DiaMedica Therapeutics Inc.
Annual Report 2019

Plain-text annual report

2019 ANNUAL REPORT Dear Shareholders, As we enter 2020, we are very excited for DiaMedica and our shareholders. We look forward to building upon 2019 which was an important year for us and we are pleased to report that we achieved each of the milestones outlined in last year’s letter to our shareholders. In that letter, we laid out a very ambitious schedule to initiate clinical study work in the United States, improve our understanding of the use of DM199 in the treatment of patients with chronic kidney disease, or CKD, recruit a world-class clinical advisory board and further develop our clinical strategy for CKD, all the while working to complete enrollment in our REMEDY study in acute ischemic stroke. Specifically, during 2019, we started and completed a Phase Ib study in patients with moderate or severe CKD, which then guided the design of our current Phase II CKD studies. In June 2019, we announced positive interim results from the Phase Ib study. We also observed favorable movements in pharmacodynamic endpoints, including improvements in nitric oxide, estimated glomerular flow rate, and urinary albumin to creatinine ratio (UACR). The study also met our primary safety and pharmacokinetics endpoints and guided dosing levels for our Phase II CKD studies. We reported full results of our Phase Ib study at the National Kidney Foundation 2020 Spring Clinical Meetings Live Virtual Conference on March 26, 2020. We established a world-class clinical advisory board for our chronic kidney disease program. Working closely with our advisors, we selected the first two causes of CKD to study in our Phase II trial which we have named “REDUX,” the Latin word for restore, a reference to our goal that DM199 can restore normal levels of the KLK1 protein. For REDUX, we selected African Americans that have hypertension, but are not diabetic, and individuals with IgA Nephropathy. Individuals with these conditions generally do not suffer from significant comorbidities, or other medical conditions. We believe that this will give us the opportunity to evaluate the therapeutic effect of DM199 on CKD without potential complications from other treatments received by the study subjects. In addition, we believe that these two groups may benefit from additional attributes of DM199. Specifically, hypertensive African Americans are more highly salt sensitive causing them to suffer greater increases in blood pressure from consuming salty foods. Bradykinin [DM199] has been shown in studies to improve regulation of sodium intake through the epithelial sodium channel, or ENaC, in the kidneys. For individuals with IgA Nephropathy, we will be looking for indications that DM199, through the increased production of regulatory T-cells, might have an impact on the autoimmune attack underlying IgA Nephropathy. In addition, within the African American group, which is three to four times more likely to progress to end stage renal disease than Caucasians, we will be monitoring for study subjects with the APOL1 gene mutation. Doctors believe that around 10% of African Americans carry this gene mutation, which causes these patients to progress to end stage renal disease twice as fast as African Americans in general. As we discussed last year, the completion of our U.S. initial public offering in December 2018 allowed us to increase the target enrollment for our REMEDY study. We completed enrollment in late October with a total of 92 subjects. We expected to report full results from REMEDY at the upcoming European Stoke Conference being held in Vienna, Austria, May 12-15, 2020. However, since the conference has been postponed until November 7-9, 2020, we are evaluating alternatives for releasing full study results. While we continue to build upon our understanding of the science of DM199, we also continue to build our team with the addition of two key senior leaders - Dr. Sydney Gilman as Vice President of Regulatory Affairs, and Dr. Edward Calamai as Head of Manufacturing. We are gratified to be able to add two highly experienced individuals to our team and would like to recognize and thank all of our employees for their hard work and dedication. In February this year, we strengthened our balance sheet with an $8.5 million capital raise, placed with institutional biotech investors. With this additional capital, we should be able to readily fund our operations through 2021. This should comfortably allow us to complete our three ongoing Phase II clinicals, which we believe will provide meaningful clinical data for DM199, without the need to immediately raise additional capital. Thus, we should be able to evaluate and be more selective with our future financing and business development opportunities. Looking ahead to 2020, we remain focused on our highest priorities: completing Phase II clinical trials in hypertensive African Americans and individuals with IgA Nephropathy with chronic kidney disease and patients who have suffered acute ischemic stroke. We have a lot of important clinical endpoints that we will be analyzing and which will direct our future developments and strategic initiatives. In closing, we are truly excited about our opportunity to offer improved treatment for poorly served patients with chronic kidney disease and patients with acute ischemic stroke. We look forward to communicating with you on the progress of DM199 as we move forward with our programs and our commitment and continued belief in DiaMedica Therapeutics’ ability to deliver innovative protein replacement therapy to patients in need. Thank you, Rick Pauls President and Chief Executive Officer Richard Pilnik Chairman of the Board NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS June 2, 2020 The Annual General Meeting of Shareholders of DiaMedica Therapeutics Inc., a corporation existing under the laws of British Columbia, will be held at the offices of Fox Rothschild LLP* located at 222 South Ninth Street, Suite 2000, Minneapolis, Minnesota 55402 USA, beginning at 2:30 p.m., Central Daylight Savings Time, on Tuesday, June 2, 2020, for the following purposes: 1. 2. 3. 4. To receive the audited consolidated financial statements of DiaMedica Therapeutics Inc. for the financial year ended December 31, 2019 and accompanying report of the independent registered public accounting firm (for discussion only). To elect four persons to serve as directors until our next annual general meeting of shareholders or until their respective successors are elected and qualified (Voting Proposal One). To consider a proposal to appoint Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020 and to authorize the Board of Directors to fix our independent registered public accounting firm’s remuneration (Voting Proposal Two). To transact such other business as may properly come before the meeting or any adjournment of the meeting. Only those shareholders of record at the close of business on April 9, 2020 will be entitled to notice of, and to vote at, the meeting and any adjournments thereof. A shareholder list will be available at our corporate offices beginning April 20, 2020 during normal business hours for examination by any shareholder registered on our common share ledger as of the record date, April 9, 2020, for any purpose germane to the meeting. By Order of the Board of Directors, Scott Kellen Corporate Secretary April 20, 2020 Minneapolis, Minnesota Important: Whether or not you expect to attend the meeting in person, please vote by the Internet or telephone, or request a paper proxy card to sign, date and return by mail so that your shares may be voted. A prompt response is helpful and your cooperation is appreciated. * As part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the Annual General Meeting may be held at another place or solely by means of remote communication. If we take this step, we will publicly announce the decision to do so in advance, as well as details on the place, if applicable, and how to attend and participate. Such information will also be available at https://www.diamedica.com/proxy. TABLE OF CONTENTS ________________ Page PROXY STATEMENT SUMMARY ........................................................................................................... 1 GENERAL INFORMATION ABOUT THE ANNUAL GENERAL MEETING AND VOTING ............. 1 Date, Time, Place and Purposes of Meeting .................................................................................... 1 Who Can Vote ................................................................................................................................. 1 How You Can Vote .......................................................................................................................... 1 How Does the Board of Directors Recommend that You Vote ....................................................... 3 How You May Change Your Vote or Revoke Your Proxy ............................................................. 3 Quorum Requirement....................................................................................................................... 3 Vote Required .................................................................................................................................. 3 Appointment of Proxyholders .......................................................................................................... 4 Other Business ................................................................................................................................. 4 Procedures at the Meeting ................................................................................................................ 4 Householding of Meeting Materials ................................................................................................ 5 Proxy Solicitation Costs ................................................................................................................... 5 VOTING PROPOSAL ONE—ELECTION OF DIRECTORS .................................................................... 6 Board Size and Structure ................................................................................................................. 6 Information about Current Directors and Board Nominees ............................................................. 6 Additional Information about Current Directors and Board Nominees ........................................... 6 Penalties or Sanctions ...................................................................................................................... 9 Corporate Cease Trade Orders or Bankruptcies .............................................................................. 9 Board Recommendation................................................................................................................... 9 VOTING PROPOSAL TWO—APPOINTMENT OF BAKER TILLY VIRCHOW KRAUSE, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZATION TO FIX REMUNERATION ............................................................................................................................. 10 Appointment of Independent Registered Public Accounting Firm ................................................ 10 Authorization to Board of Directors to Fix Remuneration ............................................................ 10 Audit, Audit-Related, Tax and Other Fees .................................................................................... 10 Audit Committee Pre-Approval Policies and Procedures .............................................................. 11 Board Recommendation................................................................................................................. 11 STOCK OWNERSHIP ............................................................................................................................... 12 Security Ownership of Significant Beneficial Owners .................................................................. 12 Security Ownership of Management ............................................................................................. 13 CORPORATE GOVERNANCE ................................................................................................................ 15 Management by Board of Directors ............................................................................................... 15 Corporate Governance Guidelines ................................................................................................. 15 Board Leadership Structure ........................................................................................................... 16 Director Independence ................................................................................................................... 17 Board Committees ......................................................................................................................... 17 Audit Committee ............................................................................................................................ 17 Compensation Committee .............................................................................................................. 19 i Nominating and Corporate Governance Committee ...................................................................... 20 Director Qualifications and the Nomination Process ..................................................................... 21 Board Diversity .............................................................................................................................. 22 Role of Board in Risk Oversight Process....................................................................................... 23 Code of Business Conduct and Ethics ........................................................................................... 23 Board and Committee Meetings and Attendance .......................................................................... 24 Policy Regarding Director Attendance at Annual General Meetings of Shareholders .................. 24 Complaint Procedures .................................................................................................................... 24 Process Regarding Shareholder Communications with Board of Directors .................................. 24 DIRECTOR COMPENSATION ................................................................................................................ 25 Non-Employee Director Compensation Program .......................................................................... 25 Director Compensation Table ........................................................................................................ 26 Indemnification .............................................................................................................................. 26 EXECUTIVE COMPENSATION .............................................................................................................. 27 Executive Compensation Overview ............................................................................................... 27 Summary Compensation Table ...................................................................................................... 34 Outstanding Equity Awards at Fiscal Year-End ............................................................................ 35 Employee Benefit and Stock Plans ................................................................................................ 35 Anti-Hedging and Pledging Policy ................................................................................................ 38 RELATED PERSON RELATIONSHIPS AND TRANSACTIONS ......................................................... 40 Introduction .................................................................................................................................... 40 Description of Related Party Transactions ..................................................................................... 40 Policies and Procedures for Related Party Transactions ................................................................ 41 SHAREHOLDER PROPOSALS FOR 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS ..................................................................................................................................... 43 COPIES OF FISCAL 2019 ANNUAL REPORT AND ADDITIONAL INFORMATION ...................... 43 ________________ DiaMedica Therapeutics Inc. is sometimes referred to as “DiaMedica,” “we,” “our” or “us” in this proxy statement. The Annual General Meeting of Shareholders to be held on June 2, 2020 is sometimes referred to as the “Annual General Meeting” or “meeting” in this proxy statement. Our voting common shares, no par value, are sometimes referred to as our “common shares” or “shares” in this proxy statement. All dollar amounts in this proxy statement are expressed in United States currency unless otherwise noted. ii PROXY STATEMENT SUMMARY ________________ This executive summary provides an overview of the information included in this proxy statement. We recommend that you review the entire proxy statement and our 2019 Annual Report to Shareholders before voting. 2020 ANNUAL GENERAL MEETING OF SHAREHOLDERS DATE AND TIME Proposal Board’s Vote Recommendation Tuesday, June 2, 2020 2:30 p.m. (Central Daylight Savings Time) LOCATION* Fox Rothschild LLP 222 South Ninth Street, #2000 Minneapolis, MN 55402 Voting Proposal No. 1: Election of Directors FOR Voting Proposal No. 2: Appointment of Independent Registered Public Accounting Firm and Authorization to Fix Remuneration FOR 10 Page 6 RECORD DATE April 9, 2020 Holders of record of our common shares at the close of business on April 9, 2020 are entitled to notice of, to attend, and to vote at the 2020 Annual General Meeting of Shareholders or any adjournment thereof * As part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the Annual General Meeting may be held at another place or solely by means of remote communication. If we take this step, we will publicly announce the decision to do so in advance, as well as details on the place, if applicable, and how to attend and participate. Such information will also be available at https://www.diamedica.com/proxy. 1 INTERNET AVAILABILITY OF PROXY MATERIALS Instead of mailing a printed copy of our proxy materials, including our Annual Report to Shareholders, to each shareholder of record, we have provided access to these materials in a fast and efficient manner via the Internet. We believe that this process expedites your receipt of our proxy materials, lowers the costs of our meeting and reduces the environmental impact of our meeting. On or about April 20, 2020, we expect to begin mailing a Notice of Internet Availability of Proxy Materials to shareholders of record as of April 9, 2020 and post our proxy materials on the website referenced in the Notice of Internet Availability of Proxy Materials (www.proxyvote.com). As more fully described in the Notice of Internet Availability of Proxy Materials, shareholders may choose to access our proxy materials at www.proxyvote.com or may request proxy materials in printed or electronic form. In addition, the Notice of Internet Availability of Proxy Materials and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. For those who previously requested printed proxy materials or electronic materials on an ongoing basis, you will receive those materials as you previously requested. Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting of Shareholders to be Held on June 2, 2020: The Notice of Annual General Meeting of Shareholders and Proxy Statement and Annual Report to Shareholders, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, are available at www.proxyvote.com 2 2020 BUSINESS HIGHLIGHTS Below are highlights of our clinical, operational and financial achievements during 2019 and the beginning of 2020. Clinical Commenced Phase II - CKD Completed Phase 1b - CKD Commenced REDUX Phase II study of DM199 for the treatment of Chronic Kidney Disease (CKD). This study is designed to investigate the safety, tolerability and efficacy of DM199 for the treatment of CKD in African Americans with hypertension and CKD in individuals with IgA Nephropathy. Completed Phase Ib study of DM199 in patients with moderate or severe CKD caused by Type I or Type II diabetes. These results, consistent with prior studies, demonstrated that DM199 continued to be safe and well tolerated with no treatment-related serious adverse events and pharmacokinetic data supported the determination of the dose range expected to normalize KLK1 levels in both moderate and severe CKD patients. Completed Phase II - AIS Completed enrollment in our Phase II REMEDY trial assessing the safety, tolerability and markers of therapeutic efficacy of DM199 in patients suffering from acute ischemic stroke (AIS). Operational Established World Class Scientific Advisory Board Established a world class scientific advisory board to advise us with respect to our Phase II clinical study for CKD, including Drs. Rajiv Agarwal, George Bakris, Glenn Chertow, Charles Herzog and Aldo Peixoto. Expanded Executive Team Hired a new Vice President, Regulatory Affairs and a Consulting Head of Manufacturing. Financial Improved Financial Position Raised $8.5 million in gross proceeds from a public underwritten offering of our common shares in February 2020. Obtained Litigation Financing Entered into a litigation funding agreement with LEGALIST FUND II, L.P. for the purpose of funding our currently pending lawsuit against Pharmaceutical Research Associates Group B.V. 3 CORPORATE GOVERNANCE HIGHLIGHTS  Annual election of directors  Majority of independent directors  Independent Board Chairman  Three fully independent Board committees  Independent compensation consultant  Corporate governance guidelines  Annual review of governance documents  Regular executive sessions  No conflicts of interest  Access to independent advisors  No guaranteed bonuses  No perquisites BOARD OF DIRECTORS NOMINEES Below are the directors nominated for election by shareholders at the 2020 Annual General Meeting of Shareholders for a one-year term. All director nominees listed below served during the fiscal year ended December 31, 2019. Zhenyu Xiao, Ph.D., a current director, is not standing for re-election at the 2020 Annual General Meeting. Director Richard Pilnik Michael Giuffre, M.D. James Parsons Rick Pauls Age 63 64 54 48 Serving Since 2009 2010 2015 2010 Independent Yes Yes Yes No The Board of Directors recommends a vote “FOR” each of these four nominees. BOARD COMMITTEE COMPOSITION The Board of Directors maintains a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Below are our current directors and their Board committee memberships. Audit Committee ● ● ● Compensation Committee ● ● ● Nominating and Corporate Governance Committee ● ● ● Independent Director (Y/N) Y Y Y N Y Director Richard Pilnik Michael Giuffre, M.D. James Parsons Rick Pauls Zhenyu Xiao, Ph.D. KEY QUALIFICATIONS The following are some key qualifications, skills, and experiences of our Board of Directors.  Leadership/Management  Prior Board Experience  Financial Expertise  Regulatory Expertise  Business Development Experience  Biopharmaceutical Industry Expertise 4 EXECUTIVE COMPENSATION BEST PRACTICES Our compensation practices include many best practices that support our executive compensation objectives and principles and benefit our shareholders. What We Do:  Emphasize pay for performance  Structure our executive compensation so a What We Don’t Do:  No guaranteed salary increases or bonuses  No repricing of stock options unless approved significant portion of pay is at risk by shareholders  Structure our executive compensation so a  No pledging or hedging of DiaMedica significant portion is paid in equity  Maintain competitive pay packages securities  No perquisites HOW WE PAY Our executive compensation program consists of the following principal elements which are described in more detail below under “Executive Compensation—Compensation Philosophy—Elements of Our Executive Compensation Program:”  Base salary – a fixed amount, paid in cash and reviewed annually and, if appropriate, adjusted.  Short-term incentive – a variable, short-term element that is payable in cash and is based on annual corporate performance objectives and, in some cases, individual performance objectives.  Long-term incentive – a variable, long-term element that is provided in stock options. 2019 EXECUTIVE COMPENSATION ACTIONS 2019 compensation actions and incentive plan outcomes based on performance are summarized below: Element Base Salary Short-Term Incentive Key 2019 Actions Our named executive officers received increases between 13% and 29% over their respective 2018 base salaries to bring them closer to our target market positioning. Our named executive officers received short-term incentive cash bonuses equal to 80% of their respective target bonus opportunities based primarily on the achievement of corporate performance objectives and an additional discretionary adjustment as determined appropriate by the Compensation Committee. Long-Term Incentive Our named executive officers received stock option awards, which vest quarterly over two years. Adopted a new shareholder-approved omnibus incentive plan. Other Compensation No significant changes were made to other components of our executive compensation program. 5 [This page intentionally left blank] Two Carlson Parkway, Suite 260, Minneapolis, Minnesota 55447 ____________________________________ PROXY STATEMENT FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS June 2, 2020 ____________________________________ The Board of Directors of DiaMedica Therapeutics Inc. is soliciting your proxy for use at the 2020 Annual General Meeting of Shareholders to be held on Tuesday, June 2, 2020. The Board of Directors expects to make available to our shareholders beginning on or about April 20, 2020 the Notice of Annual General Meeting of Shareholders, this proxy statement and a form of proxy on the Internet or has sent these materials to shareholders of DiaMedica upon their request. GENERAL INFORMATION ABOUT THE ANNUAL GENERAL MEETING AND VOTING ________________ Date, Time, Place and Purposes of Meeting The Annual General Meeting of Shareholders of DiaMedica Therapeutics Inc. will be held on Tuesday, June 2, 2020, at 2:30 p.m., Central Daylight Savings Time, at the offices of Fox Rothschild LLP located at 222 South Ninth Street, Suite 2000, Minneapolis, Minnesota 55402, USA, for the purposes set forth in the Notice of Annual General Meeting of Shareholders. As part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the Annual General Meeting may be held at another place or solely by means of remote communication. If we take this step, we will publicly announce the decision to do so in advance, as well as details on the place, if applicable, and how to attend and participate. Such information will also be available at https://www.diamedica.com/proxy. Who Can Vote Shareholders of record at the close of business on April 9, 2020 will be entitled to notice of and to vote at the Annual General Meeting or any adjournment thereof. As of that date, there were 14,139,074 of our common shares outstanding. Each common share is entitled to one vote on each matter to be voted on at the Annual General Meeting. Shareholders are not entitled to cumulate voting rights. How You Can Vote Your vote is important. Whether you hold shares directly as a shareholder of record or beneficially in “street name” (through a broker, bank or other nominee), you may vote your shares without attending the meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker, bank or other nominee. 1 If you are a registered shareholder whose shares are registered in your name, you may vote your shares in person at the meeting or by one of the three following methods:  Vote by Internet, by going to the website address http://www.proxyvote.com and following the instructions for Internet voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.  Vote by Telephone, by dialing 1-800-690-6903 and following the instructions for telephone voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.  Vote by Proxy Card, by completing, signing, dating and mailing the enclosed proxy card in the envelope provided if you received a paper copy of these proxy materials. If you vote by Internet or telephone, please do not mail your proxy card. If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a separate voting instruction form with this proxy statement or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet or telephone. The deadline for voting by telephone or by using the Internet is 11:59 p.m., Eastern Daylight Savings Time (10:59 p.m., Central Daylight Savings Time), on June 1, 2020, the day before the meeting. Please see the Notice of Internet Availability of Proxy Materials, your proxy card or the information your bank, broker or other nominee provided to you for more information on your options for voting. If you return your signed proxy card or use Internet or telephone voting before the meeting, the named proxies will vote your shares as you direct. You have multiple choices on each matter to be voted on as follows: For Voting Proposal One—Election of Directors, you may:  Vote FOR all four nominees for director,  WITHHOLD your vote from one or more of the four nominees for director. For Voting Proposal Two—Appointment of Baker Tilly Virchow and Krause, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration, you may:  Vote FOR the proposal,  Vote AGAINST the proposal or  ABSTAIN from voting on the proposal. If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to vote your shares, the proxies will vote your shares FOR all four of the nominees for election to the Board of Directors in Voting Proposal One—Election of Directors and FOR Voting Proposal Two— Appointment of Baker Tilly Virchow and Krause, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration. 2 How Does the Board of Directors Recommend that You Vote The Board of Directors unanimously recommends that you vote:  FOR all four of the nominees for election to the Board of Directors in Voting Proposal One— Election of Directors; and  FOR Voting Proposal Two—Appointment of Baker Tilly Virchow and Krause, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration. How You May Change Your Vote or Revoke Your Proxy If you are a shareholder whose shares are registered in your name, you may revoke your proxy at any time before it is voted by one of the following methods:  Submitting another proper proxy with a more recent date than that of the proxy first given by following the Internet or telephone voting instructions or completing, signing, dating and returning a proxy card to us;  Sending written notice of your revocation to our Corporate Secretary; or  Attending the meeting and voting by ballot. Quorum Requirement The quorum for the transaction of business at the meeting is any number of shareholders who, in the aggregate, hold at least 331/3% of our issued common shares entitled to be voted at the meeting or 4,713,025 common shares. In general, our common shares represented by proxies marked “For,” “Against,” “Abstain” or “Withheld” are counted in determining whether a quorum is present. In addition, a “broker non-vote” is counted in determining whether a quorum is present. A “broker non-vote” is a proxy returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received by the broker from the customer and the broker has no discretionary authority to vote on behalf of such customer on such matter. Vote Required If your shares are held in “street name” and you do not indicate how you wish to vote, your broker is permitted to exercise its discretion to vote your shares only on certain “routine” matters. Voting Proposal One—Election of Directors is not a “routine” matter. Accordingly, if you do not direct your broker how to vote, your broker may not exercise discretion and may not vote your shares on this proposal. This is called a “broker non-vote” and although your shares will be considered to be represented by proxy at the meeting, they will not be considered to be “votes cast” at the meeting and will not be counted as having been voted on the proposal. Voting Proposal Two—Appointment of Baker Tilly Virchow Krause, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration is a “routine” matter and, as such, your broker is permitted to exercise its discretion to vote your shares for or against the proposal in the absence of your instruction. 3 The table below indicates the vote required for each voting proposal, the effect of votes withheld or abstentions and the effect of any broker non-votes. Voting Proposal Voting Proposal One: Election of Directors Votes Required Affirmative vote of a majority of votes cast on the voting proposal. Effect of Votes Withheld / Abstentions Abstentions will have no effect. Affirmative vote of a majority of votes cast on the voting proposal. Abstentions will have no effect. Voting Proposal Two: Appointment of Independent Registered Public Accounting Firm and Authorization to Fix Remuneration Appointment of Proxyholders Effect of Broker Non-Votes Broker non-votes will have no effect. We do not expect any broker non-votes on this proposal. The persons named in the accompanying proxy card are officers of DiaMedica. A shareholder has the right to appoint a person or company to attend and act for the shareholder and on that shareholder’s behalf at the meeting other than the persons designated in the enclosed proxy card. A shareholder wishing to exercise this right should strike out the names now designated in the enclosed proxy card and insert the name of the desired person or company in the blank space provided. The desired person need not be a shareholder of DiaMedica. Only a registered shareholder at the close of business on April 9, 2020 will be entitled to vote, or grant proxies to vote, his, her or its common shares, as applicable, at the meeting. If your common shares are registered in your name, then you are a registered shareholder. However, if, like most shareholders, you keep your common shares in a brokerage account, then you are a beneficial shareholder. The process for voting is different for registered shareholders and beneficial shareholders. Registered shareholders and beneficial shareholders should carefully read the instructions herein if they wish to vote their common shares at the meeting. Other Business Our management does not intend to present other items of business and knows of no items of business that are likely to be brought before the meeting, except those described in this proxy statement. However, if any other matters should properly come before the meeting, the persons named on the proxy card will have discretionary authority to vote such proxy in accordance with their best judgment on the matters. Procedures at the Meeting The presiding officer at the meeting will determine how business at the meeting will be conducted. Only matters brought before the meeting in accordance with our Articles will be considered. Only a natural person present at the meeting who is either one of our shareholders, or is acting on behalf of one of our shareholders, may make a motion or second a motion. A person acting on behalf of a shareholder must present a written statement executed by the shareholder or the duly-authorized representative of the shareholder on whose behalf the person purports to act. 4 Householding of Meeting Materials Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements, annual reports and the Notice of Internet Availability of Proxy Materials. This means that only one copy of this proxy statement, our Annual Report to Shareholders or the Notice of Internet Availability of Proxy Materials may have been sent to each household even though multiple shareholders are present in the household. We will promptly deliver a separate copy of any of these documents to any shareholder upon written or oral request to Corporate Secretary, DiaMedica Therapeutics Inc., Two Carlson Parkway, Suite 260, Minneapolis, Minnesota 55447, telephone: (763) 312-6755. Any shareholder who wants to receive separate copies of this proxy statement, our Annual Report to Shareholders or the Notice of Internet Availability of Proxy Materials in the future, or any shareholder who is receiving multiple copies and would like to receive only one copy per household, should contact the shareholder’s bank, broker or other nominee record holder, or the shareholder may contact us at the above address and telephone number. Proxy Solicitation Costs The cost of soliciting proxies, including the preparation, assembly, electronic availability and mailing of proxies and soliciting material, as well as the cost of making available or forwarding this material to the beneficial owners of our common shares will be borne by DiaMedica. Our directors, officers and regular employees may, without compensation other than their regular compensation, solicit proxies by telephone, e-mail, facsimile or personal conversation. We may reimburse brokerage firms and others for expenses in making available or forwarding solicitation materials to the beneficial owners of our common shares. 5 VOTING PROPOSAL ONE—ELECTION OF DIRECTORS ________________ Board Size and Structure Our Articles provide that the Board of Directors will consist of at least three members. The Board of Directors currently consists of five directors. The Board of Directors has fixed the number of directors at four effective as of the date of the Annual General Meeting. Information about Current Directors and Board Nominees The Board of Directors has nominated the following four individuals to serve as our directors until the next annual general meeting of shareholders or until their respective successors are elected and qualified. All of the nominees named below are current members of the Board of Directors. Zhenyu Xiao, a current member of the Board of Directors, is not standing re-election at the Annual General Meeting. Dr. Xiao will continue to serve as a director of our company until the Annual General Meeting. The Board of Directors thanks Dr. Xiao for his service to the Board of Directors. The following table sets forth as of April 9, 2020 the name, age and position of each current director and each individual who has been nominated by the Board of Directors to serve as a director of our company: Name Richard Pilnik(1)(2)(3)(4).................. Michael Giuffre, M.D.(1)(2)(3)(4) .... James Parsons(1)(2)(3)(4).................. Rick Pauls ................................... Zhenyu Xiao, Ph.D.(1).................. Age 63 64 54 48 46 Position Chairman of the Board Director Director President and Chief Executive Officer, Director Director Independent Director (1) (2) Member of the Audit Committee (3) Member of the Compensation Committee (4) Member of the Nominating and Corporate Governance Committee The principal occupations and recent employment history of each of our directors are set forth below. Additional Information about Current Directors and Board Nominees The following paragraphs provide information about each current director and nominee for director, including all positions held, principal occupation and business experience for the past five years, and the names of other publicly-held companies of which the director or nominee currently serves as a director or has served as a director during the past five years. We believe that all of our directors and nominees display personal and professional integrity; satisfactory levels of education and/or business experience; broad-based business acumen; an appropriate level of understanding of our business and its industry and other industries relevant to our business; the ability and willingness to devote adequate time to the work of the Board of Directors and its committees; a fit of skills and personality with those of our other directors that helps build a board that is effective, collegial and responsive to the needs of our company; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise and background; and the ability to represent the interests of all of our shareholders. The information presented below regarding each director and nominee also sets forth specific experience, qualifications, attributes and 6 skills that led the Board of Directors to the conclusion that such individual should serve as a director in light of our business and structure. Richard Pilnik has served as a member of the Board of Directors since May 2009. Mr. Pilnik serves as our Chairman of the Board. Mr. Pilnik has served as the President and member of the board of directors of Vigor Medical Services, Inc., a medical device company, since May 2017. From December 2015 to November 2017, he served as a member of the board of directors of Chiltern International Limited, a private leading mid-tier Clinical Research Organization, and was Chairman of the Board from April 2016 to November 2017. Mr. Pilnik has a 30-year career in healthcare at Eli Lilly and Company, a pharmaceutical company, and Quintiles Transnational Corp., a global pioneer in pharmaceutical services. From April 2009 to June 2014, he served as Executive Vice President and President of Quintiles Commercial Solutions, an outsourcing business to over 70 pharma and biotech companies. Prior to that, he spent 25 years at Eli Lilly and Company where he held several leadership positions, most recently as Group Vice President and Chief Marketing Officer from May 2006 to July 2008. He was directly responsible for commercial strategy, market research, new product planning and the medical marketing interaction. From December 2000 to May 2006, Mr. Pilnik served as President of Eli Lilly Europe, Middle East and Africa and the Commonwealth of Independent States, a regional organization of former Soviet Republics, and oversaw 50 countries and positioned Eli Lilly as the fastest growing pharmaceutical company in the region. Mr. Pilnik also held several marketing and sales management positions in the United States, Europe and Latin America. Mr. Pilnik currently serves on the board of directors of Vigor Medical Systems, Inc., NuSirt, an early-stage biopharma, and BIAL Farma, a Portuguese pharmaceutical company. Mr. Pilnik is an Emeritus Board Member of Duke University Fuqua School of Business. Mr. Pilnik previously served on the board of directors of Elan Pharmaceuticals, Chiltern International, the largest mid-size Clinical Research Organization, and Certara, L.P., a private biotech company focused on drug development modeling and biosimulation. Mr. Pilnik holds a Bachelor of Arts in Economics from Duke University and an MBA from the Kellogg School of Management at Northwestern University. Mr. Pilnik is a resident of Florida, USA. We believe that Mr. Pilnik’s deep experience in the industry and his history and knowledge of our company enable him to make valuable contributions to the Board of Directors. Michael Giuffre, M.D. has served as a member of the Board of Directors since August 2010. Since July 2009, Dr. Giuffre has served as a Clinical Professor of Cardiac Sciences and Pediatrics at the University of Calgary and has had an extensive portfolio of clinical practice, cardiovascular research and university teaching. Dr. Giuffre is actively involved in health care delivery, medical leadership and in the biotechnology business sector. From 2012 to October 2019, Dr. Giuffre served as Chief Scientific Officer and President of FoodChek Laboratory and also as a member of the board of directors of FoodChek Systems Inc. From November 2017 to October 2019, he served as FoodChek Systems Inc.'s Chairman of the Board. Dr. Giuffre previously served on the board of directors of the Canadian Medical Association (CMA), Unicef Canada, the Alberta Medical Association (AMA), Can-Cal Resources Ltd, Vacci-Test Corporation, IC2E International Inc., MedMira Inc. and Brightsquid Dental, Inc. Dr. Giuffre has received a Certified and Registered Appointment and a Distinguished Fellow appointment by the American Academy of Cardiology. In 2005, he was awarded Physician of the Year by the Calgary Medical Society and in 2017 was "Mentor of the Year" for the Royal College of Physicians and Surgeons of Canada. Dr. Giuffre was also a former President of the AMA and the Calgary and Area Physicians Association and also a past representative to the board of the Calgary Health Region. Dr. Giuffre holds a Bachelor of Science in cellular and microbial biology, a Ph.D. candidacy in molecular virology, an M.D. and an M.B.A. He is Canadian Royal College board certified FRCPS in specialties that include Pediatrics and Pediatric Cardiology and has a subspecialty in Pediatric Cardiac Electrophysiology. Dr. Giuffre is currently a member of the board of directors of Avenue Living (AL) Asset Management, a private real 7 estate company in Alberta, Canada and its affiliates, AL Real Estate Opportunity Trust and AgriSelect Trust. Dr. Giuffre is currently a resident of Alberta, Canada. We believe that Dr. Giuffre’s medical experience, including as a practicing physician and professor, enable him to make valuable contributions to the Board of Directors. James Parsons has served as a member of the Board of Directors since October 2015. Previously, Mr. Parsons served as our Vice President of Finance from October 2010 until May 2014. Since August 2011, Mr. Parsons has served as Chief Financial Officer and Corporate Secretary of Trillium Therapeutics Inc., a Nasdaq-listed immuno-oncology company. Mr. Parsons serves as a member of the board of directors and audit committee chair of Sernova Corp., which is listed on the TSX Venture Exchange. Mr. Parsons has been a Chief Financial Officer in the life sciences industry since 2000 with experience in therapeutics, diagnostics and devices. Mr. Parsons has a Master of Accounting degree from the University of Waterloo and is a Chartered Professional Accountant and Chartered Accountant. Mr. Parsons is a resident of Ontario, Canada. We believe that Mr. Parsons’ financial experience, including his history and knowledge of our company, enable him to make valuable contributions to the Board of Directors. Rick Pauls was appointed our President and Chief Executive Officer in January 2010. Mr. Pauls has served as a member of the Board of Directors since April 2005 and the Chairman of the Board from April 2008 to July 2014. Prior to joining DiaMedica, Mr. Pauls was the Co-Founder and Managing Director of CentreStone Ventures Inc., a life sciences venture capital fund, from February 2002 until January 2010. Mr. Pauls was an analyst for Centara Corporation, another early stage venture capital fund, from January 2000 until January 2002. From June 1997 until November 1999, Mr. Pauls worked for General Motors Acceptation Corporation specializing in asset-backed securitization and structured finance. Mr. Pauls previously served as an independent member of the board of directors of LED Medical Diagnostics, Inc. Mr. Pauls received his Bachelor of Arts in Economics from the University of Manitoba and his M.B.A. in Finance from the University of North Dakota. Mr. Pauls is a resident of Minnesota, USA. We believe that Mr. Pauls’ experience in the biopharmaceutical industry as an executive and investor and his extensive knowledge of all aspects of our company, business, industry, and day-to-day operations as a result of his role as our President and Chief Executive Officer enable him to make valuable contributions to the Board of Directors. In addition, as a result of his role as President and Chief Executive Officer, Mr. Pauls provides unique insight into our future strategies, opportunities and challenges, and serves as the unifying element between the leadership and strategic direction provided by the Board of Directors and the implementation of our business strategies by management. Zhenyu Xiao, Ph.D. has served as a member of the Board of Directors since November 2016. Dr. Xiao is not standing for re-election as a director at the Annual General Meeting. Dr. Xiao was elected to the Board of Directors as a designee of Hermeda Industrial Co., Limited under an investment agreement which is described in more detail under “Related Persons Relationships and Transactions— Relationship with Hermeda Industrial Co., Limited.” Dr. Xiao has been the Chief Executive Officer of Hermed Equity Investment Management (Shanghai) Co., Ltd., a private equity fund managing firm. From June 2008 to November 2014, Dr. Xiao was the Associate General Manager of Shanghai Fosun Pharmaceutical Group Co Ltd., a pharmaceutical manufacturing company, where he was the deputy chief of the IPO team for the Fosun Pharma Listing in Hong Kong Exchange and the deputy director of Fosun Pharmaceutical Technological Center in charge of evaluating new technology and R&D and investment. Dr. Xiao has a Ph.D. degree in Pharmacology and conducted his postdoctoral research at University of Rochester (NY), co-founding a pharmaceutical company with Dr. Paul Okunieff and winning Small Business Technology 8 Transfer support, a U.S. Small Business Administration program to facilitate joint venture opportunities between small businesses and non-profit research institutions. Dr. Xiao is a resident of China. We believe that Dr. Xiao’s experience in the industry, including as an investor, enable him to make valuable contributions to the Board of Directors. Penalties or Sanctions To the knowledge of the Board of Directors and our management, none of our directors or director nominees as of the date of this proxy statement is or has been subject to:   any penalties or sanctions imposed by a court relating to a securities legislation or by a securities regulatory authority or has entered in a settlement agreement with a securities regulatory authority; or any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable security holder in deciding whether to vote for a director nominee. Corporate Cease Trade Orders or Bankruptcies To the knowledge of the Board of Directors and our management, none of our directors or director nominees as of the date of this proxy statement is or has been, within 10 years before the date of this proxy statement, a director, chief executive officer or chief financial officer of any company (including DiaMedica) that, while that person was acting in that capacity:  was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or  was subject to an event that resulted, after the director, chief executive officer or chief financial officer ceased to be a director, chief executive officer, or chief financial officer, in DiaMedica being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or  within a year after the director, chief executive officer, or chief financial officer ceased to be a director, chief executive officer or chief financial officer of DiaMedica, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or was subject to or instituted any proceedings, arrangement, or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets or the assets of the proposed director. Board Recommendation The Board of Directors unanimously recommends a vote FOR the election of all of the four nominees named above. The Board of Directors Recommends a Vote FOR Each Nominee for Director  9 VOTING PROPOSAL TWO—APPOINTMENT OF BAKER TILLY VIRCHOW KRAUSE, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZATION TO FIX REMUNERATION _________________ Appointment of Independent Registered Public Accounting Firm The Audit Committee of the Board of Directors appoints our independent registered public accounting firm and fixes its remuneration. In this regard, the Audit Committee evaluates the qualifications, performance and independence of our independent registered public accounting firm and determines whether to re-engage our current independent registered public accounting firm. As part of its evaluation, the Audit Committee considers, among other factors, the quality and efficiency of the services provided by the firm, including the performance, technical expertise and industry knowledge of the lead audit partner and the audit team assigned to our account; the overall strength and reputation of the firm; its capabilities relative to our business; and its knowledge of our operations. Upon consideration of these and other factors, the Audit Committee has appointed Baker Tilly Virchow Krause, LLP (Baker Tilly) to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2020. Baker Tilly was first appointed as our auditor on April 27, 2018. Representatives of Baker Tilly Virchow Krause, LLP will be present at the meeting to respond to appropriate questions. They also will have the opportunity to make a statement if they wish to do so. Authorization to Board of Directors to Fix Remuneration The approval of this proposal also constitutes authorization to the Board of Directors to fix the remuneration of Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm. Audit, Audit-Related, Tax and Other Fees The following table presents the aggregate fees billed to us by Baker Tilly Virchow Krause, LLP for the fiscal years ended December 31, 2019 and December 31, 2018. Aggregate Amount Billed by Baker Tilly Virchow Krause, LLP ($) Fiscal 2019 Fiscal 2018 Audit Fees(1) .............................................................. $ Audit-Related Fees(2) ................................................. Tax Fees .................................................................... All Other Fees ........................................................... $ 106,500 6,500 — — 219,000 61,635 — — (1) (2) These fees consisted of the audit of our annual consolidated financial statements for fiscal 2019 and 2018, review of quarterly consolidated financial statements and other services normally provided in connection with statutory and regulatory filings or engagements. These fees consisted of the review of our registration statements on Form S-8 and S-3 in 2019 and review of our registration statement on Form S-1 in connection with our initial public offering in 2018 and related services normally provided in connection with statutory and regulatory filings or engagements. 