related to potential conflicts of interest between us and our directors and officers;
risks related to competition from other biotechnology and pharmaceutical companies;
risks related to movements in foreign currency exchange rates, interest rates and rate of inflation;

5

risks related to our ability to convince public payors and hospitals to include our product candidate and potential future products, if any, on their approved formulary lists;
risks related to our ability to establish an effective sales force and marketing infrastructure, or enter into acceptable third-party sales and marketing or licensing arrangements;
risks related to our ability to manage growth;
risks related to our ability to achieve or maintain expected levels of market acceptance for our products;
risks related to our ability to realize benefits from acquired businesses or products or form strategic alliances in the future;
risks related to collaborations with third parties;
risks that employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation;
risks related to product liability lawsuits;
risks related to compulsory licensing and/or generic competition;
risks related to share price volatility in the event there is low liquidity for the trading of the Company’s common shares;
risks related to the possibility that laws and regulations governing international operations may preclude us from developing, manufacturing and selling certain product candidates outside of the United States and Canada and require us to develop and implement costly compliance programs;
risks related to laws that govern fraud and abuse and patients’ rights;
risks related to our ability to comply with environmental, health and safety laws and regulations;
risks related to us being a “passive foreign investment company”;
risks related to United States investors’ ability to effect service of process or enforcement of actions against us;
risks related to market price and trading volume volatility;
risks related to our dividend policy;
risks associated with future sales of our securities;
risks related to our ability to maintain an active trading market for the Company's common shares;
risks related to our ability to implement and maintain effective internal controls;
risks related to provisions in our charter documents and Canadian law affecting corporate governance; and
risks related to analyst coverage.

If one or more of these risks or uncertainties or a risk that is not currently known to us, materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from those expressed or implied by forward-looking statements. The forward-looking statements represent our expectations, plans, estimates and views as of the date of this document. We do not undertake and specifically decline any obligation to update, republish or revise forward-looking statements to reflect future events or circumstances or to reflect the occurrences of unanticipated events, except as required by law. Investors are cautioned that we cannot guarantee future results, events, levels of activity, performance or achievements and that forward-looking statements are inherently uncertain. Accordingly, investors are cautioned not to put undue reliance on forward-looking statements. We advise you that these cautionary remarks expressly qualify in their entirely all forward-looking statements attributable to us or persons acting on our behalf.

6

In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States, Canada, and all European countries. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. COVID-19 has had a broad adverse impact on the global economy across many industries and has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions and business shutdowns, as well as significant volatility in global financial markets. Although COVID-19 has not to date had a material impact on our business, operations, or financial condition, there can be no assurances that it will not have an impact on our business, operations, or financial condition going forward, such as disruption to supply chains or in the recruitment of patients at clinical trial sites, which has resulted in delays to projected timelines that are not deemed to be material. Management has taken recommended precautions, including adherence to local and facility-related pandemic mandates, support for work at home, encouragement and monitoring of employee vaccination, implementation of changes to secure supply chains, and taking other steps to minimize the impact to the Company of the effect of COVID-19 on vendors and partners involved in the clinical trial program, including engaging additional clinical trial sites. See “Risk Factors - Risks Relating to COVID-19” in our Annual Report on Form 10-K.

We express all amounts in this Quarterly Report on Form 10-Q in U.S. dollars, except where otherwise indicated. References to “$” and “US$” are to U.S. dollars and references to “C$” are to Canadian dollars. Except as otherwise indicated, references in this Quarterly Report on Form 10-Q to “ESSA,” “the Company,” “we,” “us” and “our” refer to ESSA Pharma Inc. and its subsidiaries.

7

PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements and Supplementary Data

Graphic

ESSA Pharma Inc.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

(Expressed in United States dollars)

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2022

8

ESSA PHARMA INC.

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

(Expressed in United States dollars)

AS OF

June 30, 

September 30, 

    

2022

    

2021

ASSETS

 

  

 

  

Current

 

  

 

  

Cash and cash equivalents

$

67,868,096

 

$

137,825,024

Short-term investments (Note 4)

106,727,807

57,102,159

Receivables

 

19,450

 

489,012

Prepaids (Note 5)

 

569,092

 

2,181,882

 

175,184,445

 

197,598,077

Deposits

259,455

 

259,455

Operating lease right-of-use assets (Note 7)

 

216,946

 

308,286

Total assets

$

175,660,846

 

$

198,165,818

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

  

Current

 

  

 

  

Accounts payable and accrued liabilities (Note 6)

$

3,902,899

 

$

3,808,944

Current portion of operating lease liabilities (Note 7)

 

130,868

 

120,719

 

4,033,767

 

3,929,663

Operating lease liabilities (Note 7)

 

111,273

 

210,251

Derivative liabilities (Note 8)

 

 

20,352

Total liabilities

 

4,145,040

 

4,160,266

Shareholders’ equity

 

  

 

  

Authorized

 

  

 

  

Unlimited common shares, without par value

 

  

 

  

Unlimited preferred shares, without par value

Common shares 44,073,076 issued and outstanding (September 30, 2021 – 43,984,346) (Note 9)

 

278,089,136

 

277,415,176

Additional paid-in capital (Note 9)

 

42,109,862

 

36,442,620

Accumulated other comprehensive loss

 

(2,128,161)

 

(2,076,479)

Accumulated deficit

 

(146,555,031)

 

(117,775,765)

 

171,515,806

 

194,005,552

Total liabilities and shareholders’ equity

$

175,660,846

 

$

198,165,818

Nature of operations (Note 1)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

9

ESSA PHARMA INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(Expressed in United States dollars)

For the three months ended

For the nine months ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

OPERATING EXPENSES

 

  

 

  

 

  

 

  

Research and development

$

6,394,534

 

$

6,231,908

$

20,063,752

 

$

17,985,937

Financing costs (Note 7)

 

3,145

 

16,667

 

10,996

 

18,147

General and administration

 

2,895,542

 

3,117,900

 

9,775,082

 

9,942,149

Total operating expenses

 

(9,293,221)

 

(9,366,475)

 

(29,849,830)

 

(27,946,233)

Foreign exchange

 

910

 

(34,084)

 

30,338

 

(19,239)

Interest and other income

 

417,872

 

80,394

 

974,207

 

155,293

Derivative liability gain (loss) (Note 8)

 

1,929

 

568,954

 

20,352

 

(470,132)

Net loss for the period before taxes

 

(8,872,510)

 

(8,751,211)

 

(28,824,933)

 

(28,280,311)

Income tax recovery (expense)

 

45,767

 

(800)

 

45,667

 

34,349

Net loss for the period

(8,826,743)

(8,752,011)

(28,779,266)

(28,245,962)

OTHER COMPREHENSIVE LOSS

Unrealized loss on short-term investments

(2,951)

 

 

(51,682)

 

Loss and comprehensive loss for the period

$

(8,829,694)

 

$

(8,752,011)

$

(28,830,948)

 

$

(28,245,962)

Basic and diluted loss per common share

$

(0.20)

 

$

(0.21)

$

(0.65)

 

$

(0.76)

Weighted average number of common shares outstanding – basic and diluted

 

44,059,700

 

41,018,024

 

44,026,502

 

36,937,014

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

10

ESSA PHARMA INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

(Expressed in United States dollars)

FOR THE NINE MONTHS ENDED JUNE 30,

    

2022

    

2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

Loss for the period

$

(28,779,266)

 

$

(28,245,962)

Items not affecting cash and cash equivalents:

 

  

 

  

Amortization of right-of-use asset

 

91,340

 

80,665

Amortization of premiums/discounts on short-term investments, net

170,331

 

Accretion of lease liability

 

10,555

 

5,497

Derivative liability loss (gain)

 

(20,352)

 

470,132

Interest income

(450,580)

(42,719)

Unrealized foreign exchange

 

571

 

26,497

Share-based payments

 

5,954,444

 

6,652,613

Changes in non-cash working capital items:

 

  

 

  

Receivables

 

469,562

 

104,749

Prepaids

 

1,612,790

 

1,145,402

Accounts payable and accrued liabilities

 

92,390

 

1,770,800

Net cash used in operating activities

 

(20,848,215)

 

(18,032,326)

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Purchase of short-term investments

(197,959,710)

(57,026,103)

Proceeds from short-term investments sold

148,254,180

22,000,000

Interest from short-term investments

 

326,270

 

11,337

Net cash used in investing activities

 

(49,379,260)

 

(35,014,766)

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Proceeds on issuance of common shares

 

 

149,999,985

Share issuance costs

 

 

(9,229,451)

Options exercised

319,832

1,186,833

Warrants exercised

382

Shares purchased through employee share purchase plan

66,926

89,318

Lease payments

 

(99,384)

 

(69,637)

Net cash provided by financing activities

 