10 Audit Committee Pre-Approval Policies and Procedures All services rendered by Baker Tilly Virchow Krause, LLP to DiaMedica were permissible under applicable laws and regulations and all services provided to DiaMedica, other than de minimis non-audit services allowed under applicable law, were approved in advance by the Audit Committee. The Audit Committee’s formal written charter requires the Audit Committee to pre-approve all auditing services and permitted non-audit services, including fees for such services. The Audit Committee has not adopted any formal pre-approval policies and procedures. Board Recommendation The Board of Directors unanimously recommends that shareholders vote FOR the appointment of Baker Tilly Virchow Krause, LLP, as our independent registered public accounting firm for the fiscal year ending December 31, 2020 and authorization to the Board of Directors to fix the remuneration of our independent registered public accounting firm. The Board of Directors Recommends a Vote FOR Voting Proposal Two  11 STOCK OWNERSHIP ________________ Security Ownership of Significant Beneficial Owners The table below sets forth information as to entities that have reported to the Securities and Exchange Commission (SEC) or have otherwise advised us that they are a beneficial owner, as defined by the SEC’s rules and regulations, of more than five percent of our common shares. Name and Address of Beneficial Owner Common Shares Hermeda Industrial Co., Limited Title of Class Level 54 Hopewell Centre 183 Queensroad East Hong Kong Common Shares Stonepine Capital Management, LLC 919 NW Bond Street, Suite 204 Bend, OR 97703-2767 Nantahala Capital Management Amount and Nature of Beneficial Ownership 1,000,000 (2) Percent of Class(1) 7.1% 800,000 (3) 5.7% (1) (2) (3) Percent of class is based on 14,139,074 shares outstanding as of our record date, April 9, 2020. Based solely on information contained in a Schedule 13G of Hermeda Industrial Co., Limited filed with the SEC on January 24, 2019, reflecting beneficial ownership as of December 6, 2018. Zhenyu Xiao, Ph.D., the managing director of Hermeda Industrial Co., Limited, has sole voting and dispositive power over the common shares held by Hermeda Industrial Co., Limited. Based solely on information contained in a Schedule 13G of Stonepine Capital Management, LLC filed with the SEC on February 12, 2020, reflecting beneficial ownership as of February 11, 2020. Stonepine Capital Management, LLC (GP) is the record owner of 800,000 shares. The GP is the general partner and investment advisor of investment funds, including Stonepine Capital, L.P. (LP), Jon M. Plexico and Timothy P. Lynch are the control persons of the GP. The GP, LP, Mr. Plexico and Mr. Lynch filed their Schedule 13G jointly, but not as members of a group, and each disclaims membership in a group. Each of the GP, LP, Mr. Plexico and Mr. Lynch disclaim beneficial ownership of these shares, except to the extent of that person’s pecuniary interest therein. 12 Security Ownership of Management The table below sets forth information known to us regarding the beneficial ownership of our common shares as of April 9, 2020, by:   each of our current directors and director nominees; each of the individuals named in the Summary Compensation Table under “Executive Compensation” on page 34; and  all of our current directors and executive officers as a group. To our knowledge, each person named in the table has sole voting and investment power with respect to all of the securities shown as beneficially owned by such person, as determined by the rules of the SEC, except as otherwise set forth in the notes to the table and subject to community property laws, where applicable. The SEC has defined “beneficial” ownership of a security to mean the possession, directly or indirectly, of voting power and/or investment power. A shareholder is also deemed to be, as of any date, the beneficial owner of all securities that such shareholder has the right to acquire within 60 days after that date through (i) the exercise of any option, warrant or right; (ii) the conversion of a security; (iii) the power to revoke a trust, discretionary account or similar arrangement; or (iv) the automatic termination of a trust, discretionary account or similar arrangement. However, such unissued shares of common shares are not deemed to be outstanding for calculating the percentage of common shares owned by any other person. Unless otherwise indicated below, the address for each beneficial owner listed is c/o DiaMedica Therapeutics Inc., Two Carlson Parkway, Suite 260, Minneapolis, Minnesota 55447. Title of Class Name of Beneficial Owner Common Shares Richard Pilnik .................................................. Common Shares Michael Giuffre, M.D. ..................................... James Parsons .................................................. Common Shares Common Shares Zhenyu Xiao, Ph.D. ......................................... Common Shares Rick Pauls ........................................................ Common Shares Scott Kellen ..................................................... Common Shares Harry Alcorn, Jr., Pharm.D. ............................ Common Shares All current directors and executive officers Amount and Nature of Beneficial Ownership(1) 113,448 212,850 (3) 35,546 1,019,546 (4) 331,397 82,216 67,635 Percent of Class(2) * 1.5% * 7.2% 2.3% * * as a group (8 persons) ...................................... 1,862,638 12.6% * (1) Represents beneficial ownership of less than one percent. Includes for the persons listed below the following shares subject to options and warrants held by such persons that are currently exercisable or become exercisable within 60 days of April 9, 2020: Name Directors Shares Underlying Stock Options Shares Underlying Warrants Richard Pilnik ............................................. Michael Giuffre, M.D. ................................ James Parsons ............................................. Rick Pauls ................................................... 70,358 39,546 33,296 300,292 — 11,225 — 2,050 13 Name Zhenyu Xiao, Ph.D. .................................... Name Executive Officers Rick Pauls ................................................... Scott Kellen................................................. Harry Alcorn, Jr., Pharm.D. ........................ All current directors and executive officers as a group (8 persons) ......................................... Shares Underlying Stock Options 16,296 300,292 70,906 59,375 590,069 Shares Underlying Warrants — 2,050 1,020 — 14,295 Excludes the following common shares issuable upon the settlement of deferred share unit awards, which will be settled after the holder’s employment or service relationship with DiaMedica terminates: Mr. Pilnik (7,588 shares); Mr. Pauls (1,749 shares); Dr. Giuffre (4,146 shares); Mr. Parsons (3,850 shares); and Dr. Xiao (3,850 shares). (2) (3) (4) Percent of class is based on 14,139,074 shares outstanding as of our record date, April 9, 2020. Includes: (i) 5,165 shares held by 424822 Alberta Ltd, over which Dr. Giuffre has sole voting and dispositive power , (ii) 36,498 shares Dr. Giuffre and his wife hold jointly, (iii) 54,186 shares held by Dr. Giuffre’s sons and daughters, (iv) 21,070 common shares held by Dr. Giuffre’s wife and (v) 45,160 shares held directly by Dr. Giuffre. Includes 1,000,000 shares held by Hermeda Industrial Co., Limited. Dr. Xiao is the managing director of Hermeda Industrial Co., Limited and has sole voting and dispositive power over the shares held by Hermeda Industrial Co., Limited. 14 CORPORATE GOVERNANCE ________________ Management by Board of Directors The Board of Directors is responsible for overseeing the management of DiaMedica and for the conduct of our affairs generally. Each director is elected annually by the shareholders and serves for a term that will end at the next annual general meeting of shareholders. The Board of Directors facilitates its exercise of independent supervision over the management of DiaMedica through a combination of formal meetings of the Board of Directors and informal discussions amongst Board members. Due to the small size of the Board of Directors, and with a majority of independent directors, the Board of Directors manages governance matters both directly and through its Board committees, which are described in more detail below. The Board of Directors looks to management of DiaMedica to keep it apprised of all significant developments affecting the company and its operations. All major acquisitions, dispositions, investments, contracts and other significant matters outside the ordinary course of our business are subject to approval by the Board of Directors. Corporate Governance Guidelines The Board of Directors has established Corporate Governance Guidelines that describes our basic approach to corporate governance. A copy of these Corporate Governance Guidelines can be found on the “Investors & Media—Governance” section of our corporate website www.diamedica.com. Among the topics addressed in our Corporate Governance Guidelines are:  Board size and qualifications;  Selection of directors;  Board leadership;  Board committees;  Board and committee meetings;  Executive sessions of independent directors;  Meeting attendance by directors and non-directors;  Appropriate information and access;  Ability to retain advisors;  Conflicts of interest and director independence;  Board interaction with corporate constituencies;  Change of principal occupation;  Term limits;  Retirement and resignation policy;  Board compensation;  Stock ownership by directors ;  Loans to directors and executive officers;  CEO evaluation;  Board and committee evaluation;  Succession planning; and  Communications with directors. 15 Board Leadership Structure Under our Corporate Governance Guidelines, the Board of Directors may select from its members a Chairman of the Board. The office of Chairman of the Board and the office of President and Chief Executive Officer may be held by one person. The Board of Directors believes it is best not to have a fixed policy on this issue and that it should be free to make this determination based on what it believes is best in the circumstances. The Board of Directors, acting as a group or through the Nominating and Corporate Governance Committee, will periodically review the leadership structure of the Board of Directors to assess whether it is appropriate given the specific characteristics and circumstances of DiaMedica. However, the Board of Directors does strongly endorse the concept of independent directors being in a position of leadership. If at any time, the Chief Executive Officer and Chairman of the Board are the same, the Board of Directors shall elect an independent director to serve as the lead director. The lead director will have the following duties and responsibilities in addition to such other duties and responsibilities as may be determined by the Board of Directors from time to time.  chairing the executive sessions of the independent directors and calling meetings of the independent directors;  determining the agenda for the executive sessions of the independent directors and participating with the Chairman of the Board in establishing the agenda for Board meetings;  coordinating feedback among the independent directors and the Chief Executive Officer;  overseeing the development of appropriate responses to communications from shareholders and other interested persons addressed to the independent directors as a group;  on behalf of the independent directors, retaining legal counsel or other advisors as they deem appropriate in the conduct of their duties and responsibilities; and  performing such other duties as the Board of Directors deems appropriate from time to time Mr. Pilnik currently serves as Chairman of the Board and Rick Pauls currently serves as President and Chief Executive Officer. We currently believe this leadership structure is in the best interests of DiaMedica and our shareholders and strikes the appropriate balance between the President and Chief Executive Officer’s responsibility for the strategic direction, day-to day-leadership and performance of our company and the Chairman of our Board’s responsibility to guide overall strategic direction of our company and provide oversight of our corporate governance and guidance to our President and Chief Executive Officer and to set the agenda for and preside over board meetings. We recognize that different leadership structures may be appropriate for companies in different situations and believe that no one structure is suitable for all companies. We believe that our company is well-served by this leadership structure. We anticipate that the Board of Directors will periodically review our leadership structure and may make such changes in the future as it deems appropriate. Under our Corporate Governance Guidelines, our independent directors will meet with no company management present during a portion of or after Board meetings on a regular basis but not less than two times per year. After each such executive session, and as otherwise necessary, our Chairman of the Board provides our Chief Executive Officer with any actionable feedback from our independent directors. The Board of Directors met four times in executive session during the fiscal year ended December 31, 2019. 16 Director Independence The Board of Directors has affirmatively determined that four of DiaMedica’s current five directors are “independent directors” under the Nasdaq Listing Rules. In making these affirmative determinations that such individuals are “independent directors,” the Board of Directors reviewed and discussed information provided by the directors and by DiaMedica with regard to each director’s business and personal activities as they may relate to DiaMedica and our management. Board Committees The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each of these committees has the composition described in the table below and the responsibilities described in the sections below. The Board of Directors has adopted a written charter for each committee of the Board of Directors which can be found on the “Investors & Media—Governance” section of our corporate website www.diamedica.com. The Board of Directors from time to time may establish other committees. The following table summarizes the current membership of each of our three board committees. Director Rick Pauls Michael Giuffre, M.D. James Parsons Richard Pilnik Zhenyu Xiao, Ph.D. Audit Committee Audit Committee —  Chair  — Compensation Committee — Chair   — Nominating and Corporate Governance Committee —   Chair — Responsibilities. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to our annual and quarterly financial statements filed with the SEC and any applicable securities regulatory authorities of the provinces and territories of Canada, our financial reporting process, our internal control over financial accounting and disclosure controls and procedures, the annual independent audit of our financial statements and the effectiveness of our legal compliance and ethics programs. The Audit Committee’s primary responsibilities include:  overseeing our financial reporting process, internal control over financial reporting and disclosure controls and procedures on behalf of the Board of Directors;  having sole authority to appoint, oversee, evaluate, retain and terminate the engagement of our independent registered public accounting firm and establish the compensation to be paid to the firm;   reviewing and pre-approving all audit services and permissible non-audit services to be provided to us by our independent registered public accounting firm; establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; and 17  overseeing our systems to monitor legal and ethical compliance programs, including the establishment and administration of (including the grant of any waiver from) a written code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Audit Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities. Composition. The current members of the Audit Committee are Dr. Giuffre, Mr. Parsons and Mr. Pilnik. Mr. Parsons is the Chair of the Audit Committee. Each member of the Audit Committee qualifies as “independent” for purposes of membership on audit committees pursuant to the Nasdaq Listing Rules and the rules and regulations of the SEC and is “financially literate” as required by the Nasdaq Listing Rules. In addition, the Board of Directors has determined that Mr. Parsons qualifies as an “audit committee financial expert” as defined by the rules and regulations of the SEC and meets the qualifications of “financial sophistication” under the Nasdaq Listing Rules as a result of his extensive financial background and various financial positions he has held throughout his career. Shareholders should understand that these designations related to our Audit Committee members’ experience and understanding with respect to certain accounting and auditing matters do not impose upon any of them any duties, obligations or liabilities that are greater than those generally imposed on a member of the Audit Committee or of the Board of Directors. Audit Committee Report. This report is furnished by the Audit Committee of the Board of Directors with respect to DiaMedica’s consolidated financial statements for the year ended December 31, 2019. One of the purposes of the Audit Committee is to oversee DiaMedica’s accounting and financial reporting processes and the audit of DiaMedica’s annual consolidated financial statements. DiaMedica’s management is responsible for the preparation and presentation of complete and accurate financial statements. DiaMedica’s independent registered public accounting firm, Baker Tilly Virchow Krause, LLP, is responsible for performing an independent audit of DiaMedica’s annual consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and for issuing a report on their audit. In performing its oversight role, the Audit Committee has reviewed and discussed DiaMedica’s audited consolidated financial statements for the year ended December 31, 2019 with DiaMedica’s management. Management represented to the Audit Committee that DiaMedica’s financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee has discussed with Baker Tilly Virchow Krause, LLP the matters required to be discussed under Public Company Accounting Oversight Board standards. The Audit Committee has received the written disclosures and the letter from Baker Tilly Virchow Krause, LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Baker Tilly Virchow Krause, LLP’s communications with the Audit Committee concerning independence. The Audit Committee has discussed with Baker Tilly Virchow Krause, LLP its independence and concluded that the independent registered public accounting firm is independent from DiaMedica and DiaMedica’s management. Based on the review and discussions of the Audit Committee described above, in reliance on the unqualified opinion of Baker Tilly Virchow Krause, LLP regarding DiaMedica’s audited consolidated financial statements, and subject to the limitations on the role and responsibilities of the Audit Committee discussed above and in the Audit Committee’s charter, the Audit Committee recommended to the Board of Directors that DiaMedica’s audited consolidated financial statements for the fiscal year ended 18 December 31, 2019 be included in its Annual Report on Form 10-K for the year ended December 31, 2019 for filing with the Securities and Exchange Commission. This report is dated as of March 17, 2020. Audit Committee James Parsons, Chair Michael Giuffre, M.D. Richard Pilnik Other Information. Additional information regarding the Audit Committee and our independent registered public accounting firm is disclosed under the “Voting Proposal Two—Appointment of Baker Tilly Virchow Krause, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration” section of this proxy statement. Compensation Committee Responsibilities. The Compensation Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to compensation of our Chief Executive Officer and other executive officers and administers our equity compensation plans. The Compensation Committee’s primary responsibilities include:  determining all compensation for our Chief Executive Officer and other executive officers;   administering our equity-based compensation plans; reviewing, assessing and approving overall strategies for attracting, developing, retaining and motivating our management and employees;  overseeing the development and implementation of succession plans for our Chief Executive Officer and other key executive officers and employees;   reviewing, assessing and approving overall compensation structure on an annual basis; and recommending and leading a process for the determination of non-employee director compensation. The Compensation Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities, and prior to doing so, assesses the independence of such experts and advisors from management. Composition. The current members of the Compensation Committee are Dr. Giuffre, Mr. Parsons and Mr. Pilnik. Dr. Giuffre is the Chair of the Compensation Committee. The Board of Directors has determined that each of the members of the Compensation Committee is an “independent director” under the Nasdaq Listing Rules, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, and otherwise independent under the rules and regulations of the SEC. Processes and Procedures for Consideration and Determination of Executive Compensation. As described in more detail above under “—Responsibilities,” the Board of Directors has delegated to the Compensation Committee the responsibility, among other things, to determine any and all compensation payable to our executive officers, including annual salaries, incentive compensation, long-term incentive compensation, perquisites and any and all other compensation, and to administer our equity-based 19 compensation plans. The Compensation Committee has the full power and authority of the Board of Directors to perform these duties and to fulfill these responsibilities. Under the terms of its formal written charter, the Compensation Committee has the power and authority, to the extent permitted by applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee. The Compensation Committee has not delegated any of its duties and responsibilities to subcommittees, but rather has taken such actions as a committee, as a whole. In 2018, the Compensation Committee engaged the services of 21-Group, an independent compensation consultant, to assist the Compensation Committee in developing a comprehensive compensation strategy based upon compensation levels at benchmark companies for DiaMedica. The Compensation Committee used the information in this report, recommendations from the 21-Group and discussions with management, to establish a compensation strategy and set target compensation levels for officers and non- employee directors. In making final decisions regarding compensation to be paid to our executive officers, the Compensation Committee considers several factors, including the benchmarking information gathered by its compensation consultant, the achievement by DiaMedica of pre-established performance objectives, the general performance of DiaMedica and the individual officers, the performance of DiaMedica and other factors that may be relevant. The Compensation Committee did not retain 21-Group during 2019. Final deliberations and decisions by the Compensation Committee regarding the form and amount of compensation to be paid to our executive officers are made by the Compensation Committee, without the presence of any executive officer of our company. Processes and Procedures for Consideration and Determination of Director Compensation. As mentioned above under “—Responsibilities,” the Board of Directors has delegated to the Compensation Committee the responsibility, among other things, to review and make recommendations to the Board of Directors concerning compensation for non-employee members of the Board of Directors, including but not limited to retainers, meeting fees, committee chair and member retainers and equity compensation. Decisions regarding director compensation made by the Compensation Committee are not considered final and are subject to final review and approval by the entire Board of Directors. In making recommendations to the Board of Directors regarding compensation to be paid to our non-employee directors, the Compensation Committee considers fees and other compensation paid to directors of benchmark companies as gathered by its compensation consultant, the number of board and committee meetings that our directors are expected to attend and other factors that may be relevant. In making final decisions regarding non-employee director compensation, the Board of Directors considers the same factors and the recommendation of the Compensation Committee. Nominating and Corporate Governance Committee Responsibilities. The Nominating and Corporate Governance Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to director nominations and corporate governance. The primary responsibilities of the Nominating and Corporate Governance Committee include:   identifying individuals qualified to become members of the Board of Directors, which includes reviewing and considering director nominees submitted by shareholders; recommending director nominees for each annual general meeting of our shareholders and director nominees to fill any vacancies that may occur between general meetings of shareholders;  being aware of best practices in corporate governance matters and developing and recommending to the Board of Directors a set of corporate governance guidelines to govern the Board of Directors, its committees, DiaMedica and our employees; and 20  developing and overseeing a periodic Board of Directors and Board committee evaluation process. The Nominating and Corporate Governance Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities. Orientation and Continuing Education of Directors. Though we do not have a formal orientation or continuing education program for new directors, the Nominating and Corporate Governance Committee is responsible for the orientation and education of all new recruits to the Board of Directors. New directors are provided with access to our recent, publicly filed documents, technical reports and internal financial information and given copies of all Board of Director minutes and corporate governance materials. Directors are encouraged to ask questions and communicate with management, auditors and technical consultants to keep themselves current with industry trends and developments and changes in legislation. Continuing education is an important compliance requirement to promote the competence and integrity of Board members. The Nominating and Corporate Governance Committee encourages our directors to take part in relevant education programs offered by appropriate regulatory bodies. Composition. The current members of the Nominating and Corporate Governance Committee are Dr. Giuffre, Mr. Parsons and Mr. Pilnik. Mr. Pilnik is the Chair of the Nominating and Corporate Governance Committee. The Board of Directors has determined that each of the members of the Nominating and Corporate Governance Committee is an “independent director” under the Nasdaq Listing Rules. Director Qualifications and the Nomination Process The Board of Directors seeks to ensure that the Board is composed of members whose particular experience, qualifications, attributes and skills, when taken together, will allow the Board to satisfy its oversight responsibilities effectively. New directors will be approved by the Board after evaluation and recommendation by the Nominating and Corporate Governance Committee. In identifying candidates for director, the Nominating and Corporate Governance Committee and the Board take into account the following:    the comments and recommendations of Board members regarding the qualifications and effectiveness of the existing Board, or additional qualifications that may be required when selecting new Board members; the requisite expertise and sufficiently diverse backgrounds of the Board’s overall membership composition; the independence of outside directors and other possible conflicts of interest of existing and potential members of the Board; and  any other factors they consider appropriate. When considering directors and nominees the Nominating and Corporate Governance Committee and the Board of Directors focuses primarily on the information discussed in each of the directors’ individual biographies. The Nominating and Corporate Governance Committee will consider director candidates recommended to it by our shareholders. Those candidates must be qualified and exhibit the experience and expertise required of the Board’s own pool of candidates, as well as have an interest in our business and demonstrate the ability to attend and prepare for Board, committee, and shareholder meetings. Any candidate must provide a written statement, in advance, affirming his or her willingness and interest in 21 serving on the Board. Candidates should represent the interests of all shareholders and not those of a special interest group. The Nominating and Corporate Governance Committee will evaluate candidates recommended by shareholders using the same criteria it uses to evaluate candidates recommended by others as described above. A shareholder that desires to nominate a person for election to the Board of Directors at a meeting of shareholders must follow the specified advance notice requirements contained in, and provide the specific information required by the BCBCA. See additional information below in “SHAREHOLDER PROPOSALS FOR 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS.” Board Diversity The Nominating and Corporate Governance Committee is responsible for reviewing with the Board of Directors, on an annual basis, the appropriate characteristics, skills and experience required for the Board of Directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the Nominating and Corporate Governance Committee, in recommending candidates for election, and the Board of Directors in approving (and, in the case of vacancies, appointing) such candidates, take into account many factors, including the following  personal and professional integrity, ethics and values;       experience in corporate management, such as serving as an officer or former officer of a publicly held company; strong finance experience; relevant social policy concerns; experience relevant to our industry; experience as a board member or executive officer of another publicly held company; relevant academic expertise or other proficiency in an area of our operations;  diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;  diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience;  practical and mature business judgment, including, but not limited to, the ability to make independent analytical inquiries; and  any other relevant qualifications, attributes or skills. The Board of Directors evaluates each individual in the context of the Board of Directors as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment using its diversity of experience in these various areas. In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee may also consider the director’s past attendance at meetings and participation in and contributions to the activities of the Board of Directors. We believe that a board of directors made up of highly qualified individuals from diverse backgrounds promotes better corporate governance, performance and effective decision-making. Our Board of Directors has not, at this time, adopted any fixed policies, targets or quotas relating to the representation on the Board of Directors or in executive officer positions based upon any external physiological attribute, including gender, as we do not believe that quotas or a formulaic approach necessarily result in the identification or selection of the best candidates. The Nominating and Corporate Governance 22 Committee nonetheless makes efforts to ensure that directors and officers have a wide range of skills, experiences and backgrounds to meet our needs. To support this objective, the Nominating and Corporate Governance Committee will, when seeking candidates for Board of Directors or executive positions, among other things, (a) consider candidates who are highly qualified based on their experience, functional expertise and personal skills and qualities; and (b) consider diversity criteria including gender and geographical background of the candidate. As at the date of this proxy statement, no women (0%) are on our Board of Directors or are executive officers of DiaMedica. Role of Board in Risk Oversight Process Risk is inherent with every business. We face a number of risks, including regulatory, compliance, legal, competitive, financial (accounting, credit, interest rate, liquidity and tax), operational, political, strategic and reputational risks. Our management is responsible for the day-to-day management of risks faced by us, while the Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors ensures that the risk management processes designed and implemented by management are adequate and functioning as designed. The Board of Directors oversees risks through the establishment of policies and procedures that are designed to guide daily operations in a manner consistent with applicable laws, regulations and risks acceptable to us. Our President and Chief Executive Officer, who is also a member of the Board of Directors, regularly discusses with the Board of Directors the strategies and risks facing our company. The standing committees of the Board of Directors oversee risks associated with their respective principal areas of focus. The Audit Committee’s role includes a particular focus on the qualitative aspects of financial reporting to shareholders and on our processes for the management of business and financial risk. The Audit Committee, along with management, is also responsible for developing and participating in a process for review of important financial and operating topics that present potential significant risk to our company. The Compensation Committee is responsible for overseeing risks and exposures associated with our compensation programs and arrangements, including our executive and director compensation programs and arrangements, and management succession planning. The Nominating and Corporate Governance Committee oversees risks relating to our corporate governance matters and policies and director succession planning. Code of Business Conduct and Ethics We have adopted a code of business conduct and ethics applicable to all of our directors, officers and employees, in accordance with Section 406 of the Sarbanes-Oxley Act of 2002, the rules of the SEC promulgated thereunder and the Nasdaq Listing Rules. We monitor employee and director compliance with our code of business conduct and ethics through employee and director reporting. Violations may be reported to supervisors, the Chief Financial Officer or, alternatively, to the Chair of the Audit Committee via e-mail. We investigate and discipline all reported violations as appropriate. In the event that any changes are made or any waivers from the provisions of the code of business conduct and ethics are made, these events would be disclosed on our website or in a Current Report on Form 8-K within four business days of such event. The code of business conduct and ethics is posted on our website at www.diamedica.com. Copies of the code of business conduct and ethics will be provided free of charge upon written request directed to Corporate Secretary, DiaMedica Therapeutics Inc., Two Carlson Parkway, Suite 260, Minneapolis, Minnesota 55447. 23 Board and Committee Meetings and Attendance The table below summarizes the attendance of each director for meetings of the Board of Directors and the meetings of all Board committees on which the director served during the fiscal year ended December 31, 2019: Number of Board Meetings Attended 6 6 6 6 2 6 Number of Audit Committee Meetings Attended(1) N/A 3 4 4 N/A 4 Number of Compensation Committee Meetings Attended N/A 4 4 4 N/A 4 Director Rick Pauls Michael Giuffre, M.D. James Parsons Richard Pilnik Zhenyu Xiao, Ph.D. (2) Total Meetings Held Number of Nominating and Corporate Governance Committee Meetings Attended N/A 2 2 2 N/A 2 (1) (2) The Audit Committee met twice in executive session with Baker Tilly Virchow Krause, LLP, our independent registered public accounting firm. Dr. Xiao attended less than 75% of all meetings of the Board of Directors during 2019. Dr. Xiao is not standing for re-election at the Annual General Meeting. Policy Regarding Director Attendance at Annual General Meetings of Shareholders Directors are encouraged, but not required, to attend our annual general meetings of shareholders. Mr. Pauls and Mr. Pilnik attended the 2019 Annual General and Special Meeting of Shareholders. Complaint Procedures The Audit Committee has established procedures for the receipt, retention and treatment of complaints received by DiaMedica regarding accounting, internal accounting controls or auditing matters. These procedures provide for the submission by our employees, on a confidential and anonymous basis, of concerns regarding questionable accounting or auditing matters. Our personnel with such concerns are encouraged to discuss their concerns with our compliance officer, outside legal counsel or Audit Committee Chair. Process Regarding Shareholder Communications with Board of Directors Shareholders may communicate with the Board of Directors or any one particular director by sending correspondence, addressed to DiaMedica’s Corporate Secretary, DiaMedica Therapeutics Inc., Two Carlson Parkway, Suite 260, Minneapolis, MN 55447 with an instruction to forward the communication to the Board of Directors or one or more particular directors. DiaMedica’s Corporate Secretary will promptly forward all such shareholder communications to the Board of Directors or the one or more particular directors, with the exception of any advertisements, solicitations for periodical or other subscriptions and other similar communications. 24 DIRECTOR COMPENSATION ________________ Non-Employee Director Compensation Program Overview. Our non-employee directors currently consist of Michael Giuffre, M.D., James Parsons, Richard Pilnik and Zhenyu Xiao, Ph.D. We use a combination of cash and long-term equity-based incentive compensation in the form of stock option grants to attract and retain qualified candidates to serve on the Board of Directors. In setting non- employee director compensation, we follow the process and procedures described under “Corporate Governance—Compensation Committee—Processes and Procedures for the Determination of Director Compensation.” In March 2019, we reviewed our non-employee director compensation program in light of our public company status and a benchmarking analysis performed in 2018 by our independent compensation consultant, 21-Group. The peer group used for this benchmarking analysis was the same peer group used for the executive compensation analysis. As a result of this review, we increased the cash retainers and long-term equity-based incentive compensation components of our non-employee director compensation program to bring them closer to our target market positioning. Cash Retainers. Each of our non-employee directors receives an annual cash retainer. The following table sets forth the annual cash retainers paid to our non-employee directors during fiscal 2019: Fiscal 2019 Annual Cash Retainer Prior to April 1, 2019 Fiscal 2019 Annual Cash Retainer Effective April 1, 2019 Description Board Member .................................................................................. CDN$ 17,500 $ Chairman of the Board ...................................................................... Audit Committee Chair ..................................................................... Compensation Committee Chair ....................................................... Nominating and Corporate Governance Committee Chair ............... 20,000 2,500 2,500 2,500 40,000 20,000 8,000 4,000 4,000 Stock Options. During 2019, each of our non-employee directors received a stock option with a value based on the amount of their annual Board member cash retainer. Accordingly, on June 23, 2019, each of our non-employee directors received an option to purchase 12,950 common shares at an exercise price equal to $4.60 per share. In addition, our Chairman of the Board received an additional option to purchase 5,750 common shares at an exercise price equal to $4.60 per share. These options expire on June 23, 2029 and vest in four equal quarterly installments over one year. 25 Director Compensation Table The table below provides summary information concerning the compensation of each individual who served as a director of our company during the fiscal year ended December 31, 2019, other than Rick Pauls, our President and Chief Executive Officer, who was not compensated separately for serving on the Board of Directors during fiscal 2019. His compensation during fiscal 2019 for serving as an executive officer of our company is set forth under “Executive Compensation—Summary Compensation Table.” Name Michael Giuffre, M.D. ...... $ James Parsons ................... Richard Pilnik ................... Zhenyu Xiao, Ph.D. .......... Fees Earned or Paid in Cash 36,722 39,722 55,443 33,256 Option Awards(1)(2) $ 43,693 43,693 63,094 43,693 Stock Awards $ — — — — All Other Compensation $ — — — — Total $ 80,415 83,415 118,537 76,949 (1) (2) Amounts reflect the grant date fair value for option awards granted to each non-employee director computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. The following directors held the following option awards as of December 31, 2019: Giuffre (44,200 options); Parsons (37,950 options); Pilnik (77,450 options) and Xiao (20,950 options). Indemnification Our Articles provide that subject to British Columbia’s Business Corporations Act (BCBCA), we will indemnify a director or a former director (each an “eligible party”) and his or her heirs and legal representatives, against all eligible penalties to which such person is liable. The Company must pay the expenses actually and reasonably incurred by such person in respect of any eligible proceeding either as they are incurred in advance of the final disposition of the proceeding or after the final disposition of a proceeding. Our Articles define an “eligible penalty” as a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding. Our Articles define an “eligible proceeding” as a legal proceeding or investigative action, whether current, threatened, pending or completed, in which an eligible party or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director of the Company: (i) is or may be joined as a party; or (ii) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding. We entered into indemnification agreements with all of our directors, which are nearly identical to the indemnification agreements with our executive officers as described under “Executive Compensation— Executive Compensation Overview—Indemnification Agreements.” At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification. Insofar as indemnification for liabilities arising under the United States Securities Act of 1933, as amended (Securities Act) may be permitted to directors, executive officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. 26 EXECUTIVE COMPENSATION ________________ Executive Compensation Overview This section addresses the compensation of our President and Chief Executive Officer and the two most highly compensated executive officers for the year ended December 31, 2019:  Rick Pauls, our President and Chief Executive Officer;  Scott Kellen, our Chief Financial Officer and Corporate Secretary; and  Harry Alcorn, Jr., Pharm.D., our Chief Medical Officer. These executive officers are collectively referred to as the named executive officers. When reading this Executive Compensation Overview, please note that we are an emerging growth company under the Jumpstart our Business Startups Act (JOBS Act) and are not required to provide a “Compensation Discussion and Analysis” of the type required by Item 402 of SEC Regulation S-K. This Executive Compensation Overview is intended to supplement the SEC-required disclosure, which is included in this section, and it is not a Compensation Discussion and Analysis. Compensation Philosophy The Compensation Committee generally targets executive compensation at the 50th percentile of our peer group as discussed below under “—Elements of Our Executive Compensation Program.” Use of Market Data We strive to compensate our executive officers competitively relative to other companies that are similar to us from a market capitalization, revenue, number of employees and clinical development perspective. To ensure reasonableness and competitiveness of our executive compensation packages relative to our peer companies, the Compensation Committee evaluates our peer group with the aid of our independent compensation consultant and with input from management. The peer group used to help determine 2019 compensation was prepared by our independent compensation consultant in 2018 and consisted of the following 12 other companies in the same industry and with similar characteristics from a market capitalization, revenue, number of employees and clinical development perspective. Actinium Pharmaceuticals, Inc. Aptose Biosciences Inc. Athersys, Inc. Cellectar Biosciences, Inc. Cidara Therapeutics, Inc. CohBar, Inc. Oncolytics Biotech Inc. Oncomed Pharmaceuticals, Inc. Zafgen, Inc. Regulus Therapeutics Inc. Sun BioPharma, Inc. Trillium Therapeutics Inc. Data from this peer group, therefore, was considered in the compensation benchmarking process as one input in helping us determine appropriate pay levels. Use of Consultants The Compensation Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities, and prior to doing so, assesses the independence of such experts and advisors from management. During 2018, the 27 Compensation Committee engaged the 21-Group, a compensation consultant, to assist the Compensation Committee in designing and reviewing our executive compensation program. The Compensation Committee used the executive compensation analysis prepared by the 21-Group in 2018 to help determine executive compensation for 2019. The 21-Group does not provide any services to our company other than those for which it has been retained by the Compensation Committee. Elements of Our Executive Compensation Program During 2019, our executive compensation program consisted of several key elements, which are described in the table below along with the key characteristics of, and the purpose for, each element. The following table also describes any key 2019 changes to each of these elements. Element Key Characteristics Purpose Key 2019 Changes A fixed amount, paid in cash periodically throughout the year and reviewed annually and, if appropriate, adjusted. Provides a source of fixed income that is market competitive and reflects scope and responsibility of the position held. Our named executive officers received increases between 13% and 29% over their respective 2018 base salaries to bring them closer to our target market positioning. Base Salary (Fixed, Cash) Short-Term Incentive (STI) (Variable, Cash) A variable, short-term element of compensation that is payable in cash based on achievement of key pre-established annual corporate objectives, and for certain executives, individual goals. Motivates and rewards our executives for achievement of annual corporate and other objectives. Long-Term Incentives (LTI) (Variable, Equity- Based Awards) A variable, long-term element of compensation that is provided in the form of time-vested stock option awards. Retirement Benefits Includes a defined contribution retirement plan with a discretionary Company match. Aligns the interests of our executives with our shareholders; encourages our executives to focus on the Company’s long-term performance; promotes retention of our executives; and encourages significant ownership of our common shares. Provides an opportunity for employees to save and prepare financially for retirement. We describe each key element of our executive compensation program in more detail in the following pages, along with the compensation decisions made in 2019. The compensation paid to our named executive officers is governed, in part, by written employment agreements with them, which are described below under “—Employment Agreements.” The named executive officers also have termination and change in control benefits as set forth in their respective employment agreements. See “—Post- Termination Severance and Change in Control Arrangements.” 28 Our named executive officers received STI cash payments equal to 80% of their respective target bonus opportunities based primarily on the achievement of corporate performance objectives and an additional discretionary adjustment as determined appropriate by the Compensation Committee. Our named executive officers received stock option awards, which vest quarterly over two years. We adopted a new, shareholder- approved omnibus incentive plan. No changes. Pay for Performance and Pay Mix We seek to motivate management to achieve corporate objectives and increase shareholder value through incentive plans that reward higher performance with increased incentive payouts and hold management accountable for performance that falls below targeted levels by paying reduced or no incentive payouts. Accordingly, in general, our executive compensation program emphasizes variable, at-risk, pay elements as a significant portion of each executive’s total compensation package. The breakdown of variable, at-risk, pay (broken out between short-term incentives and long-term incentives) compared to fixed pay (i.e., base salary) reported for 2019 in the Summary Compensation Table for our President and Chief Executive Officers and other named executive officers is as follows: Base Salary We provide a base salary for our named executive officers, which is not subject to company or individual performance risk. We recognize the need for most executives to receive at least a portion of their total compensation in the form of a guaranteed base salary that is paid in cash regularly throughout the year. The base salaries set for our named executive officers are intended to provide a steady income regardless of share price performance, allowing executives to focus on both near-term and long-term goals and objectives without undue reliance on short-term share price performance or market fluctuations. We initially fix base salaries for our executives at a level that we believe enables us to hire and retain them in a competitive environment and to reward satisfactory individual performance and a satisfactory level of contribution to our overall business objectives. The Compensation Committee reviews and approves any increases in base salaries for our named executive officers. 29 The base salary for each of our named executive officers for fiscal 2019 compared to fiscal 2018 is as follows: Name Rick Pauls ......................................... $ Scott Kellen ....................................... Harry Alcorn, Jr., Pharm.D. .............. Fiscal 2019 Fiscal 2018 $ 445,000 270,000 285,000 345,000 240,000 240,000 % Change from Fiscal 2018 29.0% 12.5% 19.0% The base salary increases for each of our named executive officers were intended to bring their base salaries closer to the 50th percentile of our peer group. Annual Short-Term Incentive Compensation In addition to base compensation, we provide our named executive officers the opportunity to earn short- term incentive (STI) compensation based on the achievement of certain annual corporate and individual performance goals. Our STI program directly aligns the interests of our executive officers and shareholders by providing an incentive for the achievement of key corporate and individual performance objectives that are critical to the success of our company and linking a significant portion of each executive’s annual compensation to the achievement of such objectives. Under the 2019 STI program, each named executive officer had a target incentive percentage that was a percentage of their base salary: Name Rick Pauls Scott Kellen Harry Alcorn, Jr., Pharm.D. Percentage of Salary Base 50% 30% 30% 2019 STI payouts were based primarily on the achievement of four pre-established corporate performance objectives that related to clinical development milestones. The STI payouts also included an additional upward discretionary adjustment, resulting in payouts representing 80% of each officer’s respective target bonus opportunity: Officer Name and Position Rick Pauls Scott Kellen Harry Alcorn, Jr., Pharm.D. 2019 Base Salary $ 445,000 270,000 285,000 Target Incentive Percentage of Base Salary 50% 30% 30% Target Bonus Opportunity $ 225,500 81,000 85,500 2019 Actual Payout $ 178,000 64,800 68,400 Long-Term Equity-Based Incentive Compensation The long-term equity-based incentive compensation component consists of stock options granted under the DiaMedica Therapeutics Inc. 2019 Omnibus Incentive Plan (2019 Plan). Long-term equity-based incentives are intended to comprise a significant portion of each executive’s compensation package, consistent with our executive compensation objective to align the interests of our executives with the interests of our shareholders. 30 The Compensation Committee believes that options effectively incentivize executives to maximize company performance over the long-term, as the value of awards is directly tied to an appreciation in the value of our common shares. Stock options also provide an effective retention mechanism because of vesting provisions. An important objective of our long-term equity-based incentive program is to strengthen the relationship between the long-term value of our common shares and the potential financial gain for our executives. Stock options provide recipients with the opportunity to purchase our common shares at a price fixed on the grant date regardless of future market price. Because stock options become valuable only if the share price increases above the exercise price and the option holder remains employed during the period required for the option to vest, they provide an incentive for an executive to remain employed. In addition, stock options link a portion of an executive’s compensation to the interests of our shareholders by providing an incentive to achieve corporate goals and increase the market price of our common shares over time. The table below sets forth the stock options that we granted to our named executive officers in 2019: Name Rick Pauls ............................ Scott Kellen .......................... Harry Alcorn, Jr., Pharm.D. . Grant Date 06/24/19 06/24/19 06/24/19 Grant Date Fair Value $ 890,736 336,557 421,750 Number of Shares Underlying Options 264,000 99,750 125,000 Exercise Price $ 4.60 4.60 4.60 All Other Compensation It is generally our policy not to extend perquisites to our executives that are not available to our employees generally. Our executives receive benefits that are also received by our other employees, including participation in the DiaMedica USA, Inc. 401(k) Plan and health, dental, disability and life insurance benefits. Employment Agreements In September 2018, we entered into an employment agreement with each of our executive officers, which provides for an annual base salary, subject to periodic reviews, incentive based compensation, equity- based compensation and benefits, in each case as determined by the Board of Directors (or a committee thereof) from time to time. The agreements contain standard confidentiality, non-competition, non- solicitation and assignment of intellectual property provisions. The agreements also contains standard severance and change in control provisions which are described under “—Post-Termination Severance and Change in Control Arrangements.” Post Termination Severance and Change in Control Arrangements Severance Arrangements. Under the terms of the employment agreements with our executive officers, if we terminate the executive’s employment without “cause”, the executive will be entitled to: (i) salary continuation payments for 12 months in the case of Mr. Pauls and nine months in the case of each of the other executives, (ii) Consolidated Omnibus Budget Reconciliation Act (COBRA) premium reimbursement during the salary continuation period, (iii) a pro rata portion of their target annual bonus for the year of termination, and (iv) immediate acceleration of their equity awards. These severance benefits are subject to the executive executing a separation agreement and release of claims. “Cause” is defined in the employment agreements as: (i) gross negligence or willful failure to perform the executive’s duties and responsibilities to DiaMedica; (ii) commission of any act of fraud, theft, embezzlement, financial dishonesty or any other willful misconduct that has caused or is reasonably expected to result in injury to DiaMedica; (iii) conviction of, or pleading guilty or nolo contendere to, any 31 felony or a lesser crime involving dishonesty or moral turpitude; (iv) material breach by the executive of any of their obligations under the agreement or any written agreement or covenant with DiaMedica, including the policies adopted from time to time by DiaMedica applicable to all executives, that has not been cured within 30 days of notice of such breach; or (v) we terminate the employment of the executive in connection with a liquidation, dissolution or winding down of DiaMedica. We believe that the form and amount of these severance benefits are fair and reasonable to both DiaMedica and our executives. The Compensation Committee reviews our severance arrangements periodically to ensure that they remain necessary and appropriate. Change in Control Arrangements. To encourage continuity, stability and retention when considering the potential disruptive impact of an actual or potential corporate transaction, we have established change in control arrangements, including provisions in the 2019 Plan and executive employment agreements. These arrangements are designed to incentivize our executives to remain with our company in the event of a change in control or potential change in control. Under the terms of the 2019 Plan, subject to the terms of the applicable award agreement or an individual agreement between DiaMedica and a participant, upon a change in control, the Board of Directors may, in its discretion, determine whether some or all outstanding options and stock appreciation rights shall become exercisable in full or in part, whether the restriction period and performance period applicable to some or all outstanding restricted stock awards and restricted stock unit awards shall lapse in full or in part and whether the performance measures applicable to some or all outstanding awards shall be deemed to be satisfied. The Board of Directors may further require that shares of stock of the corporation resulting from such a change in control, or a parent corporation thereof, be substituted for some or all of our common shares subject to an outstanding award and that any outstanding awards, in whole or in part, be surrendered to us by the holder, to be immediately cancelled by us, in exchange for a cash payment, shares of capital stock of the corporation resulting from or succeeding us or a combination of both cash and such shares of stock. Under the terms of the employment agreements that we entered into with our executives in September 2018, if we terminate the executive’s employment without “cause” or the executive terminates their employment with “good reason” in connection with or within 12 months after a “change in control,” the executive will be entitled to: (i) salary continuation payments for 18 months in the case of Mr. Pauls and 12 months in the case of each of the other executives, (ii) COBRA premium reimbursement during the salary continuation period, (iii) a pro rata portion of their target annual bonus for the year of termination, and (iv) immediate acceleration of their equity awards. These severance benefits are subject to the executive executing a separation agreement and release of claims. “Good reason” is defined in the employment agreements as the executive’s resignation within 30 days following the expiration of any cure period following the occurrence of one or more of the following, without the executive’s express written consent: (i) a material reduction of the executive’s duties, authority, reporting level, or responsibilities, relative to their duties, authority, reporting level, or responsibilities in effect immediately prior to such change in control; (ii) a material reduction in the executive’s base compensation; or (iii) DiaMedica’s requiring of the executive to change the principal location at which the executive is to perform services by more than 50 miles. “Change in control” is defined in the employment agreements as the occurrence of any of the following: (i) the acquisition, other than from us, by any individual, entity or group of beneficial ownership of 50% or more of either our then outstanding common shares or the combined voting power of our then outstanding voting securities entitled to vote generally in the election of directors; (ii) the consummation of a reorganization, merger or consolidation of DiaMedica, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of our common 32 shares and voting securities immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, of then outstanding common shares and the combined voting power of then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation; or (iii) the sale or other disposition of all or substantially all of our assets. We believe these change in control arrangements are an important part of our executive compensation program in part because they mitigate some of the risk for executives working in a smaller company where there is a meaningful risk that DiaMedica may be acquired. Change in control benefits are intended to attract and retain qualified executives who, absent these arrangements and in anticipation of a possible change in control of our company, might consider seeking employment alternatives to be less risky than remaining with our company through the transaction. We believe that the form and amount of these change in control benefits are fair and reasonable to both our company and our executives. The Compensation Committee periodically reviews our change in control arrangements to ensure that they remain necessary and appropriate. Indemnification Agreements We have entered into indemnification agreements with all of our executive officers. The indemnification agreements are governed exclusively by and construed according to the substantive laws of the BCBCA, without regard to conflicts-of-laws principles that would require the application of any other law, and provide, among other things, for indemnification, to the fullest extent permitted by law and our Articles, against any and all expenses (including attorneys’ fees) and liabilities, judgments, fines and amounts paid in settlement that are paid or incurred by the executive or on his or her behalf in connection with such action, suit or proceeding. We will be obligated to pay these amounts only if the executive acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of our company and, in the case of a criminal or administrative proceeding that is enforced by a monetary penalty, he or she had reasonable grounds for believing that his or her conduct was lawful. The indemnification agreements provide that the executive will not be indemnified and expenses advanced with respect to an action, suit or proceeding initiated by the executive unless (i) so authorized or consented to by the Board of Directors or DiaMedica has joined in such action, suit or proceeding or (ii) the action, suit or proceeding is one to enforce the executive’s rights under the indemnification agreement. Our indemnification and expense advance obligations are subject to the condition that an appropriate person or body not party to the particular action, suit or proceeding shall not have determined that the executive is not permitted to be indemnified under applicable law. The indemnification agreements also set forth procedures that apply in the event an executive requests indemnification or an expense advance. 33 Summary Compensation Table The table below provides summary information concerning all compensation awarded to, earned by or paid to our named executive officers during our 2019 and 2018 fiscal years. Name and Principal Position Year Rick Pauls(5) ................................. 2019 2018 President and Chief Executive Officer Salary Bonus(1) $ 420,000 $ — — 315,208 Non- Equity Incentive Plan Compen- sation(3) All Other Compen- sation(4) Option Awards(2) $ 890,736 $ 178,000 $ 14,650 $ 1,503,386 733,707 241,304 163,875 13,320 Total Scott Kellen ................................. 2019 2018 Chief Financial Officer and Secretary Harry Alcorn, Jr., Pharm.D. (6) ..... 2019 Chief Medical Officer 262,500 200,833 — — 336,557 361,957 64,800 70,200 13,950 9,931 677,807 642,921 273,750 — 421,750 68,400 14,400 778,300 (1) (2) (3) (4) (5) (6) We generally do not pay discretionary bonuses. Amounts reflect the full grant-date fair value of stock options granted during the applicable year computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. The grant date fair value is determined based on our Black-Scholes option pricing model. The table below sets forth the specific assumptions used in the valuation of each such option award: Grant Date 06/24/2019 04/17/2018 Grant Date Fair Value Per Share $ 3.37 9.33 Risk Free Interest Rate 1.75% 2.08% Expected Life 5.1 years 4.8 years Expected Volatility 96.3% 123.5% Expected Dividend Yield — — There can be no assurance that unvested awards will vest (and, absent vesting and exercise, no value will be realized by the executive for the award). Amounts reported represent awards earned for that year under our annual short-term incentive plan but paid during the following year. See “—Executive Compensation Overview—Annual Short-Term Incentive Compensation.” The amounts shown in the “All Other Compensation” column for fiscal 2019 include the following with respect to each named executive officer: Name Rick Pauls .............................. $ Scott Kellen ............................ Harry Alcorn, Jr., Pharm.D. ... 401(k) Match 11,200 10,500 10,950 Health Savings Account Contribution $ 3,450 3,450 3,450 $ Total 14,650 13,950 14,400 Mr. Pauls is also a director of DiaMedica and did not receive any compensation related to his role as a director. Dr. Alcorn was appointed our Chief Medical Officer in August 2018 and was not a named executive officer in 2018; therefore, his information is only provided for 2019. 34 Outstanding Equity Awards at Fiscal Year-End The following table presents for each named executive officer information regarding outstanding equity awards held as of December 31, 2019. All of our named executive officers held stock options as of December 31, 2019 and one of our named executive officers held deferred share units (DSUs). Option Awards(1) Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Option Exercise Price Option Expiration Date(2) 10,000 10,000 10,000 67,500 42,500 35,417 16,750 66,000 25,125 24,938 10,417 31,250 — — — — — 7,083 16,750 198,000 (CAD$) 23.00 (CAD$) 34.00 (CAD$) 21.40 (CAD$) 3.00 (CAD$) 5.20 (CAD$) 6.40 (CAD$) 11.20 (US$) 4.60 10/06/2021 02/15/2022 06/25/2023 12/01/2025 11/28/2026 06/19/2027 04/17/2028 06/23/2029 25,125 74,812 (CAD$) 11.20 (US$) 4.60 04/17/2028 06/23/2029 14,583 93,750 (CAD$) 10.40 (US$) 4.60 08/15/2028 06/23/2029 Name Rick Pauls Stock Options .......... DSUs ....................... Scott Kellen Stock Options .......... Harry Alcorn, Pharm.D. Stock Options .......... Stock Awards Number of Shares or Units of Stock That Have Not Vested(3) (#) Market Value of Shares or Units of Stock That Have Not Vested(4) ($) 1,749 $ 8,483 (1) (2) (3) (4) All stock options vest in 12 equal quarterly installments over three years, except the stock options granted on June 24, 2019 which vest in eight equal quarterly installments over two years. All stock options have a 10-year term, but may terminate earlier if the recipient’s employment or service relationship with our company terminates. All DSU awards are settled after the holder’s employment or service relationship with our company terminates. The market value of DSU awards that have not been settled as of December 31, 2019 is based on the closing sale price of our common shares as reported by The Nasdaq Capital Market on December 31, 2019 ($4.85). Employee Benefit and Stock Plans 2019 Omnibus Incentive Plan The DiaMedica Therapeutics Inc. 2019 Omnibus Incentive Plan (2019 Plan) was adopted by the Board of Directors on March 14, 2019 and approved by our shareholders on May 22, 2019. Shares Available. Subject to adjustment (as described below), the maximum number of our common shares authorized for issuance under the 2019 Plan is 2,000,000 shares. No more than 2,000,000 shares may be granted as incentive stock options and no more than 100,000 shares may be granted to any non- 35 employee director in any one year (other than shares received in lieu of any annual cash retainer or meeting fees). Eligible Participants. Awards may be granted to employees, non-employee directors and consultants of DiaMedica or any of our subsidiaries. A “consultant” for purposes of the 2019 Plan is one who renders services to DiaMedica or its subsidiaries that are not in connection with the offer and sale of our securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for our securities. Awards Available. The 2019 Plan permits us to grant non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, and other stock based awards. Awards may be granted either alone or in addition to or in tandem with any other type of award. Transferability. Except pursuant to a testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the 2019 Plan, no right or interest of any participant in an award prior to the exercise (in the case of options or stock appreciation rights) or vesting, issuance or settlement of such award will be assignable or transferable, or subjected to any lien, during the lifetime of the participant, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise. Termination of Employment or Other Service. The 2019 Plan provides for certain default rules in the event of a termination of a participant’s employment or other service. These default rules may be modified in an award agreement or an individual agreement between DiaMedica and a participant. If a participant’s employment or other service with DiaMedica is terminated for cause, then all outstanding awards held by such participant will be terminated and forfeited. In the event a participant’s employment or other service with DiaMedica is terminated by reason of death, disability, or retirement, then:  All outstanding stock options (excluding non-employee director options in the case of retirement) and stock appreciation rights held by the participant will, to the extent exercisable, remain exercisable for a period of one year after such termination, but not later than the date the stock options or stock appreciation rights would otherwise expire;  All outstanding stock options and stock appreciation rights that are not exercisable and all outstanding restricted stock will be terminated and forfeited; and  All outstanding unvested restricted stock units, performance awards, and other stock-based awards held by the participant will terminate and be forfeited. However, with respect to any awards that vest based on the achievement of performance goals, if a participant’s employment or other service with DiaMedica or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in no event less than one year), the Board of Directors may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance period. 36 In the event a participant’s employment or other service with DiaMedica is terminated by reason other than for cause, death, disability, or retirement, then:  All outstanding stock options (including non-employee director options) and stock appreciation rights held by the participant that then are exercisable will remain exercisable for three months after the date of such termination, but will not be exercisable later than the date the stock options or stock appreciation rights would otherwise expire;  All outstanding restricted stock will be terminated and forfeited; and  All outstanding unvested restricted stock units, performance awards and other stock-based awards will be terminated and forfeited. However, with respect to any awards that vest based on the achievement of performance goals, if a participant’s employment or other service with DiaMedica or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in no event less than one year), the Board of Directors may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance period. Adjustments. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture, or extraordinary dividend (including a spin off) or other similar change in the corporate structure or our common shares, the Board of Directors will make the appropriate adjustment or substitution in order to prevent dilution or enlargement of the rights of participants. These adjustments or substitutions may be to the number and kind of securities and property that may be available for issuance under the 2019 Plan. In order to prevent dilution or enlargement of the rights of participants, the Board of Directors may also adjust the number, kind and exercise price of securities or other property subject to outstanding awards. Term, Termination and Amendment. Unless sooner terminated by the Board of Directors, the 2019 Plan will terminate at midnight on May 21, 2029. No award will be granted after termination of the 2019 Plan, but awards outstanding upon termination of the 2019 Plan will remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the 2019 Plan. Subject to certain exceptions as set forth in the 2019 Plan, the Board of Directors has the authority to terminate and the Board of Directors has the authority to amend the 2019 Plan or any outstanding award agreement at any time and from time to time. No termination or amendment of the 2019 Plan or an award agreement shall adversely affect in any material way any award previously granted under the 2019 Plan without the written consent of the participant holding such award. Prior Stock Option Plan The DiaMedica Therapeutics Inc. Amended and Restated Stock Option Plan (Option Plan) was adopted by the Board of Directors on September 30, 2018 and by our shareholders on November 6, 2018. The Option Plan was terminated with respect to future grants upon the approval by the shareholders of the 2019 Plan. Options outstanding under the Option Plan remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the Option Plan. Subject to the discretion of the Board of Directors, where a person ceases to be an eligible participant under the Option Plan, other than by reason of death or in the event of termination for cause, options granted to participants will cease to be exercisable on the earlier of the expiry date and 90 days after the 37 date of termination. Subject to the discretion of the Board of Directors, if a participant is terminated for cause, all options received will terminate and cease to be exercisable upon such termination. In the event of any change in our outstanding common shares by reason of any stock dividend, split, recapitalization, reclassification, amalgamation, merger, consolidation, combination or exchange of shares or distribution of rights to holders of shares or any other form of corporate reorganization whatsoever, an equitable adjustment will be made to the share limits in the Option Plan and any options then outstanding and the exercise price in respect of such options. Prior Deferred Share Unit Plan The DiaMedica Therapeutics Inc. Deferred Share Unit Plan (DSU Plan) was adopted by the Board of Directors on August 25, 2011 and by our shareholders on September 22, 2011. The DSU Plan was terminated with respect to future grants upon the approval by the shareholders of the 2019 Plan. DSU awards outstanding under the DSU Plan remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the DSU Plan. All DSU awards held by a recipient settle and the shares underlying such awards become issuable only after the termination of the recipient’s employment or other service with DiaMedica. Anti-Hedging and Pledging Policy DiaMedica has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct if officers, directors and employees engage in certain types of transactions in DiaMedica’s securities that hedge or offset, or are designed to hedge or offset, any decrease in the market value of DiaMedica’s equity securities. Therefore, DiaMedica’s Insider Trading Policy provides that officers, directors and employees must comply with the following policies with respect to certain transactions in DiaMedica’s securities:  Short Sales. Short sales of DiaMedica’s securities evidence an expectation on the part of the seller that the securities will decline in value, and therefore signal to the market that the seller has no confidence in DiaMedica or its short-term prospects. In addition, short sales may reduce the seller’s incentive to improve the Company’s performance. For these reasons, short sales of DiaMedica’s securities are prohibited.  Publicly Traded Options. A transaction in options is, in effect, a bet on the short-term movement of DiaMedica’s common shares and therefore creates the appearance that an officer, director or employee is trading based on inside information. Transactions in options also may focus an officer’s, director’s or employee’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in puts, calls or other derivative securities involving DiaMedica’s equity securities, on an exchange or in any other organized market, are prohibited.  Hedging Transactions. Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow an officer, director or employee to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the officer, director or employee to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the officer, director or employee may no longer have the same objectives as DiaMedica’s other shareholders. Therefore, such transactions involving DiaMedica’s equity securities are prohibited. 38  Purchases of the Company’s Securities on Margin; Pledging the Company’s Securities to Secure Margin or Other Loans. Purchasing on margin means borrowing from a brokerage firm, bank or other entity in order to purchase DiaMedica’s securities (other than in connection with a cashless exercise of stock options through a broker under the Company’s equity plans). Margin purchases of DiaMedica’s securities are prohibited. Pledging DiaMedica’s securities as collateral to secure loans is also prohibited. This prohibition means, among other things, that directors, officers and employees cannot hold DiaMedica’s securities in a “margin account.” 39 RELATED PERSON RELATIONSHIPS AND TRANSACTIONS ________________ Introduction Below under “—Description of Related Party Transactions” is a description of transactions that have occurred during the past fiscal year, or any currently proposed transactions, to which we were or are a participant and in which:   the amounts involved exceeded or will exceed the lesser of: $120,000 or one percent (1%) of the average of our total assets at year end for the last two completed fiscal years; and a related person (including any director, director nominee, executive officer, holder of more than 5% of our common shares or any member of their immediate family) had or will have a direct or indirect material interest. These transactions are referred to as “related party transactions.” Description of Related Party Transactions Relationship with Hermeda Industrial Co., Limited We and Hermeda Industrial Co., Limited (Hermeda) are parties to an investment agreement, which includes terms relating to the composition of the Board of Directors. Under director nomination provisions of this agreement, Hermeda had the right to designate a representative to be nominated to the Board of Directors for so long as Hermeda beneficially owns at least 10% of our outstanding common shares on a non-diluted basis, and we agreed to use our reasonable best efforts to cause the Hermeda designee to be elected. As of March 31, 2020, Hermeda beneficially owned 7.1% of our outstanding common shares. Zhenyu Xiao, Ph.D., one of our directors, is the Director of Hermeda and is the current designee of Hermeda under the investment agreement. Dr. Xiao is not standing for re-election at the Annual General Meeting. Former License and Collaboration Agreement In September 2018, we entered into a license and collaboration agreement with Ahon Pharmaceutical Co Ltd. (Ahon Pharma), a subsidiary of Fosun Pharma, which allowed Ahon Pharma to have exclusive rights to clinically develop and commercialize DM199 for acute ischemic stroke in mainland China, Taiwan, Hong Kong S.A.R. and Macau S.A.R. Under the terms of the agreement, we received an upfront payment of $500,000 on signing and were entitled to receive an additional payment of $4.5 million upon the earlier of regulatory clearance to initiate a clinical trial in China or July 1, 2019. On August 12, 2019, after extensive good faith discussions with Ahon Pharma, we were unable to agree upon mutually acceptable revised terms to the agreement and we terminated the agreement for non-payment of the $4.5 million milestone, thereby regaining worldwide rights for DM199 for acute ischemic stroke. Fosun Pharma, through its partnership with SK Group, a South Korea based company is an investor in DiaMedica through its equity investment in 2016. 40 Indemnification Agreements We have entered into indemnification agreements with all of our directors and executive officers. The indemnification agreements provide, among other things, for indemnification, to the fullest extent permitted by law and our Articles, against any and all expenses (including attorneys’ fees) and liabilities, judgments, fines and amounts paid in settlement that are paid or incurred by the executive or on his or her behalf in connection with such action, suit or proceeding. The indemnification agreements also set forth procedures that apply in the event an executive requests indemnification or an expense advance. For more information regarding these agreements, see “Director Compensation—Indemnification.” DiaMedica has not identified any arrangements or agreements relating to compensation provided by a third party to DiaMedica’s directors or director nominees in connection with their candidacy or board service as required to be disclosed pursuant to Nasdaq Rule 5250(b)(3). Policies and Procedures for Related Party Transactions The Board of Directors has delegated to the Audit Committee, pursuant to the terms of a written policy and the formal written charter of the Audit Committee, the authority to review, approve and ratify related party transactions. If it is not feasible for the Audit Committee to take an action with respect to a proposed related party transaction, the Board of Directors or another committee, may approve or ratify it. No member of the Board of Directors or any committee may participate in any review, consideration or approval of any related party transaction with respect to which such member or any of his or her immediate family members is the related party. Our policy defines a “related party transaction” as a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we (including any of our subsidiaries and affiliates) were, are or will be a participant and in which any related party had, has or will have a direct or indirect interest (other than solely as a result of being a director or less than 10 percent beneficial owner of another entity). Prior to entering into or amending any related party transaction, the party involved must provide notice to our Chief Financial Officer of the facts and circumstances of the proposed transaction, including:      the related party’s relationship to us and his or her interest in the transaction; the material facts of the proposed related party transaction, including the proposed aggregate value of such transaction or, in the case of indebtedness, the amount of principal that would be involved; the purpose and benefits of the proposed related party transaction with respect to us; if applicable, the availability of other sources of comparable products or services; and an assessment of whether the proposed related party transaction is on terms that are comparable to the terms available to an unrelated third party or to employees generally. If the Chief Financial Officer determines the proposed transaction is a related party transaction in which the amount involved will or may be expected to exceed $10,000 in any calendar year, the proposed transaction will be submitted to the Audit Committee for consideration. In determining whether to approve a proposed related party transaction, the Audit Committee, or where submitted to the Chair of the Audit Committee, the Chair of the Audit Committee, will consider, among other things, the following: 41       the purpose of the transaction; the benefits of the transaction to us; the impact on a director’s independence in the event the related party is a non-employee director, an immediate family member of a non-employee director or an entity in which a non-employee director is a partner, shareholder or executive officer; the availability of other sources for comparable products or services; the terms of the transaction; and the terms available to unrelated third parties or to employees generally. Under our policy, certain related party transactions as defined under our policy will be deemed to be pre- approved by the Audit Committee and will not be subject to these procedures. 42 SHAREHOLDER PROPOSALS FOR 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS ________________ Shareholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to present proposals for inclusion in the proxy materials relating to the 2021 Annual General Meeting of Shareholders must submit their proposals so that they are received by us at our principal executive offices no later than the close of business on December 21, 2020, unless the date of the 2021 meeting is delayed by more than 30 calendar days. The proposals must satisfy the requirements of the proxy rules promulgated by the SEC and as the rules of the SEC make clear, simply submitting a proposal does not guarantee that it will be included. Any other shareholder proposals, including director nominations, to be presented at the 2021 Annual General Meeting of Shareholders (other than a matter brought pursuant to SEC Rule 14a-8) must be given in writing to our Corporate Secretary and must be delivered to or mailed and received at our registered office no later than the close of business on the date that is three months before the anniversary of the previous year’s annual reference date, being February 22, 2020. The proposals must satisfy the requirements of the BCBCA. Subject to the BCBCA, a registered owner or beneficial owner of one or more shares that carry the right to vote at general meetings and who has been a registered owner or beneficial owner of one or more such shares for an uninterrupted period of at least two years may submit to us a notice of any matter that the person wishes to have considered at our next annual general meeting. COPIES OF FISCAL 2019 ANNUAL REPORT AND ADDITIONAL INFORMATION ________________ We have sent or made electronically available to each of our shareholders a copy of our Annual Report on Form 10-K (without exhibits) for the fiscal year ended December 31, 2019. Our Annual Report includes our financial information included in our consolidated annual financial statements and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2019. Our Annual Report is electronically available on our website at www.diamedica.com, by accessing the SEC’s EDGAR filing database at www.sec.gov or on SEDAR at www.sedar.com. The exhibits to our Form 10-K are available by accessing the SEC’s EDGAR filing database at www.sec.gov. We will furnish a copy of any exhibit to our Form 10-K upon receipt from any such person of a written request for such exhibits upon the payment of our reasonable expenses in furnishing the exhibits. This request should be sent to: DiaMedica Therapeutics Inc., Two Carlson Parkway, Suite 260, Minneapolis, Minnesota 55447, Attention: Shareholder Information. _________________________ 43 Your vote is important. Whether or not you plan to attend the meeting in person, vote your shares of DiaMedica common shares by the Internet or telephone, or request a paper proxy card to sign, date and return by mail so that your shares may be voted. By Order of the Board of Directors Richard Pilnik Chairman of the Board April 20, 2020 Minneapolis, Minnesota 44 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549______________________________FORM 10-K(Mark One)☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2019or☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________________ to __________________.Commission file number: 001-36291____________________DIAMEDICA THERAPEUTICS INC.(Exact name of registrant as specified in its charter)____________________British Columbia(State or other jurisdiction of incorporation or organization)Not Applicable(I.R.S. Employer Identification No.)Two Carlson Parkway, Suite 260Minneapolis, Minnesota(Address of principal executive offices)55447(Zip Code)Registrant’s telephone number, including area code: (763) 612-6755Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredVoting Common Shares, no par value per shareDMACThe Nasdaq Capital MarketThe Nasdaq Stock Market LLCSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate 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 Section 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 thepreceding 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 90days. 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 RegulationS-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 emerginggrowth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of theExchange 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 revisedfinancial 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 Act). YES ☐ NO ☒The aggregate market value of the registrant’s voting common shares held by non-affiliates, computed by reference to the closing sales price at which the votingcommon shares were last sold as of June 30, 2019 (the last business day of the registrant’s most recently completed second fiscal quarter), as reported by the NasdaqCapital Market on that date, was $53.4 million.As of March 20, 2020, there were 14,139,074 voting common shares outstanding.DOCUMENTS INCORPORATED BY REFERENCEPart III of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the registrant’s ProxyStatement for its 2020 Annual General Meeting of Shareholders to be held June 2, 2020.[page 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DIAMEDICA THERAPEUTICS INC.ANNUAL REPORT ON FORM 10-KFISCAL YEAR ENDED DECEMBER 31, 2019TABLE OF CONTENTSPageCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 1INDUSTRY AND MARKET DATA2PART I 3Item 1.   