287,374

 

141,977,430

Effect of foreign exchange on cash and cash equivalents

 

(16,827)

 

(56,920)

Change in cash and cash equivalents for the period

 

(69,956,928)

 

88,873,418

Cash and cash equivalents, beginning of period

 

137,825,024

 

56,320,763

Cash and cash equivalents, end of period

$

67,868,096

 

$

145,194,181

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

11

ESSA PHARMA INC.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(Expressed in United States dollars)

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2022 AND 2021

Accumulated

Additional

other

Number

Common

paid-in

comprehensive

 

    

of shares

    

shares

    

capital

    

loss

    

Deficit

    

Total

Balance, September 30, 2020

 

32,064,411

$

131,086,364

$

31,204,284

$

(2,076,479)

$

(80,970,304)

 

$

79,243,865

Warrants exercised

 

1,493,504

 

2,987,158

 

(2,987,009)

 

 

 

149

Options exercised

42,207

274,365

(120,664)

153,701

Shares issued through employee share purchase plan

5,261

39,638

(12,269)

 

27,369

Share-based payments

 

 

 

1,204,985

 

 

 

1,204,985

Loss for the period

 

 

 

 

 

(6,528,704)

 

(6,528,704)

Balance, December 31, 2020

 

33,605,383

$

134,387,525

$

29,289,327

$

(2,076,479)

$

(87,499,008)

 

$

74,101,365

Financing

 

5,555,555

 

149,999,985

 

 

 

 

149,999,985

Share issuance costs

 

 

(9,168,801)

 

 

 

 

(9,168,801)

Warrants exercised

 

1,043,538

 

143,853

 

(143,753)

 

 

 

100

Options exercised

213,381

1,377,947

(600,962)

776,985

Share-based payments

 

 

 

2,663,684

 

 

 

2,663,684

Loss for the period

 

 

 

 

 

(12,965,247)

 

(12,965,247)

Balance, March 31, 2021

 

40,417,857

$

276,740,509

$

31,208,296

$

(2,076,479)

$

(100,464,255)

 

$

205,408,071

Share issuance costs

 

 

(60,649)

 

 

 

 

(60,649)

Warrants exercised

 

1,362,765

 

123,023

 

(122,890)

 

 

 

133

Options exercised

68,022

453,155

(197,008)

256,147

Shares issued through employee share purchase plan

6,272

114,958

(53,010)

 

61,948

Share-based payments

 

 

 

2,783,944

 

 

 

2,783,944

Loss for the period

 

 

 

 

 

(8,752,011)

 

(8,752,011)

Balance, June 30, 2021

 

41,854,916

$

277,370,996

$

33,619,332

$

(2,076,479)

$

(109,216,266)

 

$

199,697,583

Accumulated

Additional

other

Number

Common

paid-in

comprehensive

 

of shares

    

shares

    

capital

    

loss

    

Deficit

    

Total

Balance, September 30, 2021

 

43,984,346

$

277,415,176

$

36,442,620

$

(2,076,479)

$

(117,775,765)

 

$

194,005,552

Options exercised

29,080

184,512

(80,188)

 

104,324

Shares issued through employee share purchase plan

2,444

45,936

(18,576)

 

27,360

Share-based payments

 

2,500,091

 

2,500,091

Loss for the period

 

(9,097,919)

 

(9,097,919)

Balance, December 31, 2021

 

44,015,870

$

277,645,624

$

38,843,947

$

(2,076,479)

$

(126,873,684)

 

$

187,539,408

Options exercised

43,830

384,342

(168,834)

 

215,508

Share-based payments

 

1,863,353

 

1,863,353

Loss for the period

 

(48,731)

(10,854,604)

 

(10,903,335)

Balance, March 31, 2022

 

44,059,700

$

278,029,966

$

40,538,466

$

(2,125,210)

$

(137,728,288)

 

$

178,714,934

Shares issued through employee share purchase plan

13,376

59,170

(19,604)

 

39,566

Share-based payments

 

1,591,000

 

1,591,000

Loss for the period

 

(2,951)

(8,826,743)

 

(8,829,694)

Balance, June 30, 2022

 

44,073,076

$

278,089,136

$

42,109,862

$

(2,128,161)

$

(146,555,031)

 

$

171,515,806

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

12

ESSA PHARMA INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

(Expressed in United States dollars)

FOR THE NINE MONTHS ENDED JUNE 30, 2022

1.     NATURE OF OPERATIONS

Nature of Operations

The Company was incorporated under the laws of the Province of British Columbia on January 6, 2009. The Company’s head office address is Suite 720 – 999 West Broadway, Vancouver, BC, V5Z 1K5. The registered and records office address is the 26th Floor at 595 Burrard Street, Three Bentall Centre, Vancouver, BC, V7X 1L3. The Company is listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “EPIX”.