Business 3Information About Our Executive Officers27Item 1A.Risk Factors29Item 2.Properties69Item 3.Legal Proceedings69Item 4. Mine Safety Disclosures 70PART II71Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities71Item 6.Selected Financial Data82Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations83Item 7A.Quantitative and Qualitative Disclosures About Market Risk 94Item 8.Financial Statements and Supplementary Data 95Item 9.Changes In and Disagreements With Accountants on Accounting and Financial Disclosure120Item 9A.Controls and Procedures120Item 9B. Other Information 121PART III122Item 10.Directors, Executive Officers and Corporate Governance  122Item 11.Executive Compensation122Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 122Item 13. Certain Relationships and Related Transactions, and Director Independence  123Item 14.Principal Accounting Fees and Services123PART IV 124Item 15. Exhibits, Financial Statement Schedules124Item 16. Form 10-K Summary129SIGNATURES 130i_____________This annual report on Form 10-K contains certain forward-looking statements that are within the meaning of Section 27A of the United States Securities Act of 1933,as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by those sections. Formore information, see “Cautionary Note Regarding Forward-Looking Statements.”As used in this report, references to “DiaMedica,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires, refer to DiaMedica Therapeutics Inc.and its subsidiaries, all of which are consolidated in DiaMedica’s consolidated financial statements. References in this report to “common shares” means our votingcommon shares, no par value per share.We own various unregistered trademarks and service marks, including our corporate logo. Solely for convenience, the trademarks and trade names in this report arereferred to without the ® and ™ symbols, but such references should not be construed as any indicator that the owner of such trademarks and trade names will notassert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply arelationship with, or endorsement or sponsorship of us by, any other companies.iiCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSStatements in this annual report on Form 10-K that are not descriptions of historical facts are forward-looking statements within the meaning of the United States PrivateSecurities Litigation Reform Act of 1995 that are based on management’s current expectations and are subject to risks and uncertainties that could negatively affect ourbusiness, operating results, financial condition and share price. We have attempted to identify forward-looking statements by terminology including “anticipates,”“believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “will,” “would,” the negative of these termsor other comparable terminology, and the use of future dates.The forward-looking statements in this report include, among other things, statements about:●our plans to develop, obtain regulatory approval for and commercialize our DM199 product candidate for the treatment of CKD and AIS and our expectationsregarding the benefits of our DM199 product candidate;●our ability to conduct successful clinical testing of our DM199 product candidate for CKD and AIS;●our ability to obtain required regulatory approvals of our DM199 product candidate for CKD and AIS;●the perceived benefits of our DM199 product candidate over existing treatment options for CKD and AIS;●the potential size of the markets for our DM199 product candidate and our ability to serve those markets;●the rate and degree of market acceptance, both in the United States and internationally, of our DM199 product candidate for CKD and AIS;●our ability to partner with and generate revenue from biopharmaceutical or pharmaceutical partners to develop, obtain regulatory approval for andcommercialize our DM199 product candidate for CKD and AIS.;●the success, cost and timing of planned clinical trials, as well as our reliance on collaboration with third parties to conduct our clinical trials;●our commercialization, marketing and manufacturing capabilities and strategy;●expectations regarding federal, state, and foreign regulatory requirements and developments, such as potential United States Food and Drug Administration(FDA) regulation of our DM199 product candidate for CKD and AIS;●expectations regarding competition and our ability to obtain data exclusivity for our DM199 product candidate for CKD and AIS;●our ability to obtain funding for our operations, including funding necessary to complete planned clinical trials and obtain regulatory approvals for our DM199product candidate for CKD and AIS;●our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;●our expectations regarding our ability to obtain and maintain intellectual property protection for our DM199 product candidate; and●our anticipated use of the net proceeds from our December 2018 initial public offering in the United States and our February 2020 underwritten public offering.These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under “Part I. Item 1A. Risk Factors inthis report. Moreover, we operate in a very competitive and rapidly-changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differmaterially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events andcircumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-lookingstatements. Forward-looking statements should not be relied upon as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Except as required by law, including the securities laws of the United States, we do not intend to update any forward-looking statements to conform these statements to actual results or to changes in our expectations.1  INDUSTRY AND MARKET DATA In addition to the industry, market and competitive position data referenced in this report from our own internal estimates and research, some market data and otherstatistical information included in this report are based in part upon information obtained from third-party industry publications, research, surveys and studies, none ofwhich we commissioned. Third-party industry publications, research, surveys and studies generally indicate that their information has been obtained from sourcesbelieved to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure in this report, and while we believe that each of the publications, research, surveys and studies included in this report areprepared by reputable sources, we have not independently verified market and industry data from third-party sources. In addition, while we believe our internalcompany research and estimates are reliable, such research and estimates have not been verified by independent sources. Assumptions and estimates of our and ourindustry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Part I. Item 1A.Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Note RegardingForward-Looking Statements.” 2PART IItem 1.BusinessOverviewWe are a clinical stage biopharmaceutical company primarily focused on the development of novel recombinant (synthetic) proteins. Our goal is to use our trade secrets,patented and licensed technologies to establish our company as a leader in the development and commercialization of therapeutic treatments derived from novelrecombinant proteins. Our current focus is on chronic kidney disease (CKD) and acute ischemic stroke (AIS). We are working to advance DM199, our lead drugcandidate, through required clinical trials to create shareholder value by establishing its clinical and commercial potential as a therapy for CKD and AIS.DM199 is a recombinant form of human tissue kallikrein-1 (KLK1). KLK1 is a serine protease (protein) produced primarily in the kidneys, pancreas and salivary glandsthat plays a critical role in the regulation of local blood flow and vasodilation (the widening of blood vessels, which decreases vascular resistance) in the body, as wellas an important role in inflammation and oxidative stress (an imbalance between potentially damaging reactive oxygen species, or free radicals, and antioxidants in thebody). We believe DM199 has the potential to treat a variety of diseases where healthy function requires sufficient activity of KLK1 and its system, the kallikrein-kininsystem (KKS).Our current product candidates in clinical development are as follows:KLK1 is involved in multiple biochemical processes. The most well-characterized activity of KLK1 is enzymatic cleavage of low molecular weight kininogen (LMWK) toproduce bradykinin (BK)-like peptides, collectively known as kinins, which activate BK receptors (primarily BK2R with some BK1R). Activation of BK receptors bykinins sets in motion metabolic pathways that can improve blood flow (through vasodilation), dampen inflammation, and protect tissues and end-organs from ischemicdamage. Scientific literature, including publications in Circulation Research, Immunopharmacology and Kidney International, suggests that lower endogenous KLK1levels in patients are associated with diseases related to vascular disorders, such as kidney diseases, stroke and hypertension. DM199, as a protein replacement therapy,may replenish KLK1 levels to properly activate the KKS producing nitric oxide, prostaglandin and other anti-inflammatory mediators that protect the kidney and brainfrom damage. By providing additional supply of KLK1 protein, DM199 treatment could potentially improve blood flow to and reduce inflammation in damaged end-organs, such as the kidneys and the brain, supporting their structural integrity and normal functioning.3DM199 (KLK1): Increasing Renal Blood Flow:We believe DM199 may provide new treatment options with significant benefits over the current standards of care by offering potentially fewer side effects and atherapeutic treatment option to a greater number of patients. We are not aware of any approved therapies in the United States or the European Union to address lowKLK1 levels and we are positioning DM199 for worldwide use. To date, clinical trials have been and/or are being conducted in the United States, Europe and Australiato support regulatory filings in the United States and around the world; with an initial focus on the United States.In June 2019, we announced interim results from our Phase Ib study of DM199 in patients with moderate or severe CKD caused by Type I or Type II diabetes. Theseresults, consistent with prior studies, demonstrated that DM199 continued to be safe and well tolerated with no treatment-related serious adverse events (SAEs).Pharmacokinetic (PK) data supported the determination of the dose range expected to normalize KLK1 levels in both moderate and severe CKD patients. We were alsopleased to note that the PK profiles were similar between moderate and severe CKD patients, as well as previous healthy subjects, dosed at 3µg/kg. Pharmacodynamicdata (PD) were also evaluated through exploratory biomarkers as pre-defined secondary endpoints for this study. Although subjects only received a single dose in thestudy, favorable overall results were observed approximately 24 hours after DM199 administration, including short-term improvements in Nitric Oxide (NO), averageincrease of 35.2%, Prostaglandin E2 (PGE2), average increase of 41.2%, eGFR, average increase of 4.08 mL/min/1732, and the urinary albumin to creatinine ratio (UACR),average decrease of 18.7%. The Company believes these observations show drug activity, consistent with the DM199 mechanism of action, and may represent initialproof-of-mechanism. Full results of the study will be provided in a peer-reviewed publication and/or poster presentation.4For patients with chronic kidney disease, studies have shown that KLK1 excretion, or levels of KLK1 in the urine, were significantly decreased. This decrease was morepronounced in patients with severe renal failure requiring dialysis, as illustrated in the graph below.Low KLK1 Levels Are Associated With Chronic Kidney DiseaseStudies have also shown that lower KLK1 levels are also a predictor of stroke recurrence. As shown in the graph below, the red line represents patients in the lowestKLK1 quartile who are at the highest risk for recurrence of stroke. (2,478 stroke patients and event free survival over 5 years).Our StrategyOur goal is to become a leader in the discovery, development and commercialization of recombinant proteins for the treatment of severe and life-threatening diseases.We seek to identify and select, for development and partnership, recombinant proteins with novel mechanisms that have biological properties with broad applicability.Once we have selected a class of recombinant proteins, we apply their biological properties to clinical settings with unmet needs. We evaluate opportunities based onthe estimated development timeline, cost, regulatory pathway and commercial opportunity. After identifying suitable molecules for clinical development, we intend tomitigate development risk by maintaining a diversified and broad clinical pipeline, analyzing data to determine the potential of each program and entering intodevelopment collaborations with industry-leading companies.5  Currently, our strategy includes the following key components:  ●DM199 for CKD - complete our ongoing Phase II study ●DM199 for AIS - complete our ongoing Phase II study ●DM199 for other vascular diseases - initiate Phase II studies, with sufficient resources ●Leverage our technologies to expand our development pipeline ●Use our expertise to identify and manufacture other novel recombinant proteins Targeted Indications and Markets for DM199 Chronic Kidney Disease CKD is characterized by a progressive decline in overall kidney function as measured by the glomerular filtration rate (GFR) (a test used to evaluate blood flow throughthe kidneys), and albuminuria (a marker for glomerular injury measuring the amount of albumin protein excreted in your urine or how well the kidneys are filtering excessfluid and waste products out of your blood). As glomerular filtration decreases, the body’s ability to continue to regulate its many functions as well as eliminatemetabolic waste is lost and ultimately, may result in severe physiologic consequences. Among multiple underlying causes, CKD often begins with an increase in bloodglucose, which leads to the thickening of the glomerular membrane, known as fibrosis. As the kidney function becomes impaired, GFR decreases and abnormal amountsof protein are released into the urine collecting tubules of the kidney through damaged capillary pores in the glomerular floor. Additionally, increased blood glucoseleads to increased blood pressure, elevated reactive oxygen species, advanced glycation end product formation (harmful compounds that are formed when protein or fatcombine with sugar in the bloodstream) and inflammation. As these continue, structural components of the kidney begin to collapse, resulting in cell ischemia and celldeath. As the renal damage continues, a progressive thickening of the glomerular basement membrane is seen along with continued pathological changes in the cellsand inflammation. Early stages of CKD are characterized as microalbuminuria (small amounts of protein leak into the urine). Late stages are characterized asmacroalbuminuria (large amounts of protein leak into the urine). The rate of decline depends on a number of factors including the type of diabetes, geneticpredisposition, glycemic controls and blood pressure. At the final stages of CKD, the kidneys fail completely and dialysis or a kidney transplant is needed. CKD is a widespread health problem that generates significant economic burden throughout the world:  ●According to the National Kidney Foundation, 30 million Americans and 120 million Chinese suffer from this debilitating and potentially life-threateningcondition. ●The primary causes of CKD are diabetes (Type 2 and Type 1) and hypertension. The Medical Clinics of North America estimates that over 40% of thosewith Type 2 diabetes and 20% of those with Type 1 diabetes will eventually develop CKD, making it one of the more common risks for diabetics. ●Patients with CKD are at greater risk for hypertension and heart disease. Currently, there is no cure for CKD and treatment primarily involves management of the symptoms of the disease. Blood pressure medications, such as angiotensinconverting enzyme inhibitors (ACEi) or angiotensin receptor blockers (ARB), are often prescribed to control hypertension, and hopefully, slow the progression of CKD.However, according to the National Kidney Foundation, many of these patients continue to show declining kidney function and 3.6% of the overall population has alifetime risk of developing ESRD, where dialysis or a kidney transplant is needed. We believe DM199 may offer a novel approach for the treatment CKD since the KLK1protein plays a vital role in maintaining normal kidney function. As observed in a Phase 1B clinical trial, DM199 promotes the production of nitric oxide, prostacyclin andother anti-inflammatory mediators which are critical for kidney health and integrity. Since patients with moderate to severe CKD often excrete abnormally low levels ofKLK1 in their urine, DM199, by increasing levels of KLK1, may prevent or reduce further kidney damage by replenishing KLK1 levels and restoring the protective BKsystem. 6  Acute Ischemic Stroke Stroke is characterized by the rapidly developing loss of brain function due to a blockage of blood flow in the brain. As a result, the affected area of the brain becomesinactive and eventually dies. Strokes can be classified into two major categories: AIS and hemorrhagic stroke. AIS is characterized by interruption of the blood supplyby a blood clot (ischemia), while a hemorrhagic stroke results from rupture, or bleeding, of a blood vessel or an abnormal vascular structure. According to the U.S.Center for Disease Control and Prevention (CDC), about 87% of strokes are ischemic in nature with the remainder classified as hemorrhagic. According to the CDC,worldwide, stroke is an important cause of adult disability and the second leading cause of death in developed countries. Risk factors for stroke include advanced age,hypertension (high blood pressure), previous stroke or transient ischemic attack (TIA), diabetes, high cholesterol, cigarette smoking and atrial fibrillation. According tothe World Health Organization, each year approximately 15 million people worldwide suffer a stroke, of which 5.5 million will die and 5.0 million will be permanentlydisabled. According to the CDC:  ●Every year in the United States, approximately 795,000 people experience a new or recurrent stroke (ischemic or hemorrhagic). Approximately 610,000 ofthese are first events and 185,000 are recurrent stroke events. ●Approximately one of every 20 deaths in the United States is caused by stroke. On average, someone in the United States has a stroke every 40 secondsand someone dies from a stroke every four minutes. ●Stroke costs the United States an estimated $34 billion annually, including the cost of health care services, medications and lost productivity. More specifically, with respect to an ischemic stroke, at the site of a blood flow blockage in the brain, there exist two major ischemic zones - the core ischemic zone withnearly complete loss of blood flow (blood flow below 10% to 25%), and the surrounding ischemic penumbra, a rim of mild to moderately ischemic tissue surrounding thecore ischemic zone. Within minutes, the significant lack of blood flow in the core ischemic zone (i.e., glucose and oxygen deprivation) rapidly depletes energy stores andtriggers the loss of ion gradients, ultimately leading to neuronal cell death. The ischemic penumbra zone, however, may remain viable for several hours via collateralarteries that branch from the main occluded artery in the core ischemic zone. Unfortunately, the penumbra is at great risk of delayed tissue damage due to inflammationand cell death, or apoptosis. As time goes on, a lack of blood flow in the core ischemic zone (infarct) may lead to fluid buildup (edema) and swelling which createsintracranial pressure. This pressure on the brain leads to tissue compression resulting in additional ischemia. Additional events in AIS include vascular damage to theblood vessel lining or endothelium, loss of structural integrity of brain tissue and blood vessels, and inflammation. A stroke can lead to permanent damage with memoryloss, speech problems, reading and comprehension difficulties, physical disabilities, and emotional/behavioral problems. The long-term costs of stroke are substantial,with many patients requiring extended hospitalization, extended physical therapy or rehabilitation, and/or long-term institutional or family care. However, provided theextended window of viability in the penumbra, next generation stroke therapies are being developed to protect valuable brain tissue during the hours to a week after astroke. 7  Acute Ischemic Stroke Treatment Options  Stroke represents an area of significant unmet medical need and a KLK1 treatment (such as DM199) could provide a novel treatment option with an added significantpatient benefit in that its proposed therapeutic window is up to 24 hours after the first sign of stroke symptoms. Currently, the only pharmacological intervention for AISis tissue plasminogen activator (tPA), which must be given within 4.5 hours of symptom onset. Mechanical thrombectomy, in which the clot is removed using catheter-based tools, is also available to some patients. Despite the availability of these treatments, many patients are not eligible due to the location of the clot, the elapsed timeafter the occurrence of the stroke, or other safety considerations. Thus, we believe DM199 offers significant advantages over the current treatment options and fills anunmet need for patients who cannot receive tPA. Additionally, DM199 may also offer a complimentary follow-on treatment for patients who initially receive tPA ormechanical thrombectomy. Based on the number of strokes each year (approximately 1.7 million in the United States, Europe and Japan and 15 million worldwide) andconsidering the $8,500 estimated cost per patient for the current standard of care, tPA, we believe the annual market opportunity for DM199 could be significant. DM199 Acute Ischemic Stroke: Proposed Mechanism  8  KLK1, primarily derived from human urine, is widely used in China (marketed under the brand name Kailikang®) for the treatment of AIS, making KLK1 therapy availableto hundreds of thousands of Chinese patients who currently have no options. We believe that the proprietary DM199 protein could result in improved efficacy withoptimized pharmacokinetics (drug level exposure) and avoid the side effects of Kailikang, specifically the risk of endotoxins, impurities and antibody formationassociated with Kailikang given that it is isolated from human urine. DM199 also addresses potential supply constraints that makes Kailikang difficult and expensive toproduce given the limited source of human urine. These factors make the recombinant protein DM199 a product candidate that is better positioned for regulatoryapproval worldwide compared to a urine-derived protein since it can meet the rigorous required manufacturing standards. Potential Treatments with DM199 Chronic Kidney Disease We believe DM199 has the potential to offer therapeutic benefits for CKD patients. The KLK1 protein plays a vital role in normal kidney function, promoting theproduction of nitric oxide, prostacyclin and other anti-inflammatory mediators which are important for kidney health and integrity. Patients with moderate to severe CKDoften excrete abnormally low levels of KLK1 in their urine, leading to the hypothesis that a KLK1 deficit contributes to disease progression. We believe that DM199, as aprotein replacement therapy, can replenish KLK1 levels and properly activate the KKS producing nitric oxide, prostacyclin and other anti-inflammatory mediators whichmay protect the kidney from damage. In fact, DM199 treatment in an animal model of Type 1 diabetes delayed the onset of the disease, attenuated the degree of insulitis(inflammation in the insulin producing islet cells of the pancreas) and improved pancreatic beta cell mass in a dose-dependent manner by increasing regulatory T cells(Tregs). By providing additional KLK1, DM199 has the potential to:  ●Improve blood flow through the kidney by restoring proper regulation of blood flow through veins, arteries and especially capillaries (vasoregulation); ●Support the structural integrity of the kidney by reducing scar tissue formation (fibrosis), oxidative stress, and inflammation; and ●Activate mechanisms that upregulate Tregs, improve insulin sensitization, glucose uptake and glycogen synthesis, and lower blood pressure. Further supporting the hypothesis that an intact KKS is critical for normal kidney function, a series of observational studies published in Immunopharmacologyshowed the amount of KLK1 released into the urine appears to be inversely correlated with the severity of disease in patients with CKD. Urinary KLK1 excretion wasdecreased in patients with both mild (not requiring dialysis) and severe (kidney failure/hemodialysis) renal disease compared to controls. Decreases in urinary KLK1activity were seen especially when the reduction was associated with decreased glomerular filtration rate. DM199 treatment is intended to directly replenish KLK1 levels to maintain, or possibly restore, kidney function. Current treatment options, especially ACEi drugs, onlypartially restore kidney function and are associated with high-risk side effects. Importantly, it is becoming increasingly clear that part of the beneficial effect of ACEidrugs involves preventing the normal breakdown of BK leading to substantial increases in BK levels throughout the body. However, these effects can be unregulatedand ACEi drugs therefore can generate excessive BK where is it not needed, potentially leading to side effects such as persistent cough, angioedema (swelling of skinand tissue) and hyperkalemia (abnormally high potassium levels that can lead to cardiac arrest and sudden death). We believe DM199 treatment could allow KLK1 tofollow its normal physiological processes and release BK when and where it is needed, avoiding these side effects. 9KLK1 derived from the pancreas of a pig, or porcine KLK1, is currently used to treat CKD in Japan, China and Korea. Specifically, porcine KLK1 is also used to treathypertension and retinopathy. Based on data published by the data analytics company IQVIA and internal analysis, we estimate that millions of patients have beentreated with porcine KLK1 for these and other vascular diseases in Asia. We have identified 17 clinical papers, published in China and Germany supporting thetherapeutic activity of porcine KLK1 in CKD patients, whether given alone or in combination with an ARB or an ACEi. We also identified one 90-patient study in whichporcine KLK1 given in combination with an ARB restored normal kidney function. These unblinded studies involve treatment durations ranging from a few weeks up tosix months and report improvement in kidney disease based on decreased urinary albumin excretion rates and other clinical endpoints of kidney disease.10  Kalidinogenase (Porcine-Derived KLK1) Improves KidneyFunction in 90 Patients  There is a significant need for new and alternative treatment strategies for CKD. The combined results of these studies, which are consistent with the observedmovements in secondary endpoints in our Phase Ib study in CKD patients, and preclinical studies of DM199 provide rationale for the continued clinical development ofDM199. We intend to seek approval for use of DM199 as a novel and ground-breaking therapy for CKD. We believe DM199 could replace an ACEi and/or complementthe use of an ARB to improve kidney functions without increasing the risk of hyperkalemia, chronic cough, angioedema or other related side effects. Protein replacementtherapy with DM199, through the activation of the KKS, may complement the renin-angiotensin system, primarily targeted ARBs. Activation of the KKS system mayimprove the function of the diseased renal system by improving blood flow and vasodilation, as well as reducing inflammation and oxidative stress. We anticipate thatDM199 will boost KLK1 levels to release physiological levels of BK when and where needed, generating beneficial nitric oxide and prostacyclin while increasing Tregsto reduce inflammation. 11  DM199 (Recombinant KLK1) Proposed Mechanism of Actions  Acute Ischemic Stroke We believe treatment of AIS with DM199 could have both immediate and long-term benefits for patients that could significantly improve outcomes following AIS.Immediate actions include activation of the KKS to release nitric oxide and improve microcirculation in ischemic tissue along with improvements in the balance betweenblood flow and brain activity (neurovascular coupling). Long-term (days following the stroke) actions include the restoration of the blood brain barrier throughincreases in Tregs – a subpopulation of T cells that modulate the immune system and prevent autoimmune disease and inhibition of apoptotic cell death. In China, Kailikang is approved and marketed by Techpool Bio-Pharma Inc., a company controlled by Shanghai Pharmaceuticals Holding Co. Ltd. We believe Kailikanghas been approved for the treatment of AIS in China with a treatment window of up to 48 hours post-stroke. Based on IQVIA data, other publications and internalanalysis, we estimate that over 500,000 stroke patients have been treated with Kailikang in Asia. More than 50 published clinical studies, covering over 4,000 strokepatients, have demonstrated a beneficial effect of Kailikang treatment in AIS. According to a publication in the China Journal of Neurology, in a double-blinded,placebo-controlled trial of 446 patients treated with either Kailikang or a placebo administered up to 48 hours after a stroke showed significantly better scores on theEuropean Stroke Scale and Activities of Daily Living at three weeks post-treatment and after three months using the Barthel Index. 12   Furthermore, a comprehensive meta-analysis covering 24 clinical studies involving 2,433 patients published in the Journal of Evidence-Based Medicine concluded thathuman urinary KLK1 appears to ameliorate neurological deficits for patients with AIS and improves long-term outcomes, though a few treated patients suffered fromtransient hypotension. As DM199 is a recombinant form of human KLK1, we believe it has the potential to preserve “at risk” brain tissue by increasing cerebral blood flow, establishing bettercollateral circulation, decreasing inflammation, reducing cell death, or apoptosis, and facilitating improved blood flow to at-risk brain tissue in the ischemic penumbra.DM199 offers the potential of an improved recombinant product for worldwide use. We are developing DM199 to treat AIS patients with a therapeutic window of up to24 hours after the first sign of symptoms, well beyond the current window of up to 4.5 hours for tPA, thereby filling a large unmet need for patients who cannot receivetPA under the currently available treatment window of tPA. This important attribute could potentially make therapy available to the millions of patients worldwide whocurrently have limited treatment options. DMDx Diagnostic Tool Creation of a diagnostic tool, DMDx, to measure KLK1 levels in urine or plasma would support treatment with DM199 if it is approved for commercial sale. Severalpublished studies indicate KLK1 insufficiency is associated with multiple disease states including hypertension, CKD and AIS. Levels of endogenous KLK1 in bothurine and plasma are inversely correlated with disease severity. DMDx, if successfully developed, has the potential to help physicians identify patients at risk for thesemultiple disease states. The decision to commence this study will be dependent upon our available cash resources. Our Competition and Current Treatments for Chronic Kidney Disease and Acute Ischemic Stroke The biopharmaceutical industry is highly competitive and characterized by rapidly advancing technologies that focus on rapid development of proprietary drugs. Webelieve that our product candidates, development capabilities, experience and scientific knowledge provide us with competitive advantages. However, we facesignificant potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academicinstitutions, governmental agencies and other research institutions. Any product candidates that we successfully develop and commercialize will compete with existingtherapies and new therapies that may become available in the future. 13  Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than we do, and experience inobtaining FDA and other regulatory approvals of treatments and commercializing those treatments. Accordingly, our competitors may be more successful than us inobtaining approval for competitive products and achieving widespread market acceptance. Our competitors’ treatments may be more effectively marketed and sold thanany products we may commercialize, thus limiting our market share and resulting in a longer period before we can recover the expenses of developing andcommercializing our product candidates. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of ourcompetitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and establishedcompanies. These activities may lead to consolidated efforts that allow for more rapid development of competitive product candidates. We also compete for staff, development and clinical resources. These competitors may impair our ability to recruit or retain qualified scientific and managementpersonnel, our ability to work with specific advisors, or our ability to work with clinical contract organizations due to conflicts of interest or capacity constraints, andmay also delay recruitment of clinical study sites and study volunteers, impeding progress in our development programs. We expect any products that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, price and the availability of reimbursementfrom government or other third-party payers. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that areviewed as safer, more effective or less expensive than any products that we may develop. Chronic Kidney Disease In the United States, we are aware of only one currently approved treatment for CKD. That treatment is an ACEi (marketed under the brand name Captopril®) which isapproved for the treatment of patients with CKD caused by Type 1 diabetes. There are several pharmaceutical products for the treatment of CKD currently in clinicaldevelopment, some of which include:  ●Mineralcorticortisteroid receptor agonist (Bayer HealthCare Pharmaceuticals LLC) ●CCR2 receptor antagonists (ChemoCentryx, Inc., Bristol-Myers Squibb Company) ●Oxidative stress, cyclo-oxygenase 2 inhibitors (Reata Pharmaceuticals, Inc.) ●Glycosylation inhibitors (Glycadia, Inc. aka Glycadia Pharmaceuticals) ●Endothelin A receptor antagonists (AbbVie Inc.) ●Cyclin nucleotide phosphodiesterase inhibitor (Pfizer Inc.) ●Aldosterone receptor antagonists (Mitsubishi Tanabe Pharma Corporation) ●Nitric oxide enzyme inhibitor (GenKyoTex SA) ●Nitric oxide (Cyclerion/Ironwood Pharmaceuticals, Inc.) Current treatment strategies for CKD include the strict control of high blood pressure and high blood sugar. The ACEi drug Captopril® is approved for use in patientswith CKD due to Type 1 diabetes and both ACEi and ARBs are widely prescribed to slow the progression of CKD. Furthermore, the treatment with ACEi has been linkedto hyperkalemia (elevated blood potassium levels), which increases the risk for abnormal heart rhythms and sudden death. In fact, two clinical trials investigating the useof ACEi and ARB combination therapy in kidney disease were stopped prematurely because participants developed hyperkalemia. The added complication ofhyperkalemia results in patients receiving smaller, or suboptimal, doses or patients being untreated because they cannot tolerate the treatment. Additional side effectswith ACEi treatment are angioedema (swelling of skin tissue) and persistent cough. 14  DM199 treatment is intended to directly replenish KLK1 levels, maintaining or potentially restoring kidney function. Current treatment options, especially ACEi drugs,only partially restore kidney function and are associated with high-risk side effects. ACEi drugs can generate excessive BK where it is not needed, potentially leading toside effects such as cough and angioedema. DM199 treatment may potentially allow KLK1 to follow its normal physiological processes and release BK when and whereit is needed, avoiding these side effects. Acute Ischemic Stroke Currently, there is one approved pharmaceutical treatment for acute ischemic stroke. That treatment is tPA (marketed under the brand name Activase®), and itstherapeutic window is limited to up to 4.5 hours after the AIS. There are, however, a number of companies that are actively pursuing a variety of approaches to developpharmaceutical products for the treatment of AIS including, among others:  ●Stem cells (Athersys, Inc.) ●Cerebral edema (Biogen Inc.) ●Anti-inflammatory and clot dissolving (Biogen Inc.) ●Cell protection and anti-inflammation (ZZ Biotech LLC) ●Inhibiting platelet aggregation (Acticor Biotech SAS) There is a large unmet therapeutic need for AIS treatments that can be administered beyond the 4.5-hour time window of tPA. With this large unmet therapeutic need,there is significant competition to develop new therapeutic options. New therapeutic options in development include tissue protection focused therapies (deliverablefrom hours to days after the stroke) that preserve and protect brain cells beyond the tPA therapeutic window. Currently, the most advanced treatments involve themechanical removal of blood clots in brain arteries through sophisticated catheter-based approaches. According to published research, use of mechanicalthrombectomy is growing and the window of time after a stroke where the procedure can be used is widening. These therapies are especially targeted toward preservingviable cells in the ischemic penumbra hours after a stroke. The goal is to provide treatment options for the vast majority of AIS patients who do not receive hospital careearly enough to qualify for tPA therapy. We believe there is a very significant market opportunity for a drug that has a therapeutic window beyond that of tPA and isable to obtain regulatory approval. In January 2019, we announced the publication of a paper titled “Human Tissue Kallikrein in the Treatment of Acute Ischemic Stroke” in the peer reviewed journal,Therapeutic Advances in Neurological Disorders. The paper reviews the scientific literature covering the biochemical role of KLK1 and presents the mechanisticrationale for using KLK1 as an additional pharmacological treatment for AIS. In addition to the biochemical mechanism of KLK1, the review highlights supportingresults from human genetics and preclinical animal models of brain ischemia. It also reviews published clinical results for treatment of AIS by a form of KLK1 that isisolated from human urine. This form has been approved for post-infarct treatment of AIS in China and data has been published on clinical trials involving over 4,000patients. The paper offers a series of testable therapeutic hypotheses for demonstrating the long-term beneficial effect of KLK1 treatment in AIS patients and thereasons for this action. 15  DM199 Clinical Studies CKD Phase Ib During 2019, DiaMedica initiated and completed a Phase Ib clinical trial of DM199 in 32 subjects with moderate or severe CKD caused by Type I or Type II diabetesmellitus. The study was performed at three sites in the U.S. and was designed to assess the pharmacokinetics (PK) of three dose levels of DM199 (3, 5 and 8 µg/kg),administered in a single subcutaneous (SC) dose, as well as the evaluation of safety, tolerability and secondary pharmacodynamic (PD) endpoints. Results from thestudy were also used to guide the design of Phase II CKD studies. We announced positive interim results from the first 28 subjects. PK profiles, at the 3µg/kg dose level, were similar between moderate and severe CKD patients, andconsistent with healthy subjects (normal kidney function) tested previously. Therefore, we do not believe dosing adjustment is warranted, based on the presence orseverity of CKD and a full renal study will likely not be required. Final study results indicated that DM199 was observed to be well tolerated with no dose-limitingtolerability observed in the study. There were no deaths, no discontinuations due to a treatment-related adverse event (AE), and no treatment-related significant adverseevents (SAEs). AEs were minor and consistent with standard treatment(s) in the CKD patient population. Favorable overall PD interim results were also observed including short-term improvements in Nitric Oxide (NO), average increase of 35.2%, Prostaglandin E2 (PGE2),average increase of 41.2%, estimated glomerular flow rate (eGFR), average increase of 4.08 mL/min/1732, and the UACR, excluding subjects with normal UACR levels,average decrease of 18.7%. PD results appeared to be drug related in that greatest improvements occurred at approximately 24 hours after DM199 administration andsubsequently declined. CKD Phase II REDUX Study In October 2019, the FDA accepted our Phase II clinical trial protocol for the treatment of CKD caused by rare or significant unmet diseases. The trial named REDUX,Latin for restore, is a multi-center, open-label investigation of approximately 60 participants with CKD, who are being enrolled in two cohorts (30 participants per cohort).The study is being conducted in the United States at up to 12 sites and is focused on participants with two specific causes of CKD. Cohort I is focused on non-diabetic,hypertensive African Americans with Stage II or III CKD. African Americans are at greater risk for CKD than Caucasians, and those who have the APOL1 gene mutationare at an even higher risk. The study is designed to capture the APOL1 gene mutation as an exploratory biomarker in this cohort. Cohort II is focused on participantswith IgA Nephropathy (IgAN). The study will evaluate two dose levels of DM199 within each cohort. Study participants will receive DM199 by subcutaneous injectiontwice weekly for 95 days. The primary study endpoints include safety, tolerability, blood pressure, albuminuria and kidney function, which will be evaluated by changesfrom baseline in eGFR and albuminuria, as measured by the UACR. Participant enrollment and dosing for this study commenced in December 2019. AIS Phase II REMEDY Study In February 2018, treatment was initiated for the first patient in our Phase II REMEDY trial assessing the safety, tolerability and markers of therapeutic efficacy of DM199in patients suffering from AIS. Our REMEDY trial was expected to enroll up to 100 patients to evaluate DM199 in patients with AIS. The study drug (DM199 or placebo)was administered as an intravenous (IV) infusion within 24 hours of stroke symptom onset, followed by SC injections later that day and once every 3 days for 21 days.The study was designed to measure safety and tolerability along with multiple tests designed to investigate DM199’s therapeutic potential including plasma-basedbiomarkers and standard functional stroke measures assessed at 90 days post-stroke. Standard functional stroke measurements include the Modified Rankin Scale,National Institutes of Health Stroke Scale, the Barthel Index and C-reactive protein, a measure of inflammation. 16  In October 2019, we completed enrollment in the REMEDY trial. Final enrollment was 92 participants. Other Clinical Studies In 2017, we completed and published, in the International Journal of Clinical Trials, results from, a Phase Ib study with DM199 designed to assess the safety,tolerability, pharmacokinetics, and pharmacodynamics in healthy volunteers. This study compared multiple dose levels of DM199, administered via IV and SC routes toidentify a dose and delivery route that most closely compared to or improved upon the pharmacokinetic and pharmacodynamics profile of the approved urinary KLK1 inChina. We found that a dose of DM199 administered via IV infusion mimicked the drug profile of IV-administered urinary derived KLK1 (Kailikang). This study alsoidentified a dose of DM199, administered via SC injection, which had a superior pharmacokinetic profile and that maintained more normal KLK1 levels throughout theday. Below are results from our clinical trial showing the pharmacokinetic profile of subcutaneously administered DM199 observed in study subjects as compared towhat we believe is normal range in healthy subjects.  During 2013 and 2014, five clinical trials were completed with DM199 in over 120 volunteers, including multiple Phase I single dose ascending and multiple doseascending studies in healthy volunteers and patients with Type 2 diabetes. Chronic dosing studies over 16 to 28 days were also conducted in healthy volunteers andpatients with Type 2 diabetes (see below). As is generally the case for early phase clinical trials, the primary endpoints for all studies were safety, tolerability, andpharmacokinetics. The Phase II (Part D) study also investigated a series of secondary endpoints that included blood glucose concentration, insulin levels, glucosetolerance testing and a variety of experimental biomarkers evaluating the potential efficacy of DM199 in treating Type 2 diabetes patients. 17  DM199 Trial Design Overview TrialParticipants (N)DesignDoses (µg/kg)RouteLengthPhase-I Part AHealthy (32)Single ascending dose5, 15, 30, 50SC1 weekPhase-I Part BType 2 diabetes (10)Single ascending dose0.3, 1.5, 15SC1 weekPhase-I Part CHealthy (18)Multiple ascending dose3, 15, 25SC6 doses over 16 daysPhase-IIA Part DType 2 diabetes (36)Blinded multiple dosePlacebo, 3, 15SC10 doses over 28 daysPhase I BridgingHealthy (36)Single ascending dose0.25, 0.50, 0.751.03.0IVIVSC1 week In combination, these studies showed that DM199 was well tolerated and demonstrated clear physiological activity. After SC injection, DM199 exhibited a favorablepharmacokinetic profile with extended half-life (i.e., the time required to reduce concentration of the drug in the body by one-half), supporting potential dosing intervalsof up to one week. The dose-limiting tolerability issue in healthy volunteers was orthostatic hypotension (a condition in which blood pressure falls significantly when aperson stands) observed largely at the 50 µg/kg dose level, which is much greater than the dose level anticipated to be efficacious in patients. In each trial, observedtreatment emergent side-effects were mild to moderate in severity and resolved. The most common treatment-emergent side effects included headache, dizziness, nauseaand injection site pain, the majority of which were observed in the highest dose group of the Phase I-Part A trial. Two of these clinical studies focused on patients with Type 2 diabetes. The first study enrolled 10 Type 2 diabetic patients. The patients were dosed with either DM199,at three single ascending dose levels or placebo. DM199 was well-tolerated at all three dose levels by the diabetic patients with no dose limiting side effects. The secondstudy in patients with Type 2 diabetes enrolled 36 patients treated with one of two SC dose levels of DM199 or placebo over 28 days. This study achieved its primaryendpoints and demonstrated that DM199 was well-tolerated. The secondary endpoints for this study, however, were not met. The secondary efficacy endpoints wereconfounded due to what we believe were significant execution errors caused by protocol deviations occurring at the clinical trial site that were unable to be reconciled.See “Part I. Item 1. Business—Legal Proceedings” for more information on this study. Potential DM199 Commercial Advantages Several researchers have studied the structural and functional properties of KLK1. This deep body of knowledge has revealed the potential clinical benefits of KLK1treatments. Today, forms of KLK1 derived from human urine and porcine pancreas are sold in Japan, China and Korea to treat acute ischemic stroke, chronic kidneydisease, retinopathy, hypertension and related diseases. We are not aware of any synthetic version of KLK1 with regulatory approval for human use in any country, norany synthetic version in development besides our drug candidate DM199 (recombinant human KLK1). We believe at least five companies have attempted,unsuccessfully, to create a synthetic version of KLK1. The growing understanding of the role of KLK1 in human health and its use in Asia as an approved therapeutic highlight two important potential commercialadvantages for DM199:  ●KLK1 treatment is sold in Japan, China and Korea. Research has shown that low levels of KLK1 are associated with patients suffering from a variety ofdiseases related to vascular dysfunction, such as chronic kidney disease, acute ischemic strokes, retinopathy and hypertension. Clinical trial data withhuman urine and porcine pancreas derived KLK1 treatments have demonstrated statistically significant clinical benefits from the treatment of a variety ofpatients with KLK1 compared to placebo. These efficacy results are further substantiated by established markets in Japan, China and Korea forpharmaceutical sales of KLK1 derived from human urine and porcine pancreas. 18   ●KLK1 treatment has had limited side effects and has been well tolerated in studies to date. KLK1 is naturally produced by the human body; and therefore,the body’s own control mechanisms act to limit potential side effects. The only notable side effect observed in our clinical trials was orthostatichypotension, or sudden drop in blood pressure, which was primarily seen at doses significantly higher than our anticipated therapeutic dose levels.Routine clinical use of KLK1 treatment in Asia has been well-tolerated by patients. In 2017, we completed a clinical trial comparing the pharmacokineticprofile of DM199 to Kailikang for acute ischemic stroke, which showed DM199, when administered in intravenous form, to have a profile similar toKailikang. Further, when DM199 was administered subcutaneously, DM199 demonstrated a superior, longer acting, pharmacokinetic profile than Kailikang. We have conducted numerous internal and third-party analyses to demonstrate that DM199 is structurally and functionally equivalent to KLK1 derived from humanurine. The amino acid structure of DM199 is identical to the human urine form, and the enzymatic and pharmacokinetic profiles are substantially similar to both humanurine and porcine derived KLK1. The physiological effects of DM199 on blood pressure, from our completed studies, mirror that of human urine and porcine-derivedforms of KLK1. We believe that the results of this work suggest that the therapeutic action of DM199 will be the same or, potentially, better than that of the formsmarketed in Asia. In addition, we believe that there are also significant formulation, manufacturing, regulatory and other advantages for synthetic human KLK1 drugcandidate DM199:  ●Potency and Impurity Considerations. KLK1 derived from human urine or porcine pancreas may contain impurities, endotoxins and chemical byproductsdue to the inherent variability of the isolation and purification process. This creates the risk of inconsistencies in potency and impurities from oneproduction run to the next. However, we expect to produce a consistent formulation of KLK1 that is free of endotoxins and other impurities.  ●Cost and Scalability. Large quantities of human urine and porcine pancreas must be obtained to derive a small amount of KLK1. This creates potentialprocurement, cost and logistical challenges to source the necessary raw organic material, particularly for human urine sourced KLK1. Once sourced, theraw organic material is processed using chemicals and costly capital equipment and produces a significant amount of byproduct waste. Our novelrecombinant manufacturing process utilizes widely available raw materials and can be readily scaled for commercial production. Accordingly, we believeour manufacturing process has significant cost and scalability advantages.  ●Regulatory. We are not aware of any attempts by manufacturers of the urine or porcine based KLK1 products to pursue regulatory approvals in the UnitedStates. It is theorized that this is related to challenges presented by using inconsistent and potentially hazardous biomaterials, such as human urine andporcine pancreas, and their resulting ability to produce a consistent drug product. Our novel recombinant manufacturing process utilizes widely availableraw materials which we believe provides a significant regulatory advantage, particularly in regions such as the United States, Europe and Canada, wheresafety standards are high. In addition, DM199 could qualify for 12 years of data exclusivity under the Biologics Price Competition and Innovation Act of2009, which was enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of2010 (collectively, the ACA). 19  Regulatory Approval Securing regulatory approval for the manufacture and sale of human therapeutic products in the United States, Europe, Canada and other commercial territories is a longand costly process that is controlled by that particular territory’s national regulatory agency. The national regulatory agency in the United States is the FDA, in Europeit is the European Medicines Agency (EMA), and in Canada it is Health Canada. Other national regulatory agencies have similar regulatory approval processes, buteach national regulatory agency has its own approval processes. Approval in the United States, Europe or Canada does not assure approval by other nationalregulatory agencies, although often test results from one country may be used in applications for regulatory approval in another country. Prior to obtaining regulatory approval to market a drug product, every national regulatory agency has a variety of statutes and regulations which govern the principaldevelopment activities. These laws require controlled research and testing of products, governmental review, and approval of a submission containing preclinical andclinical data establishing the safety and efficacy of the product for each use sought, approval of manufacturing facilities including adherence to good manufacturingpractices (GMP) during production and storage, and control of marketing activities, including advertising, labeling and pricing approval. None of our product candidates have been completely developed or tested; and, therefore, we are not yet in a position to seek regulatory approval in any territory tomarket any of our product candidates. The clinical testing, manufacturing, labeling, storage, distribution, record keeping, advertising, promotion, import, export, and marketing, among other things, of ourproduct candidates are subject to extensive regulation by governmental authorities in the United States and other countries. The process of obtaining regulatoryapprovals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time andfinancial resources. Failure to comply with the applicable requirements at any time during the product development process, approval process, or after approval maysubject us to a variety of administrative or judicial sanctions, including refusal by the applicable regulatory authority to approve pending applications, withdrawal of anapproval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of productionor distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by theFDA and the Department of Justice or other governmental entities. U.S. Approval Process In the United States, the FDA is responsible for the drug approval process. The FDA’s mission is to ensure that all medications on the market are safe and effective. TheFDA’s approval process examines and thoroughly reviews potential new drugs; only those that are in compliance with the Code of Regulations, 21 CFR 312 and 21 CFR314 are approved. The U.S. food and drug regulations require licensing of manufacturing facilities, carefully controlled research and testing of products, governmental review and approvalof test results prior to marketing of therapeutic products, and adherence to GMP, as defined by each licensing jurisdiction, during production. A description of the different stages in the drug approval process in the United States follows. Stage 1: Preclinical Research. After an experimental drug is discovered, research is conducted to help determine its potential for treating or curing an illness. This iscalled preclinical research. Animal and/or bench studies are conducted to determine if there are any harmful effects of the drug and to help understand how the drugworks. Information from these experiments is submitted to the FDA as part of an investigational new drug (IND) application. The FDA reviews the information in the INDand decides if the drug is safe to study in humans. 20  Stage 2: Clinical Research. The experimental drug is studied in humans. The studies are known as clinical trials. Clinical trials are carefully designed and controlledexperiments in which the experimental drug is administered to patients to test its safety and to determine the effectiveness of an experimental drug. The four generalphases of clinical research are described below.  ●Phase I Clinical Studies. Phase I clinical studies are generally conducted with healthy volunteers who are not taking other medicines; patients with the illnessthat the drug is intended to treat are not tested at this stage. Ultimately, Phase I studies demonstrate how an experimental drug affects the body of a healthyindividual. Phase I consists of a series of small studies consisting of “tens” of volunteers. Tests are done on each volunteer throughout the study to see howthe person’s body processes, responds to, and is affected by the drug. Low doses and high doses of the drug are usually studied, resulting in thedetermination of the safe dosage range in volunteers by the end of Phase I. This information will determine whether the drug proceeds to Phase II.  ●Phase II Clinical Studies. Phase II clinical studies are conducted in order to determine how an experimental drug affects people who have the disease to betreated. Phase II usually consists of a limited number of studies that help determine the drug’s short-term safety, side effects, and general effectiveness. Thestudies in Phase II often are controlled investigations involving comparison between the experimental drug and a placebo, or between the experimental drugand an existing drug. Information gathered in Phase II studies will determine whether the drug proceeds to Phase III.  ●Phase III Clinical Studies. Phase III clinical studies are expanded controlled and uncontrolled trials that are used to more fully investigate the safety andeffectiveness of the drug. These trials differ from Phase II trials because a larger number of patients are studied (sometimes in the thousands) and because thestudies are usually double blinded, placebo controlled and of longer duration. As well, Phase III studies can include patients who have more than one illnessand are taking medications in addition to the experimental drug used in the study. Therefore, the patients in Phase III studies more closely reflect the generalpopulation. The information from Phase III forms the basis for most of the drug’s initial labeling, which will guide physicians on how to use the drug.  ●Phase IV Clinical Studies. Phase IV clinical studies are conducted after a drug is approved. Phase IV studies may be required by the FDA or conducted bycompanies to more fully understand how their drug compares to other drugs. FDA-required Phase IV studies often investigate the drug in specific types ofpatients that may not have been included in the Phase III studies and can involve very large numbers of patients to further assess the drug’s safety. Stage 3: FDA Review for Approval. Following the completion of Phase III clinical studies, the pharmaceutical company prepares an electronic common technicaldocument reporting all clinical nonclinical and chemistry, manufacturing and control studies conducted on the drug that is transmitted to the FDA as a New DrugApplication (NDA). The FDA reviews the information in the NDA to determine if the drug is safe and effective for its intended use. An advisory panel meeting isscheduled for a new drug allowing the FDA to gain feedback from experts. If the FDA determines that the drug is safe and effective, the drug will be approved. Stage 4: Marketing. After the FDA has approved the experimental drug, the pharmaceutical company can make it available to physicians and their patients. A companyalso may continue to conduct research to discover new uses for the drug. Each time a new use for a drug is discovered, the drug once again is subject to the entire FDAapproval process before it can be marketed for that purpose. 21  Any FDA approved pharmaceutical products are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting ofadverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying withcertain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among others, standards fordirect-to-consumer advertising, promoting pharmaceutical products for uses or in patient populations that are not described in the pharmaceutical product’s approvedlabeling (known as “off-label use”), industry-sponsored scientific and educational activities and promotional activities involving the internet. Failure to comply withFDA requirements is likely to have negative consequences, including adverse publicity, enforcement letters from the FDA, mandated corrective advertising orcommunications with doctors, and civil or criminal penalties. The FDA also may require post-marketing testing, known as Phase IV testing, risk evaluation and mitigation strategies and surveillance to monitor the effects of anapproved product or place conditions on an approval that could restrict the distribution or use of the product. DM199 may qualify for 12 years of data exclusivity under the Biologics Price Competition and Innovation Act of 2009 (the BPCIA), which was enacted as part of theACA. Under the BPCIA, an application for a biosimilar product (BLA) cannot be submitted to the FDA until four years, or if approved by the FDA, until 12 years, afterthe original brand product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway for the approval of biosimilar andinterchangeable biological products. The new abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics,including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. The new law is complex and is onlybeginning to be interpreted and implemented by the FDA. European Approval Process The EMA is roughly parallel to the U.S. FDA in terms of the drug approval process and the strict requirements for approval. The EMA was set up in 1995 in an attemptto harmonize, but not replace, the work of existing national medicine regulatory bodies in individual European countries. As with the FDA, the EMA drug review andapproval process follows similar stages from preclinical testing through clinical testing in Phase I, II, and III. There are some differences between the FDA and EMAreview process, specifically the review process in individual European countries. Such differences may allow certain drug products to be tested in patients at an earlierstage of development. Other Healthcare Laws and Compliance Requirements In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers forMedicare and Medicaid Services and other divisions of the U.S. government, including, the Department of Health and Human Services, the U.S. Department of Justiceand individual U.S. Attorney offices within the Department of Justice, and state and local governments. For example, if a drug product is reimbursed by Medicare,Medicaid, or other federal or state healthcare programs, our company, including our sales, marketing and scientific/educational grant programs, must comply with thefederal False Claims Act, as amended, the federal Anti-Kickback Statute, as amended, and similar state laws. If a drug product is reimbursed by Medicare or Medicaid,pricing and rebate programs must comply with, as applicable, the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990 (OBRA), and theMedicare Prescription Drug Improvement and Modernization Act of 2003. Among other things, OBRA requires drug manufacturers to pay rebates on prescription drugsto state Medicaid programs and empowers states to negotiate rebates on pharmaceutical prices, which may result in prices for our future products being lower than theprices we might otherwise obtain. Additionally, the ACA substantially changes the way healthcare is financed by both governmental and private insurers. There maycontinue to be additional proposals relating to the reform of the U.S. healthcare system, in the future, some of which could further limit coverage and reimbursement ofdrug products. If drug products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws andrequirements may apply. 22  Pharmaceutical Coverage, Pricing and Reimbursement In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part on theavailability of coverage and adequate reimbursement from third-party payers, including government health administrative authorities, managed care providers, privatehealth insurers and other organizations. In the United States, private health insurers and other third-party payers often provide reimbursement for products and servicesbased on the level at which the government (through the Medicare and/or Medicaid programs) provides reimbursement for such treatments. Third-party payers areincreasingly examining the medical necessity and cost-effectiveness of medical products and services in addition to their safety and efficacy; and, accordingly,significant uncertainty exists regarding the coverage and reimbursement status of newly approved therapeutics. In particular, in the United States, the European Unionand other potentially significant markets for our product candidates, government authorities and third-party payers are increasingly attempting to limit or regulate theprice of medical products and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices. Further, theincreased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the European Union will putadditional pressure on product pricing, reimbursement and usage, which may adversely affect our future product sales and results of operations. These pressures canarise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform,pharmaceutical reimbursement policies and pricing in general. As a result, coverage and adequate third party reimbursement may not be available for our products toenable us to realize an appropriate return on our investment in research and product development. The market for our product candidates for which we may receive regulatory approval will depend significantly on access to third-party payers’ drug formularies or listsof medications for which third-party payers provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downwardpricing pressures on pharmaceutical companies. Also, third-party payers may refuse to include a particular branded drug in their formularies or may otherwise restrictpatient access to a branded drug when a less costly generic equivalent or another alternative is available. In addition, because each third-party payer individuallyapproves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming and costly process. We would be required toprovide scientific and clinical support for the use of any product candidate to each third-party payer separately with no assurance that approval would be obtained, andwe may need to conduct expensive pharmacoeconomic studies to demonstrate the cost-effectiveness of our product candidates. This process could delay the marketacceptance of any of our product candidates for which we may receive approval and could have a negative effect on our future revenues and operating results. Wecannot be certain that our product candidates will be considered cost-effective. If we are unable to obtain coverage and adequate payment levels for our productcandidates from third-party payers, physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline topurchase them. This in turn could affect our ability to successfully commercialize our products and impact our profitability, results of operations, financial condition, andfuture success. 23  Research and Development We have devoted substantially all of our efforts to research and development (R&D) which therefore comprises the largest component of our operating costs. Ourprimary focus over the past approximately eight years has been our lead product candidate, DM199, which is currently in clinical development for the treatment of CKDand AIS. We expect our R&D expenses will continue to increase in the future as we advance our initial product candidate, DM199, through clinical trials in CKD and AIS and seekto expand our product candidate portfolio. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming andwe consider the active management and development of our clinical pipeline to be integral to our long-term success. The actual probability of success for each productcandidate, clinical indication and preclinical program may be affected by a variety of factors including, among other things, the safety and efficacy data for each productcandidate, amounts invested in their respective programs, competition and competitive developments, manufacturing capability and commercial viability. Research and development expenses include:  ●expenses incurred under contract research agreements and other agreements with third parties; ●expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf; ●employee and consultant-related expenses, which include salaries, benefits, travel and share-based compensation; ●laboratory and vendor expenses related to the execution of clinical trials and non-clinical studies; ●the cost of acquiring, developing, manufacturing, and distributing clinical trial materials; and ●facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supply costs. Research and development costs are expensed as incurred. Costs for certain development activities such as clinical trials are recognized based on an evaluation of theprogress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. We expect that it will be several years, if ever, before we have any product candidates ready for commercialization. Manufacturing We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of DM199 nor do we have plans to develop our ownmanufacturing operations in the foreseeable future. We rely on Catalent Pharma Solutions, LLC (Catalent) for all of our required raw materials, active pharmaceuticalingredients and finished DM199 product candidate for our clinical trials. We have licensed certain gene expression technology and we contract with Catalent for themanufacture of DM199. The royalty term is indefinite but the license agreement may be canceled by us on 90 days’ prior written notice. The license may not beterminated by Catalent unless we fail to make required milestone and royalty payments. We currently employ internal resources and third-party consultants to manageour manufacturing relationship with Catalent. Sales and Marketing We have not yet defined our sales, marketing or product distribution strategy for our initial product candidate, DM199, or any future product candidates, because it isstill early in the clinical development stage. We currently expect to partner with a large pharmaceutical company for sales execution. However, our future commercialstrategy may include the use of distributors, a contract sales force or the establishment of our own commercial and specialty sales force, as well as similar strategies forregions and territories outside the United States. 24  Intellectual Property We view patents and other means of intellectual property protection including trade secrets as an important component of our core business. We focus on translatingour innovations into intangible property protecting our proprietary technology from infringement by competitors. To that end, patents are reviewed frequently andcontinue to be sought in relation to those components or concepts of our preclinical and clinical products to provide protection. Our strategy, where possible, is to filepatent applications to protect our product candidates, as well as methods of manufacturing, administering and using a product candidate. Prior art searches of bothpatent and scientific databases are performed to evaluate novelty, inventiveness and freedom-to-operate. We require all employees, consultants and parties to acollaborative research agreement to execute confidentiality agreements upon the commencement of employment, consulting relationships or a collaboration with us.These agreements require that all confidential information developed or made known during the course of the engagement with us is to be kept confidential. We alsomaintain agreements with our scientific staff and all parties contracted in a scientific capacity affirming that all inventions resulting from work performed for us, using ourproperty or relating to our business and conceived or completed during the period covered by the agreement are the exclusive property of DiaMedica. Our DM199 patent portfolio includes three granted U.S. patents, a granted European patent and pending applications in Australia, Canada, China, Europe, India, Japan,Korea and the United States. Granted or pending claims offer various forms of protection for DM199 including claims to compositions of matter, pharmaceuticalcompositions, specific formulations and dosing levels and methods for treating a variety of diseases, including chronic kidney disease, stroke and related disorders.These U.S. patents and applications, and their foreign equivalents, are described in more detail below. Issued patents held by us cover the DM199 composition of matter based on an optimized combination of closely-related isoforms that differ in the extent ofglycosylation (process by which sugars are chemically attached to proteins). Issued claims in this patent family cover the most pharmacologically active variants ofDM199 and methods of using the same for treating ischemic conditions and these patents are due to expire in 2033. A second patent family includes an issued U.S.patent with claims directed to methods of treating subjects by administering a SC formulation of DM199 or related recombinant kallikrein-1 polypeptides and is predictedto expire in 2033. The pending applications are directed to a range of dose levels and dosing regimens of DM199 that are potentially useful for treating a wide range ofdiseases including, e.g. pulmonary arterial hypertension, cardiac ischemia, chronic kidney disease, diabetes, stroke and vascular dementia which, if granted, arepredicted to expire in 2038. We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of DM199. We are contracting with Catalent, a contractmanufacturing organization (CMO) with proven GMP experience in the manufacturing of recombinant proteins for clinical trials, for the manufacture of DM199. We havelicensed certain gene expression technology and we contract with Catalent for the manufacture of DM199. Under the terms of this license, certain milestone and royaltypayments may become due and are dependent upon, among other factors, performing clinical trials, obtaining regulatory approvals and ultimately the successfulcommercialization of a new drug, the outcome and timing of which is uncertain. The royalty term is indefinite but the license agreement may be canceled by us on 90days’ prior written notice. The license may not be terminated by Catalent unless we fail to make required milestone and royalty payments. 25  Methods and reagents required for commercial scale manufacture of DM199 are subject to a series of patents issued to Catalent. As noted above, we exclusively licensethese patents from Catalent for the production of DM199 or any human KLK1 protein. We believe that our proprietary technology along with trade secrets and specialized knowledge of the manufacturing process will provide substantial protection fromthird-party competitors. We also believe that DM199 cannot be easily reverse engineered for the production of a copycat version. We believe that the most relevant granted patents and applications with composition of matter or method of use claims covering DM199 are listed below, along withtheir projected expiration dates exclusive of any patent term extension: Patent/ApplicationNumber Title Geography PredictedExpirationIssued patents      US 9,364,521 Human Tissue Kallikrein 1 Glycosylation Isoforms US 2033US 9,839,678 Human Tissue Kallikrein 1 Glycosylation Isoforms US 2033       EP 2 854 841 Human Tissue Kallikrein 1 Glycosylation Isoforms Europe 2033       US 9,616,015 Formulations for Human Tissue Kallikrein-1 for ParenteralDelivery and Related Methods US 2033       Pending applications      AU 2018230478 Dosage Forms of Tissue Kallikrein 1 Australia 2038CA 3054962 Dosage Forms of Tissue Kallikrein 1 Canada 2038CN 201880016380.4 Dosage Forms of Tissue Kallikrein 1 China 2038EP 18763243.5 Dosage Forms of Tissue Kallikrein 1 Europe 2038IN 201917037712 Dosage Forms of Tissue Kallikrein 1 India 2038JP 2019-548655 Dosage Forms of Tissue Kallikrein 1 Japan 2038KR 10-2019-7026369 Dosage Forms of Tissue Kallikrein 1 Korea 2038US 16/492,059 Dosage Forms of Tissue Kallikrein 1 US 2038 In September 2018, we entered into a license and collaboration agreement with Ahon Pharmaceutical Co Ltd. (Ahon Pharma), which granted Ahon Pharma exclusiverights to develop and commercialize DM199 for acute ischemic stroke in mainland China, Taiwan, Hong Kong S.A.R. and Macau S.A.R. Under the terms of theagreement, we received an upfront payment of $500,000 on signing and were entitled to receive an additional payment of $4.5 million upon the earlier of July 1, 2019 orregulatory clearance to initiate a clinical trial in China. On August 12, 2019, after extensive good faith discussions between Ahon Pharma and the Company, the partieswere unable to agree upon mutually acceptable revised terms to the agreement and DiaMedica terminated this license agreement due to Ahon Pharma’s non-payment ofthe milestone due on July 1, 2019. As a result of this termination, DiaMedica regained worldwide rights for DM199 for acute ischemic stroke. 26  Employees As of December 31, 2019, we had 8 full-time employees and 1 part-time employee. We have never had a work stoppage and none of our employees are covered bycollective bargaining agreements. We believe our employee relations are good. Information About Our Executive Officers The following table sets forth information as of December 31, 2019 regarding each of our current executive officers: Name Age PositionsRick Pauls 48 President and Chief Executive Officer, DirectorScott Kellen 54 Chief Financial Officer and SecretaryHarry Alcorn, Pharm.D. 63 Chief Medical OfficerSydney Gilman, Ph.D. 67 Vice President, Regulatory Affairs The present principal occupations and recent employment history of each of our executive officers are set forth below. Rick Pauls was appointed our President and Chief Executive Officer in January 2010. Mr. Pauls has served as a member of our Board of Directors since April 2005 andthe Chairman of the Board from April 2008 to July 2014. Prior to joining DiaMedica, Mr. Pauls was the Co-Founder and Managing Director of CentreStone Ventures Inc.,a life sciences venture capital fund, from February 2002 until January 2010. Mr. Pauls was an analyst for Centara Corporation, another early stage venture capital fund,from January 2000 until January 2002. From June 1997 until November 1999, Mr. Pauls worked for General Motors Acceptation Corporation specializing in asset-backedsecuritization and structured finance. Mr. Pauls previously served as an independent member of the board of directors of LED Medical Diagnostics, Inc. Mr. Paulsreceived his Bachelor of Arts in Economics from the University of Manitoba and his M.B.A. in Finance from the University of North Dakota. Scott Kellen was appointed our Chief Financial Officer and Secretary in April 2018. Prior to joining DiaMedica, Mr. Kellen served as Vice President and Chief FinancialOfficer of Sun BioPharma, Inc., a publicly-traded clinical stage drug development company, from October 2015 until April 2018. From February 2010 to September 2015,Mr. Kellen served as Chief Financial Officer and Secretary of Kips Bay Medical, Inc., a publicly-traded medical device company, and became Chief Operating Officer ofKips Bay in March 2012. From November 2007 to May 2009, Mr. Kellen served as Finance Director of Transoma Medical, Inc. From 2005 to October 2007, Mr. Kellenserved as Corporate Controller of ev3 Inc. From March 2003 to April 2005, Mr. Kellen served as Senior Manager, Audit and Advisory Services of Deloitte & Touche, LLP.Altogether, Mr. Kellen has spent more than 25 years in the life sciences industry, focusing on publicly traded early stage and growth companies. Mr. Kellen has aBachelor of Science degree in Business Administration from the University of South Dakota and is a Certified Public Accountant (inactive). 27  Harry Alcorn Jr. Pharm.D. was appointed our Chief Medical Officer in August 2018. Prior to joining DiaMedica, Dr. Alcorn served as Chief Scientific Officer at DaVitaClinical Research (DCR), a company that provides clinical research services for Pharmaceutical and Biotech companies, from October 1997 to June 2018. While at DCR,Dr. Alcorn was responsible for clinical research operations, including the formation and management of the early clinical and late phase research services. Dr. Alcornalso founded the U.S. Renal Network, the first network of Phase I renal research sites in the United States. Dr. Alcorn developed DCR’s site management organization forclinical trials. Dr. Alcorn also served as an Executive Director, a Pharmacist and an Investigator at DCR. During this time, from January 2013 to December 2014, he alsoserved on the Board of Directors for the Association of Clinical Pharmacology Units, an association of Phase I clinical trial sites. Dr. Alcorn has over 30 years of clinicalresearch experience working with biotech and pharmaceutical companies, both public and private, in conducting research in renal, hepatic and cardiovascular disease.Dr. Alcorn has written and consulted on the development of several protocols and has served as Principal Investigator or Sub Investigator in numerous studies and, forseveral of these studies, presented study design and results to the FDA. Currently he holds clinical faculty appointments with the University of Minnesota, CreightonUniversity, University of Nebraska Medical Center, Virginia Commonwealth and the University of Colorado, Denver. Dr. Alcorn graduated from Creighton Universitywith a Bachelor of Pharmacy and went on to earn his Doctor of Pharmacy degree from University of Nebraska Medical Center. Sydney A. Gilman, Ph.D. was appointed our Vice President, Regulatory Affairs effective as of November 1, 2019. Dr. Gilman is currently the founder and President ofTrident Rx Consulting Services LLC, a regulatory consulting firm, a position he has held since January 2004. Dr. Gilman is a former U.S. Food and Drug Administration(FDA) Chemistry reviewer. He spent six years at the FDA in various CDER Therapeutic Drug Divisions of the Center for Drug Evaluation and Research with consultingties to both Biologics and Devices. Dr. Gilman also has an additional 20 years of experience in the pharmaceutical industry in positions ranging from Senior Scientist toDirector to Vice President Responsibilities. He earned his Bachelor of Science from Loyola College and a Ph.D. in Organic Chemistry from the University of Pittsburgh. Enforceability of Civil Liabilities Against Foreign Persons We are corporation governed under British Columbia’s Business Corporations Act (BCBCA). There is doubt as to the enforceability, in original actions in Canadiancourts, of liabilities based upon the U.S. federal securities laws or the securities laws or “blue sky” laws of any state within the United States and as to the enforceabilityin Canadian courts of judgments of U.S. courts obtained in actions based upon the civil liability provisions of the U.S. federal securities laws or any such state securitieslaws or blue sky laws. Accordingly, it may not be possible to enforce judgments obtained in the United States against us. Available Information We are a corporation governed under the BCBCA. Our company was initially incorporated under the name Diabex Inc. pursuant to The Corporations Act (Manitoba) byarticles of incorporation dated January 21, 2000. Our articles were amended (i) on February 26, 2001 to change our corporate name to DiaMedica Inc., (ii) on April 11, 2016to continue the Company from The Corporations Act (Manitoba) to the Canada Business Corporations Act (CBCA), (iii) on December 28, 2016 to change our corporatename to DiaMedica Therapeutics Inc., (iv) on September 24, 2018 to permit us to hold shareholder meetings in the United States and to permit our directors, betweenannual meetings of our shareholders, to appoint one or more additional directors to serve until the next annual meeting of shareholders; provided, however, that thenumber of additional directors shall not at any time exceed one-third of the number of directors who held office at the expiration of the last meeting of shareholders, (v)on November 15, 2018 to effect a 1-for-20 consolidation of our common shares, and (vi) on May 31, 2019, to continue our existence from a corporation incorporatedunder the CBCA into British Columbia under the BCBCA. 28  Our registered office is located at 301-1665 Ellis Street, Kelowna, British Columbia, V1Y 2B3 and our principal executive office is located at our wholly owned subsidiary,DiaMedica USA Inc., located at Two Carlson Parkway, Suite 260, Minneapolis, Minnesota, USA 55447. Our telephone number is 763-496-5454. Our internet websiteaddress is http://www.diamedica.com. Information contained on our website does not constitute part of this report. We make available, free of charge and through our Internet web site, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, andany amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonablypracticable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). Reports filed with the SEC may be viewed atwww.sec.gov. Implications of Being an Emerging Growth Company We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act), and we may remain an emerging growth company forup to five years from December 31, 2018. However, if certain events occur prior to the end of such five-year period, including if we become a large accelerated filer, ourannual gross revenue exceeds $1.07 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growthcompany prior to the end of such five-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions fromcertain disclosure and other requirements that are applicable to other public companies that are not emerging growth companies. In particular, in this report, we haveprovided only two years of audited financial statements and have not included certain other information that would be required if we were not an emerging growthcompany. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equityinterests. However, we have irrevocably elected not to avail ourselves of the extended transition period for complying with new or revised accounting standards, and,therefore, we are subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Item 1A.Risk Factors The following are the most significant factors known to us that could materially adversely affect our business, operating results or financial condition. Risks Related to Our Financial Position and Need for Additional Capital We have incurred substantial losses since our inception and expect to continue to incur future substantial losses and may never become profitable. We are a clinical stage biopharmaceutical company focused on the development of novel recombinant proteins. Investment in biopharmaceutical product developmentis highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to prove effective, gain regulatoryapproval or become commercially viable. We do not have any products approved by regulatory authorities and have not generated any revenues from product sales todate, and do not expect to generate any revenue from the sale of products for several years. We have incurred significant research, development and other expensesrelated to our ongoing operations and expect to continue to incur such expenses. As a result, we have not been profitable and have incurred significant operating lossesin every reporting period since our inception. For the years ended December 31, 2019 and 2018, we incurred a net loss of $10.6 million and $5.7 million, respectively. As ofDecember 31, 2019, we had an accumulated deficit of $56.6 million. Our prior losses, combined with expected future losses, have had and will continue to have anadverse effect on our shareholders’ equity and working capital. We expect to continue to incur substantial operating losses as we continue our research anddevelopment (R&D) activities, planned clinical trials, regulatory activities and otherwise develop our product candidate, DM199, or any future product candidates to apoint where they may be commercially sold and we begin to recognize future product sales, or receive royalty payments, licensing fees, and/or milestone paymentssufficient to generate revenues to fund our continuing operations. We expect our operating losses to increase in the near term as we continue the research, developmentand clinical trials of, and seek regulatory approval for, our product candidates. We are unable to predict the extent of any future losses or when we will becomeprofitable, if ever. Our failure to become and remain profitable may depress the market price of our common shares and could impair our ability to raise capital, developproducts, expand our business and product offerings or continue our operations. Even if we do achieve profitability, we may not be able to sustain or increaseprofitability on an ongoing basis. 29  We currently have no revenue from product sales and do not expect any revenue from product sales for several years. Accordingly, we will need additional fundingto continue our research and development activities and other operations, which may not be available to us on acceptable terms, or at all. Our future operations will be dependent upon our ability to develop our product candidates, obtain research grant funding, obtain required regulatory approvals,generate revenue from product sales, negotiate collaboration or license agreements or other strategic alternatives, and/or secure additional funding. As of December 31,2019, we had cash, cash equivalents and marketable securities of $7.9 million. Although we recently raised $7.7 million in net proceeds from our February 2020 publicoffering, we still expect we will need substantial additional capital to further our R&D activities, planned clinical trials and regulatory activities and to otherwise developour product candidate, DM199, or any future product candidates to a point where they may be commercially sold. While we are striving to achieve these plans, there isno assurance we will be successful or that additional financing will be obtained on favorable terms or at all in furtherance of our strategic objectives. Our ability tocontinue as a going concern is dependent on our ability to continue obtaining sufficient funds to conduct our R&D activities and to successfully commercialize ourproduct candidates. We will require additional funds to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we may not complete thedevelopment and commercialization of our current DM199 product candidate or develop any new product candidates. We require significant additional funds for further R&D activities, planned clinical trials and the regulatory approval process. We expect our current cash resources of$7.9 million in cash, cash equivalents and marketable securities as of December 31, 2019, together with the $7.7 million in net proceeds from our February 2020 publicoffering, to be sufficient to allow us to complete our current ongoing Phase II REMEDY trial in patients with AIS and the first two cohorts in the Phase II study inpatients with CKD and to otherwise fund our planned operations through 2021. However, the amount and timing of future funding requirements will depend on manyfactors, including, among others:  ●the rate of progress in the development of and the conduct of clinical trials with respect to our DM199 product candidate and any other future productcandidates; ●the timing and results of our ongoing development efforts, including in particular our current Phase II clinical studies; ●the costs of our development efforts, including the conduct of clinical trials with respect to our DM199 product candidate and any other future productcandidates; 30   ●the costs associated with identifying additional product candidates and the potential expansion of our current development programs or potential newdevelopment programs; ●the costs to initiate and continue research, preclinical, and clinical development efforts for any future product candidates; ●the costs necessary to obtain regulatory approvals for our DM199 product candidate and any other future product candidates; ●the costs associated with being a public company; ●the costs we incur in the filing, prosecution, maintenance and defense of our intellectual property; and ●the costs related to general and administrative (G&A) support. We may require significant additional funds earlier than we currently expect, and there is no assurance that we will not need or seek additional funding prior to suchtime. We may elect to raise additional funds even before we need them if market conditions for raising additional capital are favorable. Since our inception, we have financed our operations primarily from public and private sales of equity securities, the exercise of warrants and stock options, interestincome on funds available for investment, and government grants and tax incentives, and we expect to continue this practice for the foreseeable future. We do not haveany existing credit facilities under which we could borrow funds. We may seek to raise additional funds through various sources, such as equity and debt financings, orthrough strategic collaborations and license agreements. We can give no assurances that we will be able to secure additional sources of funds to support ouroperations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. This is particularly true ifour clinical data is not positive or economic and market conditions deteriorate. Although we have previously been successful in obtaining financing through our equity securities offerings, there can be no assurance that we will be able to do so inthe future. To the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our shareholders will be diluted.Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such asincurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketingand distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to ourtechnologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. It is possible that financingwill not be available or, if available, may not be on favorable terms. The availability of financing will be affected by the results of our clinical studies and other scientificand clinical research; our ability to attain regulatory approvals; market acceptance of our product candidates; the state of the capital markets generally with particularreference to pharmaceutical, biotechnology, and medical companies; the status of strategic alliance agreements; and other relevant commercial considerations. Ifadequate funding is not available, we may be required to implement cost reduction strategies; delay, reduce, or eliminate one or more of our product developmentprograms; relinquish significant rights to product candidates or obtain funds on less favorable terms than we would otherwise accept; and/or divest assets or ceaseoperations through a merger, sale, or liquidation of our company. We are exposed to financial risk related to the fluctuation of foreign currency exchange rates and the degrees of volatility of those rates. We may be adversely affected by foreign currency exchange rate fluctuations. To date, we have been primarily funded through issuances of equity and proceeds fromthe exercise of warrants and stock options, which are denominated both in U.S. and Canadian dollars. Currently, the majority of our expenditures are in U.S. dollars.However, significant costs are also incurred in Canadian dollars, British pounds, and Australian dollars; and, therefore, we are subject to foreign currency exchange ratefluctuations which may, from time to time, impact our financial position and results of operations. 31  Risks Related to Our Business and Our Industry We are an early stage company with no approved products and no revenue from commercialization of any products. We are at an early stage of development of our product candidate, DM199, for the treatment of CKD and AIS. We have not completed the development of any productcandidate and, accordingly, have not begun to commercialize any product candidate or generate any revenues from any product sales. DM199 requires significantadditional clinical testing and investment prior to seeking marketing approval. A commitment of substantial resources by ourselves and any potential partners tocontinue to conduct clinical trials for DM199 will be required to meet applicable regulatory standards, obtain required regulatory approvals, and successfullycommercialize this product candidate. DM199 is not expected to be commercially available for several years, if at all. Our prospects depend on the success of our product candidate, DM199, which is at an early stage of development, and we may not generate revenue from productsales for several years, if at all, from this product candidate or any future product candidates. We are highly dependent on the success of DM199, and we may not be able to successfully obtain regulatory or marketing approval for, or successfully commercialize,this product candidate. To date, we have expended significant time, resources and effort on the development of DM199, including conducting preclinical and clinicaltrials, for the treatment of CKD and AIS. Although we intend to study the use of DM199 to treat multiple diseases, we have no other product candidates in our currentclinical development pipeline. Our ability to generate revenue from product sales and to achieve commercial success in the near term will initially depend almost entirelyon our ability to successfully develop, obtain regulatory approval for and then successfully commercialize DM199. Prior to commercialization of any potential product,significant additional investments will be necessary to complete the development of DM199 or any future product candidates. Preclinical and clinical trial work must becompleted before DM199 or any future product candidate could be ready for use within the markets that we have identified. We may fail to develop any products, obtainregulatory approvals, complete required clinical trials successfully, or commercialize any products. Competitors may develop alternative products and methodologies todiagnose and treat the disease indications we are pursuing, thus reducing our competitive advantages. We do not know whether any of our product developmentefforts will prove to be effective, meet applicable regulatory standards, obtain the requisite regulatory approvals, be capable of being manufactured at a reasonable cost,or be successfully marketed. The product candidate we are currently developing is not expected to be commercially viable for several years. In addition, although nosignificant adverse events have occurred to date, DM199 may cause undesirable side effects. Results of early preclinical and clinical research may not be indicative ofthe results that will be obtained in later stages of clinical research. If regulatory authorities do not approve DM199 for the treatment of CKD and/or AIS or any futureproduct candidates, or if we fail to maintain regulatory compliance, we will have limited ability to commercialize DM199 or any future product candidates, and ourbusiness and results of operations would be harmed. If we do succeed in developing viable products from DM199 or any future product candidates, we will face manypotential obstacles, such as the need to develop or obtain manufacturing, sales and marketing, and distribution capabilities. 