The Company is focused on the development of small molecule drugs for the treatment of prostate cancer. The Company has acquired a license to certain patents (“NTD”) which were the joint property of the British Columbia Cancer Agency and the University of British Columbia. As of June 30, 2022, no products are in commercial production or use.

2.     BASIS OF PRESENTATION

Basis of Presentation

These accompanying unaudited condensed consolidated interim financial statements, including comparatives, have been prepared in accordance with United States’ Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these condensed consolidated interim financial statements do not include all of the information and footnotes required for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and notes for the year ended September 30, 2021 and included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC and with the securities commissions in British Columbia, Alberta and Ontario on November 18, 2021.

These unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations for the three and nine months ended June 30, 2022 and 2021 are not necessarily indicative of results that can be expected for a full year. These unaudited condensed consolidated interim financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company included in the Company’s 2021 Annual Report on Form 10-K for the year ended September 30, 2021, with the exception of any policies described in Note 3.

These accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its wholly owned subsidiaries. Inter-company transactions, balances and unrealized gains or losses on transactions are eliminated upon consolidation.

The accompanying condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial assets measured at fair value.

All amounts expressed in these accompanying condensed consolidated interim financial statements and the accompanying notes are expressed in United States dollars, except per share data and where otherwise indicated. References to “$” are to United States dollars and references to “C$” are to Canadian dollars.

13

Use of Estimates

The preparation of the accompanying condensed consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, expenses, contingent assets and contingent liabilities as of the end of, or during, the reporting period. Actual results could significantly differ from those estimates. Significant areas requiring management to make estimates include the derivative liabilities, the valuation of equity instruments issued for services, income taxes and the product development and relocation grant. Further details of the nature of these assumptions and conditions may be found in the relevant notes to these condensed consolidated interim financial statements.

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both. Estimates and assumptions are reviewed quarterly.

3.     RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements not yet adopted

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated interim financial statements.

Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are  not believed by management to have a material impact on the Company’s present or future consolidated financial statement presentation or disclosures.

14

4.     SHORT-TERM INVESTMENTS

Short-term investments consist of guaranteed investment certificates (“GICs”) held at financial institutions purchased in accordance with the Company’s treasury policy. These GICs and term deposits bear interest at 0.31%-1.58% per annum and have maturities of up to 12 months.

Short-term investments also consist of U.S. treasury securities, corporate debt securities and commercial paper. The Company has classified these investments as available-for-sale, as the sale of such investments may be required prior to maturity to implement management strategies, and therefore has classified all investment securities as current assets. Those investments with maturity dates of three months or less at the date of purchase are presented as cash equivalents in the accompanying balance sheets. Short-term investments are carried at fair value with the unrealized gains and losses included in accumulated other comprehensive loss as a component of shareholders’ equity (deficit) until realized. Any premium or discount arising at purchase is amortized or accreted to interest income as an adjustment to yield using the straight-line method over the life of the instrument. The Company records an allowance for credit losses when unrealized losses are due to credit-related factors. Realized gains and losses are calculated using the specific identification method and recorded as interest income.

As of June 30, 2022

Amortized

Unrealized

Accrued

Estimated

    

Cost

    

Gains

    

Losses

    

Interest

    

Fair Value

GICs and Term deposits

$

89,496,261

 

$

 

$

 

$

130,434

 

$

89,626,695

U.S. Treasury securities

8,580,088

(24,305)

137,103

8,692,886

Corporate debt securities

 

4,433,583

 

 

(27,377)

 

43,353

 

4,449,559

Commercial paper

 

3,958,667

 

 

 

 

3,958,667

Balance, end of period

$

106,468,599

 

$

 

$

(51,682)

 

$

310,890

 

$

106,727,807

As of September 30, 2021

Amortized

Unrealized

Accrued

Estimated

    

Cost

    

Gains

    

Losses

    

Interest

    

Fair Value

GICs and Term deposits

$

57,026,103

 

$

 

$

 

$

76,056

 

$

57,102,159

Balance, end of period

$

57,026,103

 

$

 

$

 

$

76,056

 

$

57,102,159

As of June 30, 2022, short-term investments have an aggregate fair market value of $106.7 million (2021 – $57.1 million) were in an aggregate gross unrealized loss position of $51,682 (2021 - $Nil). The Company considers the decline in market value for the securities to be primarily attributable to current economic and market conditions. These particular investments have been in an unrealized loss position for less than 12 months and it is not more likely than not that the Company will be required to sell any of its securities prior to maturity. Accordingly, no allowance for credit losses has been recorded as of June 30, 2022 and no realized gains or losses on sales of short-term investments have been recorded through June 30, 2022.