32  The clinical and commercial success of our DM199 product candidate will depend on a number of factors, many of which are beyond our control. The clinical and commercial success of our DM199 product candidate will depend on a number of factors, many of which are beyond our control, including, amongothers:  ●the timely initiation, continuation, and completion of our currently ongoing Phase II and future clinical trials for DM199, which will depend substantiallyupon requirements for such trials imposed by the FDA and other regulatory agencies and bodies; ●our ability to demonstrate the safety and efficacy of DM199 to the satisfaction of the relevant regulatory authorities; ●whether we are required by the FDA or other regulatory authorities to conduct additional clinical trials, and the scope and nature of such clinical trials,prior to approval to market our DM199 product candidate; ●the timely receipt of necessary marketing approvals from the FDA and foreign regulatory authorities, including pricing and reimbursement determinations; ●the ability to successfully commercialize our DM199 product candidate for marketing and sale, if approved by the FDA or foreign regulatory authorities,whether alone or in collaboration with others; ●our ability and the ability of third-party manufacturers to manufacture the quantities of our DM199 product candidate with quality attributes necessary tomeet regulatory requirements and at a scale and yield sufficient to meet anticipated demand at a cost that allows us to achieve profitability; ●our success in educating health care providers and patients about the benefits, risks, administration, and use of our DM199 product candidate, ifapproved; ●acceptance of our DM199 product candidate, if approved, as safe and effective by patients and the healthcare community; ●the achievement and maintenance of compliance with all regulatory requirements applicable to our DM199 product candidate, our third-partymanufacturers, and our internal operations; ●the maintenance of an acceptable safety profile of our products, if any, following any approval; ●the availability, perceived advantages, relative cost, relative safety, and relative efficacy of alternative and competitive treatments; ●our ability to provide approved product with a convenient and patient-friendly administration procedure; ●our ability to successfully enforce our intellectual property rights for our DM199 product candidate and against the products of potential competitors; and ●our ability to avoid or succeed in third-party patent interference or patent infringement claims. No assurance can be provided that we will ever be able to achieve profitability through the sale of, or royalties from, our DM199 product candidate. If we or any futurecollaborators are not successful in obtaining approval for and commercializing our DM199 product candidate, or are delayed in completing those efforts, our businessand operations would be adversely affected. We rely and will continue to rely on third parties to plan, conduct, and monitor our preclinical and clinical trials, and their failure to perform as required couldcause substantial harm to our business. We rely and will continue to rely on third parties to conduct a significant portion of our preclinical and clinical development activities. Preclinical activities include invivo studies in specific disease models, pharmacology and toxicology studies, and assay development. Clinical development activities include trial design, regulatorysubmissions, clinical patient recruitment, clinical trial monitoring, clinical data management and analysis, safety monitoring, and project management. If there is anydispute or disruption in our relationship with third parties, or if they are unable to provide quality services in a timely manner and at a feasible cost, our activedevelopment programs may face delays. Further, if any of these third parties fails to perform as we expect or if their work fails to meet regulatory requirements, ourtesting could be delayed, cancelled, or rendered ineffective. 33  We rely on a contract manufacturer over whom we have limited control. If we are subject to quality, cost, or delivery issues with the materials supplied by this orfuture contract manufacturers, our business operations could suffer significant harm. Completion of our clinical trials and commercialization of our DM199 product candidate and any future product candidates require access to, or development of, facilitiesto manufacture our product candidates at sufficient yields and at commercial scale. Our clinical trials must be conducted with product candidates produced underapplicable current good manufacturing practices (cGMP) regulations. Failure to comply with these regulations may require us to repeat clinical trials, which would delaythe regulatory approval process. We rely on CMOs for manufacturing, filling, packaging, storing, and shipping DM199 in compliance cGMP regulations applicable toDM199. The FDA ensures the quality of drug products by carefully monitoring drug manufacturers’ compliance with cGMP regulations. The cGMP regulations for drugscontain minimum requirements for the methods, facilities, and controls used in the manufacturing, processing, and packing of a drug product. We have no direct experience in manufacturing or managing third parties in manufacturing our DM199 product candidate in the volumes that are expected to benecessary to support our clinical trials and commercialization, if DM199 is approved. Our efforts to establish these capabilities may not meet our requirements as toscale-up, timeliness, yield, cost, or quality in compliance with cGMP regulations applicable to DM199. We, any future collaborators, or our experienced third-partymanufacturers may encounter difficulties in production, which may include the following, among others:  ●costs and challenges associated with scale-up and attaining sufficient manufacturing yields; ●supply chain issues, including the timely availability and shelf life requirements of raw materials and supplies and the lack of redundant and backupsuppliers; ●quality control and assurance; ●shortages of qualified personnel and capital required to manufacture large quantities of our product candidate; ●competing capacity needs at CMOs supporting product development as quantities for supply increase; ●establishment of commercial supply capacity through binding supply agreements; ●compliance with regulatory requirements that vary in each country where a product might be sold; ●capacity limitations and scheduling availability in contracted facilities; and ●natural disasters, cyberattacks, or other force majeure events that affect facilities and possibly limit production or loss of product inventory maintained inthird party storage facilities. There can be no assurances that our current CMOs or any future CMOs will be able to meet our timetable and requirements for our DM199 product candidate or anyfuture product candidates. If we are unable to arrange for alternative third-party manufacturing sources on commercially reasonable terms or in a timely manner, we maybe delayed in the development of DM199 and any future product candidates. Further, CMOs must operate in compliance with cGMP regulations, and failure to do socould result in, among other things, the disruption of product supplies. Our dependence upon our current CMOs and any future third parties for the manufacture of ourproduct candidates may adversely affect our ability to develop our product candidates on a timely and competitive basis and, if we are able to commercialize our productcandidates, may adversely affect our revenues from product sales and profit margins. 34  If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positiveresults, we would incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of ourproduct candidates. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct preclinical studies and extensive clinical trialsin humans to demonstrate the safety and efficacy of our product candidates. Clinical testing is expensive and difficult to design and implement, can take many years tocomplete, and has uncertain outcomes. The outcome of preclinical studies and early clinical trials may not predict the success of later clinical trials, and interim results ofa clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks inadvanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials. We do not know whether the clinicaltrials we are currently conducting or may conduct in the future will demonstrate adequate efficacy and safety to result in regulatory approval to market DM199 or anyfuture product candidates in any jurisdiction. A product candidate may fail for safety or efficacy reasons at any stage of the testing process. In addition, the patientpopulations in our clinical studies for DM199 often have many co-morbidities that may cause severe illness or death, which may be attributed to DM199 in a manner thatnegatively affects the safety profile of our DM199 product candidate. If the results of our ongoing or future clinical trials for DM199 are inconclusive with respect toefficacy, if we do not meet our clinical endpoints with statistical significance, or if there are unanticipated safety concerns or adverse events that emerge during clinicaltrials, we may be prevented from or delayed in obtaining marketing approval, and even if we obtain marketing approval, any sales may suffer. A major risk we face is thepossibility that neither our current DM199 product candidate nor any future product candidates will successfully gain market approval from the FDA or other regulatoryauthorities, resulting in us being unable to derive any commercial revenue from them after investing significant amounts of capital in multiple stages of preclinical andclinical testing. If we experience delays in clinical testing, we will be delayed in commercializing our product candidates, and our business may be substantially harmed. We cannot predict whether any clinical trials will begin as planned, will need to be restructured, or will be completed on schedule, or at all. Our product developmentcosts will increase if we experience delays in clinical testing. Significant clinical trial delays could shorten any periods during which we may have the exclusive right tocommercialize our product candidates or allow our competitors to bring products to market before us, which would impair our ability to successfully commercialize ourproduct candidates and may harm our financial condition, results of operations and prospects. The commencement and completion of clinical trials for our productcandidates may be delayed for a number of reasons, including among others:  ●failure by regulatory authorities to grant permission to proceed or placing the clinical trial on hold; ●patients failing to enroll or remain in our trials at the rates and within the timelines we expect; ●suspension or termination of clinical trials by regulators for many reasons, including concerns about patient safety or failure of our contract manufacturersto comply with cGMP requirements; ●any changes to our manufacturing process that may be necessary or desired; ●delays or failure to obtain clinical supply from contract manufacturers of our product candidates necessary to conduct clinical trials; ●product candidates demonstrating a lack of safety or efficacy during clinical trials; 35   ●patients choosing an alternative treatment for the indications for which we are developing any of our product candidates or participating in competingclinical trials; ●patients failing to complete clinical trials due to dissatisfaction with the treatment, side effects, or other reasons; ●reports of clinical testing on similar technologies and products raising safety and/or efficacy concerns; ●competing clinical trials and scheduling conflicts with participating clinicians; ●clinical investigators not performing our clinical trials on their anticipated schedule, dropping out of a trial, or employing methods not consistent with theclinical trial protocol, regulatory requirements or other third parties not performing data collection and analysis in a timely or accurate manner; ●failure of our contract research organizations (CROs) to satisfy their contractual duties or meet expected deadlines; ●inspections of clinical trial sites by regulatory authorities, Institutional Review Boards (IRBs) or ethics committees finding regulatory violations thatrequire us to undertake corrective action, resulting in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study; ●one or more IRBs or ethics committees rejecting, suspending or terminating the study at an investigational site, precluding enrollment of additionalsubjects, or withdrawing its approval of the trial; ●failure to reach agreement on acceptable terms with prospective clinical trial sites; or ●public health crises, epidemics and pandemics, such as the novel strain of coronavirus (COVID: 19) that recently originated in China, which has alreadyadversely impacted and may continue to adversely impact our ability to recruit or enroll subjects for our clinical trials. We are currently experiencing slower than expected enrollment in our Phase II studies for CKD. If this slow enrollment continues, the completion of these studies willtake longer than expected. Our product development costs will increase if we experience delays in testing or approval or if we need to perform more or larger clinical trials than planned.Additionally, changes in regulatory requirements and policies may occur, and we may need to amend study protocols to reflect these changes. Amendments may requireus to resubmit our study protocols to regulatory authorities or IRBs or ethics committees for re-examination, which may impact the cost, timing or successful completionof that trial. Delays or increased product development costs may have a material adverse effect on our business, financial condition, and prospects. Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time-consuming and uncertain and mayprevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates. As a result, we cannot predictwhen or if, and in which territories, we, or any future collaborators, will obtain marketing approval to commercialize a product candidate. The process of obtaining marketing approvals, both in the United States and abroad, is expensive and may take many years, if approval is obtained at all, and can varysubstantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Our current product candidate and the activities associated with its development and commercialization, including design, research, testing, manufacture, safety,efficacy, quality control, recordkeeping, labeling, packaging, storage, approval, advertising, promotion, sale, distribution, import, export, and reporting of safety andother post-market information, are subject to comprehensive regulation by the FDA, the EMA and other similar foreign regulatory agencies. Failure to obtain marketingapproval for a product candidate will prevent us from commercializing the product candidate. We have only limited experience in filing and supporting the applicationsnecessary to gain marketing approvals and expect to rely on third-parties to assist us in this process. Securing marketing approval requires the submission of extensivepreclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy.Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, theregulatory authorities. The FDA, EMA or other regulatory authorities may determine that our product candidates may not be effective, may be only moderately effectiveor may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limitcommercial use. As a result, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render theapproved product not commercially viable. 36  In addition, changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes inregulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantialdiscretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical,clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of aproduct candidate. We are in litigation against Pharmaceutical Research Associates Group B.V., a contract research organization, seeking to compel them to comply with the terms ofa clinical trial research agreement and their failure to perform as required could adversely affect our ability to obtain regulatory approval for DM199. In March 2013, we entered into a clinical research agreement with Pharmaceutical Research Associates Group B.V. (PRA Netherlands) to perform a double-blinded,placebo-controlled, single-dose and multiple-dose study to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics and proof of concept of DM199 inhealthy subjects and in patients with Type 2 diabetes mellitus. In one arm of this study, we enrolled 36 patients with Type 2 diabetes who were treated with twosubcutaneous dose levels of DM199 over a 28-day period. This study achieved its primary endpoint and demonstrated that DM199 was well tolerated. The secondaryendpoints for this study, however, were not met. We believe there were significant execution errors in Part D of the study that were caused by protocol deviationsoccurring at the clinical trial site that were unable to be reconciled. We believe these included dosing errors and sample mix-ups. These errors undermined our ability tointerpret the secondary endpoints. To date, we have been unable to obtain the complete study records from PRA Netherlands for the arm of the study that included 36patients with Type 2 diabetes and was intended to measure primary endpoints (safety, tolerability) and secondary endpoints (blood glucose concentration, insulinlevels, glucose tolerance test and a variety of experimental biomarkers). Without these records and given our inability to reconcile the protocol deviations, we have beenunable to generate a final study report. Due in part to these confounded secondary endpoints, we are not currently continuing the clinical study of DM199 for Type 2diabetes. We have initiated litigation against PRA Netherlands to compel them to comply with the terms of the clinical research agreement, including providing full studyrecords, and to recover damages. Litigation distracts the attention of our management from our business, is expensive and the outcome is uncertain. 37  Though we have entered into a litigation funding agreement to help cover the costs associated with our litigation against PRA Netherlands, there is no assurancethat we will generate any recovery from the litigation and, because of the terms of the litigation funding agreement, a significant portion, if not all, of any recoverywe may obtain may be due to the funder under the agreement. On December 27, 2019, we entered into a litigation funding agreement with LEGALIST FUND II, L.P. (the Funder) for the purpose of funding our currently pendinglawsuit against PRA Netherlands. Our management believes, but cannot guarantee, that this litigation funding agreement will allow us to pursue this litigation moreeffectively. Although the Funder made its evaluation as to the likelihood of success, litigation is very uncertain, and no assurance can be provided that, just because wehave obtained litigation funding, we will be successful or that any recovery we may obtain will be significant. Under the terms of the litigation funding agreement, the Funder agreed to pay up to an aggregate of $1.0 million to fund reasonable legal fees, court costs, and otherexpenses incurred by us in connection with the litigation, including $200,000 for fees and costs previously paid by us. These payments, however, are conditioned uponthe transfer of venue of the litigation from Delaware to Minnesota (Transfer) and if the venue is not transferred we will not be entitled to receive any payments under thelitigation funding agreement. If the venue is transferred, we agreed to repay the Funder from any proceeds arising from the litigation (Claim Proceeds) the amount ofcosts actually paid or otherwise funded by the Funder in connection with the litigation, plus the reimbursement of $10,000 for its diligence and underwriting costs.Additionally, we agreed to pay the Funder from the Claim Proceeds the greater of: (i) $1.0 million if repayment occurs within nine months of the Transfer, $2.0 million ifrepayment occurs more than nine months after the Transfer but before trial has begun, or $3.0 million thereafter; or (ii) 20% of the Claim Proceeds. In the event theFunder has not been repaid 3½ years after the Transfer, the Funder is entitled to receive interest on the unpaid amounts equal to 20% per annum commencing on the 3½year anniversary of the Transfer. Our obligation under the litigation funding agreement to make the foregoing payments to the Funder is non-recourse and limited onlyto the Claim Proceeds. As a result of the agreement, if we obtain Claim Proceeds, it is possible, depending on the amount of the Claim Proceeds, that we will receive nonet recovery after all payments have been made to the Funder. We may not be able to obtain FDA acceptance of INDs to commence future clinical trials in the United States on the timelines we expect, and even if we are able to,the FDA may not permit us to proceed in a timely manner, or at all. Prior to commencing clinical trials in the United States for future trials of our current DM199 product candidate or any trials of future product candidates, we will berequired to have an accepted IND for each product candidate and for each targeted indication. During 2019, we filed and the FDA accepted an IND for the Phase Ibstudy and the first two cohorts in the Phase II study in patients with CKD. A submission of an IND may not result in the FDA allowing further clinical trials to begin and,once begun, issues may arise that will require us to suspend or terminate such clinical trials. Additionally, even if relevant regulatory authorities agree with the designand implementation of the clinical trials set forth in an IND, these regulatory authorities may change their requirements in the future. Failure to submit or obtainacceptance of INDs may cause the development of our product candidates to be delayed or terminated, which could materially and adversely affect our business andprospects. 38  If we have difficulty enrolling patients in clinical trials, the completion of the trials may be delayed or not completed at all. As DM199 and any future product candidates advance to clinical testing, and then through progressively larger and more complex clinical trials, we will need to enrollan increasing number of patients that meet our eligibility criteria. There is significant competition for recruiting patients in clinical trials and we may be unable to enrollthe patients we need to complete clinical trials on a timely basis or at all. The factors that affect our ability to enroll patients are largely uncontrollable and include,among others:  ●size and nature of the patient population; ●eligibility and exclusion criteria for the trial; ●design of the study protocol; ●competition with other companies for clinical sites or patients; ●the perceived risks and benefits of the product candidate under study; ●real or perceived availability of alternative treatments; ●the patient referral practices of physicians; ●the number, availability, location, and accessibility of clinical trial sites; ●the efforts of our physician investigators and clinical trial sites to facilitate enrollment in our clinical trials; and ●public health crises, epidemics and pandemics, such as the novel strain of coronavirus (COVID: 19), which has already adversely impacted and maycontinue to adversely impact our ability to recruit or enroll subjects for our clinical trials. We are currently experiencing slower than expected enrollment in our Phase II studies for CKD. If this slow enrollment continues, the completion of these studies willtake longer than expected. We may not be able to successfully initiate or continue clinical trials if we cannot timely enroll a sufficient number of eligible patients toparticipate in the clinical trials required by regulatory agencies. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, wemay need to delay, limit, or terminate on-going or planned clinical trials, any of which could have a material adverse effect on our business and prospects and ability toraise additional financing to fund our operations. We may not be able to reproduce the results of previously conducted clinical studies of other forms of KLK1, including Kailikang and Kallidinogenase, therebypreventing DM199 from displacing other forms of KLK1. While there have been numerous studies demonstrating the efficacy of Kailikang and Kallidinogenase, we rely on the scientific and clinical knowledge and experience ofother biotechnology and pharmaceutical companies and organizations in conducting those clinical studies. No assurance can be given that in our clinical trialsinvolving DM199 we will be able to reproduce results of previously conducted studies or prove that DM199 is safe or effective and able to displace other forms of KLK1in the market. Negative results from clinical trials or studies of others and adverse safety events involving the targets of our product candidates may have an adverse impact onour future commercialization efforts. From time to time, studies or clinical trials on various aspects of biopharmaceutical products are conducted by academic researchers, competitors, or others. The resultsof these studies or trials, when published, may have a significant effect on the market for the biopharmaceutical product that is the subject of the study. The publicationof negative results of studies or clinical trials or adverse safety events related to our product candidates, or the therapeutic areas in which our product candidatescompete, could adversely affect the market price of our common shares and our ability to finance future development of our product candidates, and our business andfinancial results could be materially and adversely affected. 39  We may be required to suspend, repeat or terminate our clinical trials if they are not conducted in accordance with regulatory requirements, the results arenegative or inconclusive, or the trials are not well designed. Clinical trials must be conducted in accordance with the FDA’s current Good Clinical Practices requirements, or cGCPs, or analogous requirements of applicable foreignregulatory authorities. Clinical trials are subject to oversight by the FDA, other foreign governmental agencies, and IRBs or ethics committees at the study sites wherethe clinical trials are conducted. In addition, clinical trials must be conducted with product candidates produced in accordance with applicable current GoodManufacturing Practices. Clinical trials may be suspended by us or by the FDA, other foreign regulatory authorities, or by an IRB or ethics committee with respect to aparticular clinical trial site, for various reasons, including:  ●deficiencies in the conduct of the clinical trials, including failure to conduct the clinical trial in accordance with regulatory requirements or study protocols; ●deficiencies in the clinical trial operations or trial sites; ●unforeseen adverse side effects or the emergence of undue risks to study subjects; ●deficiencies in the trial design necessary to demonstrate efficacy; ●the product candidate may not appear to offer benefits over current therapies; or ●the quality or stability of the product candidate may fall below acceptable standards. The design and implementation of clinical trials is a complex process. As a Company, we have limited experience designing and implementing clinical trials. We may notsuccessfully or cost-effectively design and implement clinical trials that achieve our desired clinical endpoints efficiently, or at all. A clinical trial that is not well designedmay delay or even prevent initiation of the trial, can lead to increased difficulty in enrolling patients, may make it more difficult to obtain regulatory approval for theproduct candidate on the basis of the study results, or, even if a product candidate is approved, could make it more difficult to commercialize the product successfully orobtain reimbursement from third party payers. Additionally, a trial that is not well-designed could be inefficient or more expensive than it otherwise would have been, orwe may incorrectly estimate the costs to implement the clinical trial, which could lead to a shortfall in funding. Regulatory approval processes are lengthy, expensive, and inherently unpredictable. Our inability to obtain regulatory approval for our product candidates wouldsubstantially harm our business. Our shareholders and investors should be aware of the risks, problems, delays, expenses, and difficulties which we may encounter in light of the extensive regulatoryenvironment within which our business is carried out. Numerous statutes and regulations govern the preclinical and clinical development, manufacture and sale, andpost-marketing responsibilities for non-therapeutic and human therapeutic products in the United States, European Union and other countries that are the intendedmarkets for our current and future product candidates. Such legislation and regulations govern the approval of manufacturing facilities, the testing procedures, andcontrolled research that must be carried out, and the preclinical and clinical data that must be collected prior to marketing approval. Our R&D efforts, as well as anyfuture clinical trials, and the manufacturing and marketing of any products we may develop, will be subject to and restricted by such extensive regulations. The process of obtaining necessary regulatory approvals is lengthy, expensive, and uncertain. We may fail to obtain the necessary approvals to commence or continueclinical testing or to manufacture or market our potential products in reasonable time frames, if at all. In addition, governmental authorities in the United States or othercountries may enact regulatory reforms or restrictions on the development of new therapies that could adversely affect the regulatory environment in which we operateor the development of any products we may develop. Completing clinical testing and obtaining required approvals is expected to take several years and to require the expenditure of substantial resources. There can be noassurance that clinical trials will be completed successfully within any specified period of time, if at all. Furthermore, clinical trials may be delayed or suspended at anytime by us or by the various regulatory authorities if it is determined at any time that the subjects or patients are being exposed to unacceptable risks. 40  Any failure or delay in obtaining regulatory approvals would adversely affect our ability to utilize our technology and would adversely affect our operations.Furthermore, no assurance can be given that our current or future product candidates will prove to be safe and effective in clinical trials or that they will receive therequisite regulatory approval. Moreover, any regulatory approval of a drug that is eventually obtained may be granted with specific limitations on the indicated uses forwhich that drug may be marketed. Furthermore, product approvals may be withdrawn if problems occur following initial marketing or if compliance with regulatorystandards is not maintained. Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or recall or withdrawal from the market, and wemay be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and ifany of them are approved. The FDA and other federal and state agencies, including the U.S. Department of Justice (DOJ), closely regulate compliance with all requirements governing prescriptiondrug products, including requirements pertaining to marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing ofproducts in accordance with cGMP requirements. The FDA and DOJ impose stringent restrictions on manufacturers’ communications regarding off-label use, and if wedo not market our products for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of such requirements may lead toinvestigations alleging violations of the Food, Drug and Cosmetic Act and other statutes, including the False Claims Act and other federal and state health care fraudand abuse laws as well as state consumer protection laws. Our failure to comply with all regulatory requirements, and later discovery of previously unknown adverse events or other problems with our products, manufacturers ormanufacturing processes, may yield various results, including:  ●litigation involving patients using our products; ●restrictions on such products, manufacturers or manufacturing processes; ●restrictions on the labeling or marketing of a product; ●restrictions on product distribution or use; ●requirements to conduct post-marketing studies or clinical trials; ●warning or untitled letters; ●withdrawal of the products from the market; ●refusal to approve pending applications or supplements to approved applications that we submit; ●recall of products; ●fines, restitution or disgorgement of profits or revenues; ●suspension or withdrawal of marketing approvals; ●damage to relationships with any potential collaborators; ●unfavorable press coverage and damage to our reputation; ●refusal to permit the import or export of our products; ●product seizure; or ●injunctions or the imposition of civil or criminal penalties. Non-compliance by us or any future collaborator with regulatory requirements regarding safety monitoring or pharmacovigilance, and with requirements related to thedevelopment of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with regulatory requirements regardingthe protection of personal information can also lead to significant penalties and sanctions. 41  We may not achieve our publicly announced milestones according to schedule, or at all. From time to time, we may announce the timing of certain events we expect to occur, such as the anticipated timing of initiation or completion of or results from ourclinical trials. These statements are forward-looking and are based on the best estimates of management at the time relating to the occurrence of such events. However,the actual timing of such events may differ significantly from what has been publicly disclosed. The timing of events such as the initiation or completion of a clinicaltrial, filing of an application to obtain regulatory approval, or an announcement of additional clinical trials for a product candidate may ultimately vary from what ispublicly disclosed. These variations in timing may occur as a result of different events, including the nature of the results obtained during a clinical trial or during aresearch phase, problems with a CMO or CRO or any other event having the effect of delaying the publicly announced timeline. We undertake no obligation to updateor revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise required by law. Any variation in thetiming of previously announced milestones could have a material adverse effect on our business plan, financial condition or operating results, and the trading price ofour common shares. Future development collaborations may be important to us. If we are unable to enter into or maintain these collaborations, or if these collaborations are notsuccessful, our business could be adversely affected. We may in the future determine to seek to collaborate with pharmaceutical and biotechnology companies for the development or commercialization of our current orfuture product candidates. We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for any collaboration willdepend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and theproposed collaborator’s evaluation of a number of factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or atall, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delayits potential development schedule or reduce the scope of research activities, or increase our expenditures and undertake discovery, nonclinical or clinical developmentactivities at our own expense. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development activities, wemay not be able to continue or further develop our current or future product candidates, and our business may be materially and adversely affected. Future collaborations we may enter into may involve the following risks, among others:  ●collaborators may have significant discretion in determining the efforts and resources that they will apply to these collaborations; ●collaborators may not perform their obligations as expected; ●changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, may divert resources or create competingpriorities; ●collaborators may delay discovery, nonclinical or clinical development, provide insufficient funding for product development of targets selected by us,stop or abandon discovery, nonclinical or clinical development for a product candidate, or repeat or conduct new discovery, and nonclinical and clinicaldevelopment for a product candidate; ●collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or productcandidates if the collaborators believe that competitive products are more likely to be successfully developed than our products; ●product candidates discovered in collaboration with us may be viewed by our future collaborators as competitive with their own product candidates orproducts, which may cause collaborators to cease to devote resources to the development of our product candidates; 42   ●disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, mightcause delays or termination of the discovery, preclinical or clinical development or commercialization of product candidates, might lead to additionalresponsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; ●collaborators may not properly maintain or defend our intellectual property rights or intellectual property rights licensed to us or may use our proprietaryinformation in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us topotential litigation; ●collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and ●collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursuefurther development or commercialization of the applicable product candidates. Additionally, subject to its contractual obligations to us, if a collaborator is involved in a business combination, the collaborator might deemphasize or terminate thedevelopment of any of our product candidates. If a collaborator terminates its agreement with us, we may find it more difficult to attract new collaborators and the waywe are perceived in the business and financial communities could be adversely affected. If our collaborations do not result in the successful development of our product candidates, our product candidates could be delayed and we may need additionalresources to develop product candidates. All of the risks relating to product development, regulatory approval and commercialization described in this report also applyto the activities of our future collaborators. The successful commercialization of our current or future product candidates, if approved, will depend on achieving market acceptance and we may not be able togain sufficient acceptance to generate significant revenue. Even if our product candidates are successfully developed and receive regulatory approval, they may not gain market acceptance among physicians, patients,healthcare payers such as private insurers or governments and other funding parties, and the medical community. The degree of market acceptance for any products wedevelop will depend on a number of factors including, among others:  ●demonstration of the clinical efficacy and safety; ●the prevalence and severity of any adverse side effects; ●limitations or warnings contained in the product’s approved labeling; ●cost-effectiveness and availability of acceptable pricing; ●competitive product profile versus alternative treatment methods and the superiority of alternative treatment or therapeutics; ●the effectiveness of marketing and distribution methods and support for the products; and ●coverage and reimbursement policies of government and third-party payers to the extent that our products could receive regulatory approval but not beapproved for coverage by or receive adequate reimbursement from government and quasi-government agencies or other third-party payers. Disease indications may be small subsets of a disease that could be parsed into smaller and smaller indications as different subsets of diseases are defined. Thisincreasingly fine characterization of diseases could have negative consequences, including creating an approved indication that is so small as not to have a viablemarket for us. If future technology allows characterization of a disease in a way that is different from the characterization used for large, pivotal studies, it may makethose studies invalid or reduce their usefulness, and may require repeating all or a portion of the studies. Future technology may supply better prognostic ability, whichcould reduce the portion of patients projected to need a new therapy. Even after being cleared by regulatory authorities, a product may later be shown to be unsafe ornot to have its purported effect, thereby preventing its widespread use or requiring withdrawal from the market. 43  If we fail to obtain coverage and adequate reimbursement for our products, our revenue-generating ability will be diminished and there is no assurance that theanticipated market for our products will be sustained. We believe that there may be many different potential applications for products successfully derived from our technologies and that the anticipated market for productsunder development will continue to expand. However, due to competition from existing or new products and the yet-to-be established commercial viability of ourproduct candidates, no assurance can be given that these beliefs will prove to be correct. Physicians, patients, formularies, payers or the medical community in generalmay not accept or utilize any products that we may develop. Other drugs may be approved during our clinical testing which could change the accepted treatments forthe diseases we have targeted and make our product candidates obsolete. Our ability to successfully commercialize our future products, if any, will depend, in part, on the extent to which coverage of and adequate reimbursement for suchproducts and related treatments will be available from governmental health payer programs at the federal and state levels, including Medicare and Medicaid, privatehealth insurers, managed care plans and other organizations. No assurance can be given that third-party coverage and adequate reimbursement will be available that willallow us to obtain or maintain price levels sufficient for the realization of an appropriate return on our investment in product development. Coverage and adequatereimbursement from governmental healthcare programs, such as Medicare and Medicaid, and private health insurers, managed care plans and other organizations iscritical to new product acceptance by healthcare providers. There is no uniform coverage and reimbursement policy among third-party payers in the United States;however, private third-party payers may follow Medicare coverage and reimbursement policy in setting their own coverage policy and reimbursement rates. Additionally,coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives arealready available or subsequently become available. Even if we obtain coverage for our product candidates, the related reimbursement rates might not be adequate tomake our product attractive to providers, or may require patient cost sharing (e.g., copayments/deductibles) that patients find unacceptably high. In addition, healthcarereform and controls on healthcare spending may limit coverage of our products and the price we charge and get paid for any products and the amounts thereof that wecan sell. Patients are unlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of ourproduct candidates. Outside of the United States, the successful commercialization of our products will depend largely on obtaining and maintaining government coverage, because in manycountries patients are unlikely to use prescription drugs that are not covered by their government healthcare programs. Negotiating coverage and reimbursement withgovernmental authorities can delay commercialization by 12 months or more. Coverage and reimbursement policies may adversely affect our ability to sell our productson a profitable basis. In many international markets, governments control the prices of prescription pharmaceuticals, including through the implementation of referencepricing, price cuts, rebates, revenue-related taxes and profit control, and we expect prices of prescription pharmaceuticals to decline over the life of the product or asvolumes increase. 44  We will not be able to successfully commercialize our current or future product candidates without establishing sales and marketing capabilities internally orthrough collaborators. We currently have no sales and marketing staff. We may not be able to find suitable sales and marketing staff and collaborators for our products if and when theyreceive required approvals. We have no prior experience in the marketing, sale and distribution of pharmaceutical products, and there are significant risks involved inbuilding and managing a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequatetraining to sales and marketing personnel, effectively manage a geographically dispersed sales and marketing team, and maintain compliance by a marketing team withcomplex laws and regulations applicable to product marketing. Any collaborators may not be adequate or successful or could terminate or materially reduce the effortthey direct to our products. The development of a marketing and sales capability will require significant expenditures, management resources and time. The cost ofestablishing such a sales force may exceed any potential product revenue, or our marketing and sales efforts may be unsuccessful. If we are unable to develop aninternal marketing and sales capability in a timely fashion, or at all, or if we are unable to enter into a marketing and sales arrangement with a third party on acceptableterms, we may be unable to successfully develop and seek regulatory approval for our product candidates and/or effectively market and sell approved products, if any. We face competition from other biotechnology and pharmaceutical companies and our financial condition and operations will suffer if we fail to competeeffectively. Technological competition is intense in the industry in which we operate. Competition comes from pharmaceutical companies, biotechnology companies, anduniversities, as well as companies that offer non-pharmaceutical solutions in the markets we may attempt to address with our products. Many of our competitors havesubstantially greater financial and technical resources; more extensive R&D capabilities; and greater marketing, distribution, production, and human resources than wedo. Moreover, competitors may develop products more quickly than us and may obtain regulatory approval for such products more rapidly than we do. Products andprocesses which are more effective than those that we intend to develop may be developed by our competitors. R&D by others may render our product candidates non-competitive or obsolete. Our product candidates may face competition sooner than expected. We believe that DM199 could qualify for 12 years of data exclusivity in the United States under the Biologics Price Competition and Innovation Act of 2009, which wasenacted as part of the ACA. Under the BPCIA, an application for a biosimilar product, or BLA, cannot be submitted to the FDA until four years, or if approved by theFDA, until 12 years, after the original brand product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway for theapproval of biosimilar and interchangeable biological products. The new abbreviated regulatory pathway establishes legal authority for the FDA to review and approvebiosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. This law is complex andis only beginning to be interpreted and implemented by the FDA. While it is uncertain when any such processes may be fully adopted by the FDA, any such processescould have a material adverse effect on the future commercial prospects for any of our product candidates that are biologics. There is also a risk that the U.S. Congresscould repeal or amend the BPCIA to shorten this exclusivity period, potentially creating the opportunity for biosimilar competition sooner than anticipated after theexpiration of our patent protection. Moreover, the extent to which a biosimilar, once approved, will be substituted for any reference product in a way that is similar totraditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. 