15

5.     PREPAIDS

June 30, 

September 30, 

    

2022

    

2021

Prepaid insurance

$

317,962

 

$

1,751,052

Prepaid CMC and clinical expenses and deposits

 

181,835

 

240,513

Other deposits and prepaid expenses

 

69,295

 

190,317

Balance, end of period

$

569,092

 

$

2,181,882

6.     ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

June 30, 

September 30, 

    

2022

    

2021

Accounts payable

$

555,962

 

$

1,425,871

Accrued expenses

 

2,945,398

 

2,062,441

Accrued vacation

 

401,539

 

320,632

Balance, end of period

$

3,902,899

 

$

3,808,944

7.     OPERATING LEASE

Operating lease right-of-use asset

    

  

Balance, September 30, 2020

$

55,162

Addition

 

323,036

Amortization

(80,665)

Balance, June 30, 2021

$

297,533

Balance, September 30, 2021

$

308,286

Amortization

(91,340)

Balance, June 30, 2022

$

216,946

Operating lease liabilities

 

  

Balance, September 30, 2020

$

59,094

Addition

 

323,036

Accretion

5,497

Lease payments

(69,637)

Balance, June 30, 2021

$

317,990

Balance, September 30, 2021

$

330,970

Accretion

10,555

Lease payments

(99,384)

Balance, June 30, 2022

$

242,141

16

The Company recognizes a right-of-use asset for the right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company’s obligation to make payments over the lease term. The present value of the lease payments is calculated using an incremental borrowing rate as the Company’s leases do not provide an implicit interest rate. At June 30, 2022, the Company’s incremental borrowing rate was 5.0% and the remaining lease term for the South San Francisco office was 23 months and Houston office was 13 months.

Accretion expense of $10,555 (2021 - $1,480) has been recorded in “financing costs” in the condensed consolidated interim statements of operations and comprehensive loss.

8.     DERIVATIVE LIABILITIES

In January 2016, the Company completed a private placement of 227,273 units of the Company at $66.00 per unit (“Unit”) for gross proceeds of $14,999,992. Each Unit consisted of one common share of the Company, one 7-year cash and cashless exercise warrant (the “7-Year Warrants”), and one half of one 2-year cash exercise warrant (the “2-Year Warrants”). The 7-Year Warrants and 2-Year Warrants have an exercise price of $66.00 per common share (collectively, the “2016 Warrants”). The holders of the 7-Year Warrants may elect, in lieu of exercising the 7-Year Warrants for cash, a cashless exercise option, in whole or in part, to receive common shares equal to the fair value of the 7-Year Warrants based on the number of 7-Year Warrants to be exercised multiplied by a ten-day weighted average market price less the exercise price with the difference divided by the weighted average market price. If a warrant holder exercises this option, there will be variability in the number of shares issued per 7-Year Warrant.

Additionally, the 2016 Warrants contain provisions which may require the Company to redeem the 2016 Warrants, at the option of the holder, in the event of a major transaction, such as a change of control or sale of the Company’s assets (“Major Transaction”). The redemption value would be subject to a Black-Scholes valuation at the time of exercise. In the event the consideration for a Major Transaction payable to the common shareholders is in cash, in whole or in part, the redemption of the 2016 Warrants would be made in cash pro-rata to the composition of the consideration. The potential for a cash settlement for the 2016 Warrants outside the control of the Company, in accordance with U.S. GAAP, requires the 2016 Warrants to be treated as financial liabilities measured at fair value through profit or loss. The 2016 Warrants are not traded in an active market.

Valuation

The Company uses the Black-Scholes option pricing model to estimate fair value. The following weighted average assumptions were used to estimate the fair value of the derivative warrant liabilities on June 30, 2022 and 2021:

June 30, 

June 30, 

2022

    

2021

Risk-free interest rate

 

2.65

%  

0.36

%

Expected life