45  Even if, as we expect, our current or future product candidates are considered to be reference products eligible for 12 years of exclusivity under the BPCIA, anothercompany could market competing products if the FDA approves a full BLA for such product containing the sponsor’s own preclinical data and data from adequate andwell-controlled clinical trials to demonstrate the safety, purity and potency of the products. Moreover, an amendment or repeal of the BPCIA could result in a shorterexclusivity period for our product candidates, which could have a material adverse effect on our business. Our relationships with customers and third-party payers will be subject to applicable fraud and abuse and other healthcare laws and regulations, which couldexpose us to criminal sanctions, civil penalties, program exclusion, contractual damages, reputational harm and diminished profits and future earnings. Healthcare providers, physicians and third-party payers will likely play a primary role in the recommendation, prescription and sale of any product candidates for whichwe receive marketing approval. Our future arrangements with third-party payers, customers and prescribing providers may expose us to broadly applicable fraud andabuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, distribute andsell the products for which we receive marketing approval. Currently, applicable federal and state healthcare laws and regulations that may apply to our products andarrangements include the following:  ●the federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providingremuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendationof, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid. This statute mayapply to our marketing practices, educational programs, pricing policies and relationships with healthcare providers in a position to prescribe orrecommend our products. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to havecommitted a violation;  ●the federal False Claims Act imposes civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowinglypresenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid,decrease or conceal an obligation to pay money to the federal government. The government also may assert that a claim including items or servicesresulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims statutes.Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly inflating drug prices they reportto pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing freeproduct to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices,including off-label promotion, may also violate false claims laws;  ●the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health Information Technology for Economic andClinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations,including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.There is an increasing trend for more criminal prosecutions and compliance enforcement activities for noncompliance with HIPAA as well as for databreaches involving protected individually identifiable health information. In the ordinary course of our business, we may receive protected healthinformation from clinical study sites and clinicians. HIPAA restricts the use and disclosure of health information by most health care providers (CoveredEntities) as well as by individuals and entities that perform various functions for or on behalf of Covered Entities (Business Associates). Depending onhow we engage with health care providers in the development and commercialization of products, we may be deemed to be a Business Associate underHIPAA. Failure to comply with the HIPAA privacy and security standards may subject us to civil and criminal liability, and the cost of reporting andmitigating data breaches could be significant, all of which could have a material adverse effect on us and our operating results; 46   ●the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially falsestatement in connection with the delivery of or payment for healthcare benefits, items or services;  ●the federal Physician Payments Sunshine Act under the ACA requires manufacturers of drugs, devices, biologics and medical supplies for which paymentis available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare& Medicaid Services (CMS) information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists,optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to reportannually to CMS ownership and investment interests held by the physicians and their immediate family members and payments or other “transfers ofvalue” to such physician owners. Effective January 2022, applicable manufacturers will also be required to collect and report information on payments or“transfers of value” to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse-midwives;  ●analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involvinghealthcare items or services reimbursed by non-governmental third-party payers, including private insurers, and some state laws require pharmaceuticalcompanies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by thefederal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers ormarketing expenditures;  ●the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act (PDMA) and its implementation regulations, aswell as the Drug Supply Chain Security Act (DSCSA), which regulates the distribution of and tracing of prescription drugs and prescription drug samplesat the federal level, and sets minimum standards for the regulation of drug distributors by the states. The PDMA, its implementing regulations and statelaws limit the distribution of prescription pharmaceutical product samples, and the DSCSA imposes requirements to ensure accountability in distributionand to identify and remove counterfeit and other illegitimate products from the market; and  ●the U.S. Foreign Corrupt Practices Act of 1977, as amended (FCPA), the U.S. domestic bribery statute contained in 18 U.S.C. §201 and the U.S. Travel Act. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidancepromulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians andother healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many ofwhich differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. 47  The risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatoryauthorities or the courts, and their provisions are open to a variety of interpretations. We are unable to predict what additional federal or state legislation or regulatoryinitiatives may be enacted in the future regarding our business or the healthcare industry in general, or what effect such legislation or regulations may have on us.Federal or state governments may impose additional restrictions or adopt interpretations of existing laws that could have a material adverse effect on us. Although wewill endeavor to identify and comply with new laws and regulations and new interpretations of existing laws and regulations, it is possible that we may be unaware ofnew legal requirements or interpretations, which could result in our violation of these laws and/or regulations. Laws, restrictions, and other regulatory measures are also imposed by anti-kickback prohibitions, fraud and abuse restrictions, and other healthcare laws and regulationsin international jurisdictions, and in those jurisdictions, we face the same issues as in the United State regarding exposure to criminal sanctions, civil penalties, programexclusion, contractual damages, reputational harm, and diminished profits and future earnings. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It ispossible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involvingapplicable fraud and abuse or other healthcare laws and regulations. Some of these laws may have safe harbors and/or exceptions that, if met, may protect ourarrangements from liability. However, failure to meet any element of a safe harbor or exception may cause an arrangement to lose safe harbor/exception protection. Theremay not be safe harbors or exceptions for every potential financial arrangement we may enter into, and there can be no assurances that any of our arrangements orrelationships will meet an otherwise applicable safe harbor or exception. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil,criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment orrestructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance withapplicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Any investigationof or action against us for violation of these laws, even if we successfully defend against it, would cause us to incur significant legal expenses and divert ourmanagement’s attention from the operation of our business. We heavily rely on the capabilities and experience of our key executives and scientists and the loss of any of them could affect our ability to develop our products. We depend heavily on members of our management team and certain other key personnel, including in particular our clinical personnel. We also depend on our clinicalcollaborators and advisors, all of whom have outside commitments that may limit their availability to us. In addition, we believe that our future success will depend inlarge part upon our ability to attract and retain highly skilled scientific, managerial, medical, clinical, and regulatory personnel, particularly as we continue to expand ouractivities and seek regulatory approvals for clinical trials and eventually our DM199 product candidate. We enter into agreements with scientific and clinicalcollaborators and advisors, key opinion leaders, and academic partners in the ordinary course of our business. We also enter into agreements with physicians andinstitutions that will recruit patients into our clinical trials on our behalf in the ordinary course of our business. Notwithstanding these arrangements, we face significantcompetition for these types of personnel from other companies, research and academic institutions, government entities and other organizations. We cannot predict oursuccess in hiring or retaining the personnel we require for continued growth. The loss of the services of any of our executive officers or other key personnel couldpotentially harm our business, operating results, or financial condition. 48  We will likely need to expand our operations and increase the size of our company, and we may experience difficulties in managing growth. As we advance DM199 and any future product candidates through preclinical testing and clinical studies, and develop our current or future product candidates, we willneed to increase our product development, scientific, regulatory and compliance and administrative headcount to manage these programs. In addition, to continue tomeet our obligations as a public company, we will likely need to increase our general and administrative capabilities. Our management, personnel and systems currentlyin place may not be adequate to support this future growth. Our need to effectively manage our operations, growth and various projects requires that we:  ●successfully attract and recruit new employees with the expertise and experience we will require; ●manage our clinical programs effectively, which we anticipate being conducted at numerous clinical sites; ●develop a marketing, distribution and sales infrastructure if we seek to market our products directly; and ●continue to improve our operational, manufacturing, quality assurance, financial and management controls, reporting systems and procedures. If we are unable to successfully manage this growth and increased complexity of operations, our business may be adversely affected. Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have amaterial adverse effect on our business. We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include failure to comply with FDA regulations, provide accurateinformation to the FDA, comply with manufacturing and reporting standards we have established, comply with federal and state health-care fraud and abuse laws andregulations, report financial information or data accurately, or disclose unauthorized activities to us. In particular, sales, marketing, and business arrangements in thehealthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws andregulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other businessarrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatorysanctions and serious harm to our reputation. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights,those actions could have a substantial impact on our business and results of operations, including the imposition of substantial fines or other sanctions. Even if we aresuccessful in defending against any such action, we would incur significant legal expenses in responding to and defending against it. 49  We may expand our business through the acquisition of companies or businesses or by entering into collaborations or by in-licensing product candidates, each ofwhich could disrupt our business and harm our financial condition. We have in the past and may in the future seek to expand our pipeline and capabilities by acquiring one or more companies or businesses, entering into collaborations,or in-licensing one or more technologies or product candidates. Our ability to grow through acquisitions, collaborations and in-licenses will depend, in part, on theavailability of suitable candidates at acceptable prices, terms and conditions, our ability to compete effectively for candidates, and the availability of capital andpersonnel resources to carry out such transactions. Acquisitions, collaborations and in-licenses involve numerous risks, including, among others:  ●substantial cash expenditures; ●adverse impact on overall profitability; ●technology development risks; ●potentially dilutive issuances of equity securities; ●reallocation of amounts of capital from other initiatives; ●incurrence of debt and contingent liabilities, some of which may be difficult or impossible to identify at the time of acquisition; ●write-off of significant amounts of goodwill, other intangible assets and/or long-lived assets as a result of deterioration in the performance of an acquiredbusiness, adverse market conditions, changes in the competitive landscape, changes in laws or regulations that restrict activities of an acquired business,or as a result of a variety of other circumstances; ●difficulties in assimilating the information and financial systems, operations, processes and products of the acquired companies; ●inability to effectively manage our expanded operations; ●potential disputes regarding contingent consideration; ●diverting our management’s attention away from other business concerns; ●disruption to our existing operations and plans; ●entering markets in which we have limited or no direct experience; ●potential loss of our key employees or key employees of the acquired companies or businesses; ●violation of confidentiality, intellectual property, and non-compete obligations or agreements by employees of an acquired business or lack of orinadequate formal intellectual property protection mechanisms in place at an acquired business; ●failure by acquired businesses to comply with applicable international, federal and state regulatory standards; ●infringement by acquired businesses of intellectual property rights of others; ●inaccurate assessment of additional post-acquisition or business venture investments, undisclosed, contingent or other liabilities or problems,unanticipated costs associated with an acquisition, and an inability to recover or manage such liabilities and costs; and ●incorrect estimates made in the accounting for acquisitions and incurrence of non-recurring charges. We cannot provide assurance that any acquisition, collaboration, or in-license will result in short-term or long-term benefits to us. We may incorrectly judge the value orworth of an acquired company or business or in-licensed product candidate. In addition, our future success would depend in part on our ability to manage the growthassociated with some of these acquisitions, collaborations and in-licenses. We cannot provide assurance that we would be able to successfully combine our businesswith that of acquired businesses, manage a collaboration or integrate in-licensed product candidates. Furthermore, the development or expansion of our business mayrequire a substantial capital investment by us. 50  Our DM199 product candidate or future product candidates may cause or have attributed to them undesirable side effects or have other properties that could delayor prevent their regulatory approval, limit the commercial scope of their approved uses, or result in significant negative consequences following any marketingapproval. Undesirable side effects caused by our DM199 product candidate or any future product candidate or that may be identified as related to our product candidates byinvestigators conducting our clinical trials or even related to competing products in development that use a similar mechanism of action or act through a similarbiological disease pathway could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the delay or denial of regulatory approvalby the FDA or other comparable foreign regulatory authorities, potential product liability claims or a more restrictive label. Results of our trials could reveal unacceptableside effects or unexpected characteristics which could be attributed to our DM199 product candidate or any future product candidates. This may require longer andmore extensive clinical development or we could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to ceaseclinical trials or deny approval of our product candidates for any or all of our targeted indications. Drug-related side effects could affect patient recruitment or the abilityof enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition andprospects significantly. Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by any suchproducts, a number of potentially significant negative consequences could result, including, among others:  ●we may suspend marketing of, or withdraw or recall, such product; ●regulatory authorities may withdraw approvals of such product; ●regulatory authorities may require additional warnings on the label or otherwise seek to limit the scope of the approved uses reflected in the label of suchproduct; ●the FDA may require the use of or modification of a Risk Evaluation and Mitigation Strategy (REMS) or a comparable foreign regulatory authority mayrequire the establishment or modification of a similar strategy that may, for instance, restrict distribution of our products and impose other implementationrequirements on us; ●regulatory authorities may require that we conduct post-marketing studies; ●we could be sued and held liable for harm caused to patients; and ●our reputation may suffer. Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate or otherwise materially harm the commercialprospects for the product candidate, if approved, and could significantly harm our business, results of operations and prospects. We face the risk of product liability claims, which could exceed our insurance coverage and produce recalls, each of which could deplete our cash resources. We are exposed to the risk of product liability claims alleging that use of our product candidates caused an injury or harm. These claims can arise at any point in thedevelopment, testing, manufacture, marketing, or sale of our product candidates and may be made directly by patients involved in clinical trials of our productcandidates, by consumers or healthcare providers, or by individuals, organizations, or companies selling our products. Product liability claims can be expensive todefend, even if the product or product candidate did not actually cause the alleged injury or harm. 51  Insurance covering product liability claims becomes increasingly expensive as a product candidate moves through the development pipeline to commercialization. Toprotect against potential product liability risks, we have AUD $20 million per occurrence and AUD $20 million aggregate clinical trial insurance for the REMEDY Phase IIclinical trial in Australia and US $5.0 million product liability insurance coverage. However, there can be no assurance that such insurance coverage is or will continue tobe adequate or available to us at a cost acceptable to us or at all. We may choose or find it necessary under our collaboration agreements to increase our insurancecoverage in the future. We may not be able to secure greater or broader product liability insurance coverage on acceptable terms or at reasonable costs when needed.Any liability for damages resulting from a product liability claim could exceed the amount of our coverage, require us to pay a substantial monetary award from our owncash resources and have a material adverse effect on our business, financial condition, and results of operations. Moreover, a product recall, if required, could generatesubstantial negative publicity about our products and business, inhibit or prevent commercialization of other products and product candidates, or negatively impactexisting or future collaborations. If we are unable to maintain product liability insurance required by our third parties, the corresponding agreements would be subject to termination, which couldhave a material adverse impact on our operations. Some of our license, clinical trials and other agreements with third parties require, and in the future will likely require, us to maintain product liability insurance in at leastcertain specified minimum amounts. If we cannot maintain acceptable amounts of coverage on commercially reasonable terms in accordance with the terms set forth inthese agreements, the corresponding agreements would be subject to termination, which could have a material adverse impact on our operations. A risk of product liability claims, and related negative publicity, is inherent in the development of human therapeutics and other products. Product liability insurance isexpensive, its availability is limited, and it may not be offered on terms acceptable to us, or at all. The commercialization of our potential products could be inhibited orprevented by an inability to maintain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims. A productliability claim against us or the withdrawal of a product from the market could have a material adverse effect upon us and our financial condition. A variety of risks are associated with operating our business internationally which could materially adversely affect our business. We currently conduct certain R&D operations in the United States and Australia. In the future, we expect to conduct certain clinical trials, and plan to seek regulatoryapproval of our product candidates, outside of the United States. Accordingly, we are subject to risks related to operating in foreign countries including, among others:  ●different regulatory requirements for drug approvals in foreign countries; ●different standards of care in various countries that could complicate the evaluation of our product candidates; ●different United States and foreign drug import and export rules; ●reduced protection for intellectual property rights in certain countries; ●withdrawal from or revision to international trade policies or agreements and the imposition or increases in import and export licensing and othercompliance requirements, customs duties and tariffs, import and export quotas and other trade restrictions, license obligations, and other non-tariff barriersto trade; ●unexpected changes in tariffs, trade barriers, and regulatory requirements; 52   ●the imposition of U.S. or international sanctions against a country, company, person, or entity with whom we do business that would restrict or prohibitcontinued business with that country, company, person, or entity; ●different reimbursement systems and different competitive drugs indicated to treat the indications for which our product candidates are being developed; ●economic weakness, including inflation, or political instability in particular foreign economies and markets; ●compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; ●compliance with the Foreign Corrupt Practices Act and other anti-corruption and anti-bribery laws; ●foreign taxes, including withholding of payroll taxes; ●foreign currency exchange rate fluctuations, which could result in increased operating expenses and/or reduced revenue, and other obligations incident todoing business in another country; ●difficulties in managing and staffing international operations and increases in infrastructure costs, including legal, tax, accounting, and informationtechnology; ●workforce uncertainty in countries where labor unrest is more common than in the United States; ●production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; ●potential liability resulting from development work conducted by foreign partners; ●transportation delays and interruptions; ●business interruptions resulting from natural disasters or geopolitical actions, including war and terrorism, or systems failure, including cybersecuritybreaches; and ●compliance with evolving and expansive international data privacy laws, such as the European Union General Data Protection Regulation. Future legislation in the United States, Europe or other countries, and/or regulations and policies adopted by the FDA, the EMA or comparable regulatoryauthorities, may increase the time and cost required for us or our collaborator to conduct and complete clinical trials of our current or future product candidates. The FDA and the EMA have each established regulations to govern the product development and approval process, as have other foreign regulatory authorities. Thepolicies of the FDA, the EMA and other regulatory authorities may change. For example, in December 2016, the 21st Century Cures Act (Cures Act) was signed into law.The Cures Act, among other things, is intended to modernize the regulation of drugs and spur innovation, but not all of its provisions have yet been implemented.Additionally, in August 2017, the FDA issued final guidance setting forth its current thinking with respect to development programs and clinical trial designs forantibacterial drugs to treat serious bacterial diseases in patients with an unmet medical need. We cannot predict what if any effect the Cures Act or any existing or futureguidance from the FDA or other regulatory authorities will have on the development of our product candidates. Recently enacted and future legislation may increase the difficulty and cost for us and our future collaborators to obtain marketing approval of and commercializeour product candidates and affect the prices we may obtain. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcaresystem that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell anyproduct candidates for which we obtain marketing approval. 53  Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals ofcontaining healthcare costs, improving quality and/or expanding access. For example, the ACA, which was enacted in the United States in March 2010, includesmeasures to change health care delivery, decrease the number of individuals without insurance, ensure access to certain basic health care services, and contain therising cost of care. This healthcare reform movement, including the enactment of the ACA, has significantly changed health care financing by both governmental andprivate insurers in the United States. With respect to pharmaceutical manufacturers, the ACA increased the number of individuals with access to health care coverage,including prescription drug coverage, but it simultaneously imposed, among other things, increased liability for rebates and discounts owed to certain entities andgovernment health care programs, fees for the manufacture or importation of certain branded drugs, and transparency reporting requirements under the PhysicianPayments Sunshine Act. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, as well as efforts by the current administration to repeal orreplace certain aspects of the ACA. Since January 2017, two U.S. Presidential Executive Orders have been signed and other directives designed to delay theimplementation of certain provisions of the ACA or otherwise remove some of the requirements for health insurance mandated by the ACA. Concurrently, Congress hasconsidered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, two billsaffecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effectiveJanuary 1, 2019, the tax-based individual shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage forall or part of a year, which is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, the U.S. President signed a continuing resolution onappropriations for fiscal year 2018. This continuing resolution delayed implementation of the tax on certain high cost employer-sponsored insurance plans until January1, 2022 and provided a moratorium on the annual fee imposed on certain health insurance providers based on market share until January 1, 2020. Further, the BipartisanBudget Act of 2018, among other things, amended the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owedby pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donuthole.” In addition to the ACA, other federal health reform measures have been proposed and adopted in the United States. For example, legislation has been enacted to reducethe level of reimbursement paid to providers under the Medicare program over time, as well as to phase in alternative payment models for provider services under theMedicare program with the goal of incentivizing the attainment of pre-defined quality measures. As these measures are not fully in effect, and since the U.S. Congresscould intervene to prevent their full implementation, it is unclear how payment reductions or the introduction of the quality payment program will impact overallphysician reimbursement under the Medicare program. It is also unclear if changes in Medicare payments to providers would impact such providers’ willingness toprescribe and administer our products, if approved. Further, there has been heightened governmental scrutiny over the manner in which companies set prices for theirmarketed products. For example, there have been several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, amongother things, bring more transparency to drug pricing, review the relationship between pricing and patient programs, and reform government program reimbursementmethodologies for drug products. We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and additionaldownward pressure on the price that we may receive for any product, if approved. Any reduction in reimbursement from Medicare or other government programs mayresult in a similar reduction in payments from private payers. The implementation of cost containment measures or other healthcare reforms may prevent us from beingable to generate revenue, attain profitability, or commercialize our product candidates. 54  Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for drugs. We cannot be surewhether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changeson the marketing approvals of our current or future product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approvalprocess may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and otherrequirements. Our inability to maintain contractual relationships with physicians could have a negative impact on our research and development. We maintain contractual relationships with respected physicians in hospitals and universities who assist us in the design of our clinical trials and interpretation of trialresults. If we are unable to enter into and maintain these relationships, our ability to develop, obtain required regulatory approvals for, and market our productcandidates could be adversely affected. In addition, it is possible that U.S. federal and state and international laws requiring us to disclose payments or other transfersof value, such as free gifts or meals, to surgeons and other healthcare providers could have a chilling effect on these relationships with individuals or entities that may,among other things, want to avoid public scrutiny of their financial relationships with us. We conduct certain research and development operations through our Australian wholly-owned subsidiary. If we lose our ability to operate in Australia, or if oursubsidiary is unable to receive the research and development incentive payment allowed by Australian regulations, our business and results of operations couldsuffer. We maintain a wholly-owned Australian subsidiary, DiaMedica Australia Pty Ltd., to conduct various clinical activities for our product and development candidate inAustralia. Due to the geographical distance and lack of employees currently in Australia, as well as our lack of experience operating in Australia, we may not be able toefficiently or successfully monitor, develop and commercialize our lead product candidate in Australia, including conducting clinical trials. Furthermore, we have noassurance that the results of any clinical trials that we conduct for our product candidate in Australia will be accepted by the FDA or foreign regulatory authorities fordevelopment and commercialization approvals. In addition, current Australian tax regulations provide for a refundable R&D incentive payment equal to 43.5% of qualified expenditures. We received incentivepayments of approximately USD $856,000 and USD $621,000 during 2019 and 2018, respectively, for research expenditures made during 2019 and 2018. If our subsidiaryloses its ability to operate in Australia, or if we are ineligible or unable to receive the R&D incentive payment, or the Australian government significantly reduces oreliminates the incentive program, our business and results of operations may be adversely affected. Fluctuations in insurance cost and availability could adversely affect our operating results or risk management profile. We hold a number of insurance policies, including product liability insurance, directors’ and officers’ liability insurance, property insurance, and workers’ compensationinsurance. The costs of maintaining adequate insurance coverage, most notably directors’ and officers’, have increased significantly recently and may continue to do soin the future, thereby adversely affecting our operating results. If such costs continue to increase, we may be forced to accept lower coverage and higher deductibles,which would have an adverse effect on our risk management profile and inhibit our ability to recruit qualified directors and officers. In addition, if any of our currentinsurance coverage should become unavailable to us or become economically impractical, we would be required to operate our business without indemnity fromcommercial insurance providers. 55  Risks Related to Intellectual Property If we are unable to adequately protect and enforce our intellectual property, our competitors may take advantage of our development efforts or acquiredtechnology and compromise our prospects of marketing and selling our product candidates. We believe that patents and other proprietary rights are key to our business. Our policy is to file patent applications to protect technology, inventions, andimprovements that may be important to the development of our business. We also rely upon trade secrets, know-how, continuing technological innovations, andlicensing opportunities to develop and maintain our competitive position. We plan to enforce our issued patents and our rights to proprietary information andtechnology. We review third-party patents and patent applications, both to refine our own patent strategy and to identify useful licensing opportunities. Our success depends, in part, on our ability to secure and protect our intellectual property rights and to operate without infringing on the proprietary rights of othersor having third parties circumvent the rights owned or licensed by us. We have a number of patents, patent applications and rights to patents related to ourcompounds, product candidates and technology, but we cannot be certain that they will be enforceable or provide adequate protection or that pending patentapplications will result in issued patents. To the extent that development, manufacturing, and testing of our product candidates is performed by third party contractors, such work is performed pursuant to feefor service contracts. Under the contracts, all intellectual property, technology know-how, and trade secrets arising under such agreements are our exclusive propertyand must be kept confidential by the contractors. It is not possible for us to be certain that we have obtained from the contractors all necessary rights to suchtechnologies. Disputes may arise as to the scope of the contract or possible breach of contract. No assurance can be given that our contracts would be enforceable orwould be upheld by a court. The patent positions of pharmaceutical and biotechnology firms, ourselves included, are uncertain and involve complex questions of law and fact for whichimportant legal issues remain unresolved. Therefore, it is not clear whether our pending patent applications will result in the issuance of patents or whether we willdevelop additional proprietary products which are patentable. Part of our strategy is based on our ability to secure a patent position to protect our technology. Thereis no assurance that we will be successful in this approach and failure to secure patent protection may have a material adverse effect upon us and our financialcondition. Also, we may fail in our attempt to commercialize products using currently patented or licensed technology without having to license additional patents.Moreover, it is not clear whether the patents issued or to be issued will provide us with any competitive advantages or if any such patents will be the target ofchallenges by third parties, whether the patents of others will interfere with our ability to market our products, or whether third parties will circumvent our patents bymeans of alternate processes. Furthermore, it is possible for others to develop products that have the same effect as our product candidates or technologies on anindependent basis or to design around technologies patented by us. Patent applications relating to or affecting our business may have been filed by pharmaceuticalor biotechnology companies or academic institutions. Such applications may conflict with our technologies or patent applications and such conflict could reduce thescope of patent protection that we could otherwise obtain or even lead to the rejection of our patent applications. There is no assurance that we can enter intolicensing arrangements on commercially reasonable terms or develop or obtain alternative technology in respect of patents issued to third parties that incidentallycover our products or production technologies. Any inability to secure licenses or alternative technology could result in delays in the introduction of some of ourproduct candidates or even lead to us being prevented from pursuing the development, manufacture or sale of certain products. Moreover, we could potentiallyincur substantial legal costs in defending legal actions that allege patent infringement, or by initiating patent infringement suits against others. It is not possible forus to be certain that we are the creator of inventions covered by pending patent applications or that we were the first to invent or file patent applications for anysuch inventions. While we have used commercially reasonable efforts to obtain assignments of intellectual property from all individuals who may have createdmaterials on our behalf (including with respect to inventions covered by our patent and pending patent applications), it is not possible for us to be certain that wehave obtained all necessary rights to such materials. No assurance can be given that our patents, if issued, would be upheld by a court, or that a competitor’stechnology or product would be found to infringe on our patents. Moreover, much of our technology know-how that is not patentable may constitute trade secrets.Therefore, we require our employees, consultants, advisors and collaborators to enter into confidentiality agreements either as stand-alone agreements or as part oftheir employment or consulting contracts. However, no assurance can be given that such agreements will provide meaningful protection of our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure of confidential information. Also, while we have used commerciallyreasonable efforts to obtain executed copies of such agreements from all employees, consultants, advisors and collaborators, no assurance can be given thatexecuted copies of all such agreements have been obtained. 56  We may require additional third-party licenses to effectively develop and manufacture our product candidates and are currently unable to predict the availabilityor cost of such licenses. A substantial number of patents have already been issued to other biotechnology and pharmaceutical companies. To the extent that valid third-party patent rights coverour product candidates, we or our strategic collaborators would be required to seek licenses from the holders of these patents in order to manufacture, use, or sell theseproduct candidates, and payments under them would reduce our profits from these product candidates. We are currently unable to predict the extent to which we maywish or be required to acquire rights under such patents, the availability and cost of acquiring such rights, and whether a license to such patents will be available onacceptable terms, or at all. There may be patents in the United States or in foreign countries or patents issued in the future that are unavailable to license on acceptableterms. Our inability to obtain such licenses may hinder or eliminate our ability to develop, manufacture and market our product candidates. Changes in patent law and its interpretation could diminish the value of patents in general, thereby impairing our ability to protect our product candidates. As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property rights, particularly patents. Obtainingand enforcing patents in the biopharmaceutical industry involves technological and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly,time consuming, and inherently uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protectionavailable in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our and ourlicensors’ or collaborators’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained.Depending on decisions by the U.S. Congress, the federal courts, and the U.S. Patent and Trademark Office (USPTO), the laws and regulations governing patents couldchange in unpredictable ways that would weaken our and our licensors’ or collaborators’ ability to obtain new patents or to enforce existing patents and patents we andour licensors or collaborators may obtain in the future. Changes in either the patent laws or interpretation of the patent laws in the United States or other countries couldincrease the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. 57  Assuming that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent,while outside the United States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith America Invents Act, or theAmerica Invents Act, enacted in September 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements forpatentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to inventthe claimed invention. A third party that files a patent application in the USPTO after March 2013, but before us could, therefore, be awarded a patent covering aninvention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant of the time from invention to filing of apatent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot becertain that we or our licensors were the first to either (i) file any patent application related to our product candidates or (ii) invent any of the inventions claimed in our orour licensor’s patents or patent applications. The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation.These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent inUSPTO-administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Because of a lower evidentiary standard inUSPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provideevidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if firstpresented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have beeninvalidated if first challenged by the third party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase theuncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issuedpatents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances orweakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our and our licensors’ or collaborators’ ability to obtainpatents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S.Congress, the federal courts, and the U.S. Patent and Trademark Office, and similar legislative, judicial, and administrative bodies in other countries, the laws andregulations governing patents could change in unpredictable ways that would weaken our and our licensors’ or collaborators’ ability to obtain new patents or to enforceexisting patents and patents we and our licensors or collaborators may obtain in the future. Litigation regarding patents, patent applications, and other proprietary rights may be expensive, time consuming and cause delays in the development andmanufacturing of our product candidates. Third parties may claim that we are using their proprietary information without authorization. Third parties may also have or obtain patents and may claim thattechnologies licensed to or used by us infringe their patents. If we are required to defend patent infringement actions brought by third parties, or if we sue to protect ourown patent rights or otherwise to protect our proprietary information and to prevent its disclosure, we may be required to pay substantial litigation costs and managerialattention may be diverted from business operations even if the outcome is in our favor. In addition, any legal action that seeks damages or an injunction to stop us fromcarrying on our commercial activities relating to the affected technologies could subject us to monetary liability (including treble damages and attorneys’ fees if we arefound to have willfully infringed) and require us or any third-party licensors to obtain a license to continue to use the affected technologies. We cannot predict whetherwe would prevail in any of these types of actions or that any required license would be available on commercially acceptable terms or at all. Some of our competitors maybe able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. 58  Competitors may infringe our patents or other intellectual property. If we were to initiate legal proceedings against a third party to enforce a patent covering our productcandidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States,defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of severalstatutory requirements, including lack of novelty, obviousness, written description or non-enablement. Grounds for an unenforceability assertion could be an allegationthat someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Theoutcome following legal assertions of invalidity and unenforceability is unpredictable. Moreover, similar challenges may be made by third parties outside the context oflitigation, e.g., via administrative proceedings such as post grant or inter partes review in the United States or via oppositions or other similar proceedings in othercountries/regions. Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventionswith respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to itfrom the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all, or if a non-exclusivelicense is offered and our competitors gain access to the same technology. Our defense of litigation, validity or enforceability, interference or derivation proceedingsmay fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated withlitigation or such other proceedings could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our researchprograms, license necessary technology from third parties, or enter into development partnerships that would help us bring our product candidates to market. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk thatsome of our confidential information could be compromised by disclosure. There could also be public announcements of the results of hearings, motions, or otherinterim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the market priceof our common shares. If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experiencedisruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business. We are a party to a license agreement relating to an expression system and cell line for use in the production of DM199 or any human KLK1, and we may need to obtainadditional licenses from others to advance our R&D activities or allow the commercialization of DM199 or any other product candidates we may identify and pursue.Future license agreements may impose various development, diligence, commercialization and other obligations on us. If any of our in-licenses are terminated, or if theunderlying patents fail to provide the intended exclusivity, competitors or other third parties may gain access to technologies that are material to our business, and wemay be required to cease our development and commercialization of DM199 or other product candidates that we may identify or to seek alternative manufacturingmethods. However, suitable alternatives may not be available or the development of suitable alternatives may result in a significant delay in our commercialization ofDM199. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations and prospects. 59  Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including, among others:  ●the scope of rights granted under the license agreement and other interpretation-related issues; ●the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the licensingagreement; ●the sublicensing of patent and other rights under our collaborative development relationships; ●our diligence obligations under the license agreement and what activities satisfy those diligence obligations; ●the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us andour partners; and ●the priority of invention of patented technology. In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in suchagreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to bethe scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevantagreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes overintellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may beunable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial condition,results of operations, and prospects. Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them. Because we rely on third parties to develop our products, we must share trade secrets with them. We seek to protect our proprietary technology in part by entering intoconfidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, employment or consulting agreements, or other similaragreements with our collaborators, advisors, employees, and consultants prior to beginning research or disclosing proprietary information. These agreements typicallyrestrict the ability of our collaborators, advisors, employees, and consultants to publish data potentially relating to our trade secrets. Our academic collaboratorstypically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure our intellectual propertyrights arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with otherparties. We also conduct joint R&D programs which may require us to share trade secrets under the terms of R&D collaboration or similar agreements. However, wecannot be certain that such agreements have been entered into with all relevant parties. Moreover, despite our efforts to protect our trade secrets, our competitors maydiscover our trade secrets, either through breach of these agreements, independent development, or publication of information including our trade secrets in caseswhere we do not have proprietary or otherwise protected rights at the time of publication. Trade secrets can be difficult to protect. If the steps taken to maintain ourtrade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secrets. A competitor’s discovery of ourtrade secrets may impair our competitive position and could have a material adverse effect on our business and financial condition. 60  Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time. Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S.non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our productcandidates are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics or biosimilars. Given the amountof time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly aftersuch candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others fromcommercializing products similar or identical to ours. We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third partiesor that our employees have wrongfully used or disclosed alleged trade secrets of their former employers. As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at universities or other biotechnology orpharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractorsdo not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independentcontractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employees’former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to payingmonetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defendingagainst such claims, litigation could result in substantial costs and be a distraction to management and other employees. Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO andvarious governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have systems in place toremind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and variousnon-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patentapplication process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of alate fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of thepatent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter themarket and this circumstance would have a material adverse effect on our business. 61  We may not be able to protect our intellectual property rights throughout the world. Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectualproperty rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do notprotect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties frompracticing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States orother jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may alsoexport infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may competewith our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certaincountries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly thoserelating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of ourproprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert ourefforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and could put our patent applicationsat risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remediesawarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain asignificant commercial advantage from the intellectual property that we develop or license. Risks Related to Our Common Shares Our common share price has been volatile and may continue to be volatile. Our common shares trade on The Nasdaq Capital Market under the trading symbol “DMAC.” A number of factors could influence the volatility in the trading price ofour common shares, including changes in the economy or in the financial markets, industry related developments, and the impact of material events and changes in ouroperations. Our quarterly losses may vary because of expenses we incur related to our R&D and clinical activities, including the timing of costs for manufacturingDM199 and initiating and completing preclinical and clinical trials. Each of these factors could lead to increased volatility in the market price of our common shares. Inaddition, the market prices of the securities of our competitors may also lead to fluctuations in the trading price of our common shares. We do not have a very active trading market for our common shares and one may never develop. Our common shares commenced trading in the United States on The Nasdaq Capital Market in December 2018. Previously our shares traded in Canada on the TSXVenture Exchange. We do not have a very active trading market for our common shares, and one may never develop. Although we anticipate a more active tradingmarket for our common shares will develop in the future, we can give no assurance that this will occur or that an active trading market will be sustained. If an activemarket for our common shares does not develop, it may be difficult for you to sell our common shares at a favorable price or at all. We may issue additional common shares resulting in share ownership dilution. Future dilution will likely occur due to anticipated future equity issuances by us. To the extent we raise additional capital through the sale of equity or convertible debtsecurities, the ownership interests of our shareholders will be diluted. In addition, as of December 31, 2019, we had outstanding warrants to purchase 971,953 commonshares, options to purchase 1,220,359 common shares, deferred share units representing 21,183 common shares and 1,384,822 common shares reserved for futureissuance in connection with future grants under the DiaMedica Therapeutics Inc. 2019 Omnibus Incentive Plan. If these or any future outstanding warrants, options, ordeferred share units are exercised or otherwise converted into our common shares, our shareholders will experience additional dilution. 62  If there are substantial sales of our common shares or the perception that such sales could occur, the market price of our common shares could decline. Sales of substantial numbers of our common shares or the perception that such sales could occur could cause a decline in the market price of our common shares. Anysales by existing shareholders or holders who exercise their warrants or stock options may have an adverse effect on our ability to raise capital and may adversely affectthe market price of our common shares. We could be subject to securities class action litigation, which is expensive and could divert management attention. In the past, securities class action litigation has often been brought against a company following a decline or increase in the market price of its securities or certainsignificant business transactions. We may become involved in this type of litigation in the future, especially if our clinical trial results are not successful or we enter intoan agreement for a significant business transaction. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and ourresources, which could harm our business. This is particularly true in light of our limited securities litigation insurance coverage. If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, the market price of ourcommon shares and trading volume could decline. The market price and trading volume for our common shares will depend in part on the research and reports that securities or industry analysts publish about us or ourbusiness. We do not have any control over these analysts. There can be no assurance that analysts will continue to cover us or provide favorable coverage. If one ormore of the analysts who cover us downgrade our common shares or change their opinion of our common shares, the market price of our common shares would likelydecline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, whichcould cause the market price of our common shares or trading volume to decline. We are an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to us as such may make ourcommon shares less attractive to our shareholders and investors. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012. We may remain an emerging growth company until December 31,2023, the last day of the fiscal year following the fifth anniversary of our first sale of common shares pursuant to a registration statement under the Securities Act of1933, as amended (the Securities Act) or until such earlier time as we have more than $1.07 billion in annual revenue, the market value of our common shares held bynon-affiliates is more than $700 million or we issue more than $1 billion of non-convertible debt over a three-year period. For so long as we remain an emerging growthcompany, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerginggrowth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002(Section 404), not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory auditfirm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, reduced disclosure obligationsregarding executive compensation and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approvalof any golden parachute payments not previously approved. 63  We are also a “smaller reporting company” under the federal securities laws and, as such, are subject to scaled disclosure requirements afforded to such companies. Forexample, as a smaller reporting company, we are subject to reduced executive compensation disclosure requirements. Our shareholders and investors may find our common shares less attractive as a result of our status as an “emerging growth company” and “smaller reportingcompany” and our reliance on the reduced disclosure requirements afforded to these companies. If some of our shareholders or investors find our common shares lessattractive as a result, there may be a less active trading market for our common shares and the market price of our common shares may be more volatile. Our inability to comply with Nasdaq’s continued listing requirements could result in our common shares being delisted, which could affect the market price andliquidity of our common shares and reduce our ability to raise capital. Because our common shares are listed on The Nasdaq Capital Market, we are required to meet certain qualitative and financial tests to maintain the listing of ourcommon shares on The Nasdaq Capital Market. If we do not maintain compliance with Nasdaq’s continued listing requirements within specified periods and subject topermitted extensions, our common shares may be recommended for delisting (subject to any appeal we would file). No assurance can be provided that we will complywith these continued listing requirements. If our common shares were delisted, it could be more difficult to buy or sell our common shares and to obtain accuratequotations, and the price of our common shares could suffer a material decline. Delisting would also impair our ability to raise additional capital. Any failure to maintain an effective system of internal controls may result in material misstatements of our consolidated financial statements or cause us to fail tomeet our reporting obligations or fail to prevent fraud; and in that case, our shareholders or other investors could lose confidence in our financial reporting, whichwould harm our business and could negatively impact the market price of our common shares. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we fail to maintain an effective system of internal controls, wemight not be able to report our financial results accurately or prevent fraud; and in that case, our shareholders or other investors could lose confidence in our financialreporting, which would harm our business and could negatively impact the market price of our common shares. As a result of our limited administrative staffing levels,internal controls that rely on segregation of duties in many cases are not possible. Due to resource constraints and the present stage of our development, we do nothave sufficient size and scale to warrant the hiring of additional staff to address this potential weakness at this time. To help mitigate the impact of this, we are highlyreliant on the performance of compensating procedures and senior management’s review and approval. Even if we conclude that our internal control over financialreporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes inaccordance with generally accepted accounting principles in the United States, because of its inherent limitations, internal control over financial reporting may notprevent or detect fraud or misstatements. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm ourresults of operations or cause us to fail to meet our future reporting obligations. If we fail to timely achieve and maintain the adequacy of our internal control over financial reporting, we may not be able to produce reliable financial reports or helpprevent fraud. Our failure to achieve and maintain effective internal control over financial reporting could prevent us from complying with our reporting obligations on atimely basis, which could result in the loss of shareholder or other investor confidence in the reliability of our consolidated financial statements, harm our business andnegatively impact the market price of our common shares. 64  Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to furnish a report by our management regarding our internal control over financial reporting, and ifwe become an accelerated filer under the federal securities laws, we will be required to include an attestation report on internal control over financial reporting issued byour independent registered public accounting firm. There is a risk that neither we nor our independent registered public accounting firm will be able to conclude withinthe prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financialmarkets due to a loss of confidence in the reliability of our financial statements. We have never paid dividends and do not expect to do so in the foreseeable future. We have not declared or paid any cash dividends on our common shares to date. The payment of dividends in the future will be dependent on our earnings andfinancial condition and on such other factors as our Board of Directors considers appropriate. Unless and until we pay dividends, shareholders may not receive a returnon their common shares. There is no present intention by our Board of Directors to pay dividends on our common shares. We currently intend to retain all of our futureearnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends.As a result, appreciation, if any, in the market price of our common shares will be your sole source of gain for the foreseeable future. Risks Related to Our Jurisdiction of Organization It may be difficult for non-Canadian shareholders or investors to obtain and enforce judgments against us because of our organization as a British Columbiacorporation. We are a corporation existing under the laws of British Columbia, Canada. Two of our directors are residents of Canada, and all or a substantial portion of their assets,and a portion of our assets, are located outside the United States. Consequently, it may be difficult for holders of our securities who reside in the United States to effectservice within the United States upon those directors who are not residents of the United States. It may also be difficult for holders of our securities who reside in theUnited States to realize in the United States upon judgments of courts of the United States predicated upon our civil liability and the civil liability of our directors, andofficers under the United States federal securities laws. Our shareholders and other investors should not assume that British Columbian or Canadian courts (i) wouldenforce judgments of United States courts obtained in actions against us or such directors, or officers predicated upon the civil liability provisions of the United Statesfederal securities laws or the securities or “blue sky” laws of any state or jurisdiction of the United States, or (ii) would enforce, in original actions, liabilities against usor such directors, or officers predicated upon the United States federal securities laws or any securities or “blue sky” laws of any state or jurisdiction of the UnitedStates. In addition, the protections afforded by the securities laws of British Columbia or Canada may not be available to our shareholders or other investors in theUnited States. 65  We are governed by the corporate laws of British Columbia, which in some cases have a different effect on shareholders than the corporate laws in effect in theUnited States. We are a British Columbia corporation. Our corporate affairs and the rights of holders of our common shares are governed by British Columbia’s Business CorporationsAct and applicable securities laws, which laws may differ from those governing a company formed under the laws of a United States jurisdiction. The provisions underthe BCBCA and other relevant laws may affect the rights of shareholders differently than those of a company governed by the laws of a United States jurisdiction andmay, together with our Notice of Articles and Articles, have the effect of delaying, deferring or discouraging another party from acquiring control of our company bymeans of a tender offer, proxy contest or otherwise, or may affect the price an acquiring party would be willing to offer in such an instance. The material differencesbetween the BCBCA and the Delaware General Corporation Law, by way of example, that may be of most interest to shareholders include the following:  ●for material corporate transactions (such as mergers and amalgamations, other extraordinary corporate transactions, or amendments to our Notice of Articles),the BCBCA, subject to the provisions of our Articles, generally requires two-thirds majority vote by shareholders; whereas, the DGCL generally only requires amajority vote of shareholders;  ●under the BCBCA, a holder of 5% or more of our common shares can requisition a special meeting at which any matters that can be voted on at our annualmeeting can be considered; whereas, the DGCL does not give this right;  ●our Articles require two-thirds majority vote by shareholders to pass a resolution for one or more directors to be removed; whereas, the DGCL only requires theaffirmative vote of a majority of the shareholders; and  ●our Articles may be amended by resolution of our directors to alter our authorized share structure, including to (a) subdivide or consolidate any of our sharesand (b) create additional classes or series of shares; whereas, under the DGCL, a majority vote by shareholders is generally required to amend a corporation’scertificate of incorporation and a separate class vote may be required to authorize alternations to a corporation’s authorized share structure. We cannot predict if investors find our common shares less attractive because of these material differences. If some investors find our common shares less attractive asa result, there may be a less active trading market for our common shares and our share price may be more volatile. Our shareholder rights plan may delay or prevent an acquisition of us that shareholders may consider favorable or may prevent efforts by our shareholders tochange our directors or our management, which could decrease the value of our common shares. On December 21, 2017, our shareholders approved the renewal of a shareholder rights plan agreement through the annual general meeting to be held by DiaMedica in2020. The shareholder rights plan is designed to provide adequate time for our Board of Directors and shareholders to assess an unsolicited takeover bid for ourcompany, to provide our Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value if a takeover bid is made, and toprovide shareholders with an equal opportunity to participate in a takeover bid and receive full and fair value for their common shares. Under the terms of theshareholder rights plan, the rights will become exercisable only when a person, including any party related to it, acquires or attempts to acquire 20% or more of ouroutstanding common shares without complying with the “permitted bid” provisions of the plan or without approval of our Board of Directors. Should such anacquisition occur or be announced, each right would, upon exercise, entitle a rights holder, other than the acquiring person and related persons, to purchase commonshares at a 50% discount to the market price at the time. Under the plan, a “permitted bid” is a bid made to all holders of our common shares and which is open foracceptance for not less than 60 days. If at the end of 60 days at least 50% of the outstanding common shares, other than those owned by the offeror and certain relatedparties have been tendered, the offeror may take up and pay for the common shares but must extend the bid for a further 10 days to allow other shareholders to tender. 66  While we believe our rights plan enables our Board of Directors to help ensure that our shareholders are not deprived of the opportunity to realize the full and fair valueof their investments, the rights plan may inhibit a change in control of our company by a third party in a transaction not approved by our Board of Directors. If a changein control is inhibited or delayed in this manner, it may adversely affect the market price of our common shares. The shareholder rights plan is set to expire at the close ofour annual general meeting of shareholders in 2020 and we currently anticipate letting the plan expire at that time. We may be classified as a “passive foreign investment company” in future taxable years, which may have adverse U.S. federal income tax consequences for U.S.shareholders. Generally, for any taxable year in which 75% or more of our gross income is passive income, or at least 50% of the average quarterly value of our assets (which may bedetermined in part by the market value of our common shares, which is subject to change) are held for the production of, or produce, passive income, we would becharacterized as a passive foreign investment company (PFIC) for U.S. federal income tax purposes. The average percentage of a corporation’s assets that produce orare held for the production of passive income generally is determined on the basis of the fair market value of the corporation’s assets at the end of each quarter (whichmay be determined in part by the market value of our common shares, which is subject to change). The tests for determining PFIC status for any taxable year are dependent upon a number of factors, some of which are beyond our control, including the value of ourassets, the market price of our common shares, and the amount and type of our gross income. Based on these tests (i) we believe that we were a PFIC for the taxable yearended December 31, 2016, and (ii) we do not believe that we were a PFIC for the taxable years ended December 31, 2019, 2018 and 2017. Our status as a PFIC is a fact-intensive determination made for each taxable year, and we cannot provide any assurance regarding our PFIC status for the taxable year ending December 31, 2020 or forfuture taxable years. U.S. shareholders who own our common shares for any period during which we are a PFIC will be required to file IRS Form 8621 for each tax yearduring which they hold our common shares. If we are a PFIC for any year during a non-corporate U.S. shareholder’s holding period of our common shares, and the U.S. shareholder does not make a QualifiedElecting Fund election (QEF Election) or a “mark-to-market” election, both as described below, then such non-corporate U.S. shareholder generally will be required totreat any gain realized upon a disposition of our common shares, or any so-called “excess distribution” received on our common shares, as ordinary income, rather thanas capital gain, and the preferential tax rate applicable to dividends received on our common shares would not be available. This income generally would be allocatedover a U.S. shareholder’s holding period with respect to our common shares and the amount allocated to prior years will be subject to tax at the highest tax rate in effectfor that year and an interest charge would be imposed on the amount of deferred tax on the income allocated to prior taxable years. Pursuant to the specific provisions ofthe PFIC rules, a taxpayer may realize gain on the disposition of common shares if the securities are disposed of by a holder whose securities are attributed to the U.S.shareholder, if the securities are pledged as security for a loan, transferred by gift or death, or are subject to certain corporate distributions. Additionally, if we are aPFIC, a U.S. shareholder who acquires our common shares from a decedent would be denied normally available step-up in tax basis for our common shares to fair marketvalue at the date of death but instead would have a tax basis equal to the lower of the fair market value of such common shares or the decedent’s tax basis in suchcommon shares. 67  A U.S. shareholder may avoid these adverse tax consequences by making a timely and effective QEF election. A U.S. shareholder who makes a QEF election generallymust report, on a current basis, its share of our ordinary earnings and net capital gains, whether or not we distribute any amounts to our shareholders, and would berequired to comply with specified information reporting requirements. Any gain subsequently recognized upon the sale by that U.S. shareholder of the common sharesgenerally would be taxed as capital gain and the denial of the basis step-up at death described above would not apply. The QEF election is available only if the companycharacterized as a PFIC provides a U.S. shareholder with certain information regarding its earnings and capital gains, as required under applicable U.S. Treasuryregulations. We intend to provide all information and documentation that a U.S. shareholder making a QEF election is required to obtain for U.S. federal income taxpurposes (e.g., the U.S. shareholder’s pro rata share of ordinary income and net capital gain, and a “PFIC Annual Information Statement” as described in applicable U.S.Treasury regulations). As an alternative to a QEF Election, a U.S. shareholder may also mitigate the adverse tax consequences of PFIC status by timely making a “mark-to-market” election. AU.S. shareholder who makes the mark-to-market election generally must include as ordinary income each year the increase in the fair market value of the common sharesand deduct from gross income the decrease in the value of such shares during each of its taxable years. Losses would be allowed only to the extent of the net mark-to-market gain accrued under the election. If a mark-to-market election with respect to our common shares is in effect on the date of a U.S. shareholder’s death, the tax basisof the common shares in the hands of a U.S. shareholder who acquired them from a decedent will be the lesser of the decedent’s tax basis or the fair market value of thecommon shares. A mark-to-market election may be made and maintained only if our common shares are regularly traded on a qualified exchange, including Nasdaq.Whether our common shares are regularly traded on a qualified exchange is an annual determination based on facts that, in part, are beyond our control. Accordingly, aU.S. shareholder might not be eligible to make a mark-to-market election to mitigate the adverse tax consequences if we are characterized as a PFIC. Certain economic risks are inherent in making either a QEF Election or a mark-to-market election. If a QEF Election is made, it is possible that a small but significantamount of earned income will be reported to a U.S. shareholder as taxable income as long as the company invests its cash reserves, and income taxes will be due andpayable on such an amount. A U.S. shareholder of our common shares may pay tax on such “phantom” income, i.e., income reported to it pursuant to the QEF Election,but not actually received. There is no assurance that any distribution or profitable sale will ever be made regarding our common shares, so the tax liability may result in anet economic loss. A mark-to-market election may result in significant share price gains in one year causing a significant income tax liability. This gain may be offset inanother year by significant losses. If a mark-to-market election is made, this highly variable tax gain or loss may result in substantial and unpredictable changes intaxable income. The amount included in income under a mark-to-market election may be substantially greater than the amount included under a QEF election. Both theQEF and mark-to-market elections are binding on the U.S. shareholder for all subsequent years that the U.S. shareholder owns our shares unless permission to revokethe election is granted by the IRS. Although we generally will continue to be treated as a PFIC as to any U.S. shareholder if we are a PFIC for any year during a U.S. shareholder’s holding period, if wecease to satisfy the requirements for PFIC classification, the U.S. shareholder may avoid PFIC classification for subsequent years if the U.S. shareholder elects to make aso-called “purging election,” by recognizing income based on the unrealized appreciation in the common shares through the close of the tax year in which we cease tobe a PFIC. RULES RELATING TO A PFIC ARE VERY COMPLEX. YOU SHOULD CONSULT YOUR TAX ADVISER CONCERNING THE RELATIVE MERITS AND THE ECONOMICAND TAX IMPACT OF PFIC RULES TO YOUR INVESTMENT IN OUR COMMON SHARES AS A NON-ELECTING U.S. SHAREHOLDER, A U.S. SHAREHOLDERMAKING A QEF ELECTION, OR A U.S. SHAREHOLDER MAKING A MARK-TO-MARKET ELECTION. 68  Should we be classified as a PFIC during a U.S. shareholder’s holding period for our common shares, each such U.S. shareholder should consult their own tax advisorswith respect to the possibility of making these elections and the U.S. federal income tax consequences of the acquisition, ownership and disposition of our commonshares. In addition, the possibility of us being classified as a PFIC may deter certain U.S. investors from purchasing our common shares, which could have an adverseimpact on the market price of our common shares and our ability to raise additional financing by selling equity securities, including our common shares. Item 1B.Unresolved Staff Comments This Item 1B is inapplicable to us as a smaller reporting company. Item 2.Properties Our principal executive offices, together with our research and development operations, are at the office of our wholly owned subsidiary, DiaMedica USA Inc., located atTwo Carlson Parkway, Suite 260, Minneapolis, Minnesota, USA 55447. We lease these premises, which consist of approximately 3,800 square feet, pursuant to a leasethat expires in August 2022. We believe that our facilities are adequate for our current needs and that suitable additional space will be available as and when needed onacceptable terms. Item 3.Legal Proceedings In March 2013, we entered into a clinical research agreement with PRA Netherlands to perform a double-blinded, placebo-controlled, single-dose and multiple-dosestudy to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics and proof of concept of DM199 in healthy subjects and in patients with Type 2 diabetesmellitus. In one arm of this study, we enrolled 36 patients with Type 2 diabetes who were treated with two SC dose levels of DM199 over a 28-day period. This studyachieved its primary endpoint and demonstrated that DM199 was well-tolerated. The secondary endpoints for this study, however, were not met. The secondary efficacyendpoints were confounded due to what we believe were significant execution errors caused by protocol deviations occurring at the clinical trial site that were unable tobe reconciled. To date, we have been unable to obtain the complete study records from PRA Netherlands and generate a final study report. On November 14, 2017, weinitiated litigation with PRA Netherlands in the United States District Court, Southern District of New York, to compel them to comply with the terms of the clinicalresearch agreement, including providing full study records and to recover damages. After PRA Netherlands objected to the venue, on August 24, 2018, we re-filed ourcomplaint against both PRA Netherlands and its U.S. parent, PRA Health Sciences, Inc. (“PRA USA” and collectively with PRA Netherlands, PRA), in the United StatesDistrict Court, District of Delaware. PRA again objected to the venue, we intend to re-file our complaint against PRA in the United States District Court, District ofMinnesota. The complaint alleges, among other things, that PRA failed to conduct the study in accordance with the study protocol and with generally acceptedstandards for conducting such clinical trials and that PRA further refused to provide us with all data, records and documentation, and/or access thereto, related to thestudy in accordance with the clinical trial study agreement. The complaint seeks to compel PRA to comply with the terms of the clinical trial study agreement, includingproviding full study records and to recover damages. On November 19, 2018, PRA Netherlands and PRA USA filed motions to dismiss the lawsuit. We subsequentlyrequested, and PRA Netherlands and PRA USA agreed, that we be permitted to file a motion seeking to transfer the Delaware action to the United States District Court,District of Minnesota. On February 20, 2019, we filed this motion to transfer venue. From time to time, we may be subject to other various ongoing or threatened legal actions and proceedings, including those that arise in the ordinary course ofbusiness, which may include employment matters and breach of contract disputes. Such matters are subject to many uncertainties and to outcomes that are notpredictable with assurance and that may not be known for extended periods of time. Other than the PRA matter noted above, we are not currently engaged in or aware ofany threatened legal actions. 69  Item 4.Mine Safety Disclosures Not applicable. 70  PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common shares are listed on The Nasdaq Capital Market under the trading symbol “DMAC” and have been so listed since December 7, 2018, the date of our initialpublic offering in the United States. Our common shares previously traded in Canada on the TSX Venture Exchange under the trading symbol “DMA” through January18, 2019. We voluntarily delisted our common shares from the TSX Venture Exchange since we believe that the financial and administrative costs associated withmaintaining a dual listing are not justified. Prior to our initial public offering, our common shares traded over-the-counter in the United States on the OTCQB marketplaceunder the trading symbol “DMCAD” from November 15, 2018 to December 7, 2018 and before November 15, 2018, under the trading symbol “DMCAF.” Number of Record Holders As of March 20, 2020, we had 43 holders of record of our common shares. This does not include persons whose common shares are in nominee or “street name”accounts through brokers or other nominees. Dividend Policy We have never declared or paid cash dividends on our common shares, and currently do not have any plans to do so in the foreseeable future. We expect to retain ourfuture earnings, if any, for use in the operation and expansion of our business. Additionally, we may in the future become subject to contractual restrictions on, orprohibitions against, the payment of dividends. Subject to the foregoing, the payment of cash dividends in the future, if any, will be at the discretion of our Board ofDirectors and will depend upon such factors as earnings levels, capital requirements, our overall financial condition and any other factors deemed relevant by our Boardof Directors. As a result, you will likely need to sell your common shares to realize a return on your investment and you may not be able to sell your shares at or abovethe price you paid for them. Use of Proceeds On December 11, 2018, the SEC declared effective our registration statement on Form S-1 (File No. 333- 228313), as amended, filed in connection with our initial publicoffering. Pursuant to the registration statement, we issued and sold an aggregate of 4,100,000 common shares in the initial public offering at a price to the public of $4.00per share. As a result of the offering, we received gross proceeds of approximately $16.4 million, resulting in net proceeds to us of approximately $14.7 million, afterdeducting the underwriting discount and offering expenses. None of the expenses associated with the initial public offering were paid to directors, officers, personsowning ten percent or more of any class of equity securities, or to their associates, or to our affiliates. Craig-Hallum Capital Group LLC (Craig-Hallum) acted as the solemanaging underwriter for the offering. As of December 31, 2019, we have used approximately $9.1 million of the proceeds from our initial public offering to fund clinical development of DM199, to conductresearch activities and for working capital and general corporate purposes. No payments were made by us to directors, officers or persons owning ten percent or more ofour common shares or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and bonuses and to non-employee directors as compensation for board and board committee service. There has been no material change in the planned use of proceeds from our initial publicoffering from that described in the final prospectus, dated December 6, 2018, filed with the SEC on December 10, 2018 pursuant to Rule 424(b)(4) under the SecuritiesAct. 71  Pending their use as described above, we have invested the net proceeds in short-term, interest-bearing obligations, investment-grade instruments or guaranteedobligations of the U.S. government. Purchases of Equity Securities by the Company We did not purchase any common shares or other equity securities of our company during the fourth quarter ended December 31, 2019. Recent Sales of Unregistered Equity Securities On October 1, 2019, we issued a warrant to purchase up to 50,000 common shares at an exercise price equal to $4.00 per share to Craig-Hallum Capital Group LLC inconsideration for certain strategic advisory services. The warrant is exercisable for a term of five years. The warrant includes a cashless exercise provision entitlingCraig-Hallum to surrender a portion of the underlying common shares that has a value equal to the aggregate exercise price in lieu of paying cash upon exercise. Thewarrant was issued to Craig-Hallum in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve apublic offering, the recipient took the securities for investment and not resale, and we took appropriate measures to restrict transfer. We did not sell any other unregistered equity securities of our company during the fourth quarter ended December 31, 2019. Exchange Controls There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital, including foreign exchange controls, or that affect theremittance of dividends, interest or other payments to non-resident holders of the securities of DiaMedica, other than Canadian withholding tax. Certain Canadian Federal Income Tax Considerations for U.S. Holders The following is, as of March 10, 2020, a summary of the principal Canadian federal income tax considerations under the Income Tax Act (Canada) (Tax Act) generallyapplicable to a holder of our common shares who, for purposes of the Tax Act and at all relevant times, is neither resident in Canada nor deemed to be resident in Canadafor purposes of the Tax Act and any applicable income tax treaty or convention, and who does not use or hold (and is not deemed to use or hold) common shares in thecourse of carrying on a business in Canada, deals at arm’s length with us, is not affiliated with us, is not a “specified shareholder” of us (within the meaning ofsubsection 18(5) of the Tax Act) and holds our common shares as capital property (Holder). A “specified shareholder” for these purposes generally includes a personwho (either alone or together with persons with whom that person is not dealing at arm’s length for the purposes of the Tax Act) owns or has the right to acquire orcontrol 25% or more of the common shares determined on a votes or fair market value basis. Generally, common shares will be considered to be capital property to aHolder thereof provided that the Holder does not hold common shares in the course of carrying on a business and such Holder has not acquired them in one or moretransactions considered to be an adventure or concern in the nature of trade. This summary does not apply to a Holder, (i) that is a “financial institution” for purposes of the mark-to-market rules contained in the Tax Act; (ii) that is a “specifiedfinancial institution” as defined in the Tax Act; (iii) that holds an interest which is a “tax shelter investment” as defined in the Tax Act; or (iv) that has elected to reportits tax results in a functional currency other than Canadian currency. Special rules, which are not discussed in this summary, may apply to a Holder that is an “authorizedforeign bank” within the meaning of the Tax Act, a partnership or an insurer carrying on business in Canada and elsewhere. Such Holders should consult their own taxadvisors. 72  This summary is based upon the provisions of the Tax Act (including the regulations (Regulations) thereunder) in force as of March 10, 2020 and our understanding ofthe current administrative policies and assessing practices of the Canada Revenue Agency (CRA) published in writing by the CRA prior to March 10, 2020. Thissummary takes into account all specific proposals to amend the Tax Act (and the Regulations) publicly announced by or on behalf of the Minister of Finance (Canada)prior to the date hereof (Tax Proposals) and assumes that the Tax Proposals will be enacted in the form proposed, although no assurance can be given that the TaxProposals will be enacted in their current form or at all. This summary does not otherwise take into account any changes in law or in the administrative policies orassessing practices of the CRA, whether by legislative, governmental or judicial decision or action. This summary is not exhaustive of all possible Canadian federalincome tax considerations and does not take into account other federal or any provincial, territorial or foreign income tax legislation or considerations, which may differmaterially from those described in this summary. This summary is of a general nature only and is not, and is not intended to be, and should not be construed to be, legal or tax advice to any particular Holder, and norepresentations concerning the tax consequences to any particular Holder are made. Holders should consult their own tax advisors regarding the income taxconsiderations applicable to them having regard to their particular circumstances. Dividends Dividends paid or credited (or deemed to be paid or credited) to a Holder by us are subject to Canadian withholding tax at the rate of 25% unless reduced by the terms ofan applicable tax treaty or convention. For example, under the Canada-United States Tax Convention (1980), as amended (US Treaty), the dividend withholding tax rate isgenerally reduced to 15% (or 5% in the case of a Holder that is a company that beneficially owns at least 10% of our voting shares) in respect of a dividend paid orcredited to a Holder beneficially entitled to the dividend who is resident in the United States for purposes of the US Treaty and whose entitlement to the benefits of theUS Treaty is not limited by the limitation of benefits provisions of the US Treaty. Holders are urged to consult their own tax advisors to determine their entitlement torelief under the US Treaty or any other applicable tax treaty as well as their ability to claim foreign tax credits with respect to any Canadian withholding tax, based ontheir particular circumstances. Disposition of Common Shares A Holder generally will not be subject to tax under the Tax Act in respect of a capital gain realized on the disposition or deemed disposition of a common share, unlessthe common share constitutes or is deemed to constitute “taxable Canadian property” to the Holder thereof for purposes of the Tax Act, and the gain is not exempt fromtax pursuant to the terms of an applicable tax treaty or convention. In general, provided the common shares are listed on a “designated stock exchange” (which currently includes The Nasdaq Capital Market) at the date of thedisposition, the common shares will only constitute “taxable Canadian property” of a Holder if, at any time within the 60-month period preceding the disposition: (i) suchHolder, persons with whom the Holder did not deal at arm’s length, partnerships in which the Holder or a person with whom the Holder did not deal at arm’s length holdsa membership interest directly or indirectly through one or more partnerships, or any combination thereof, owned 25% or more of the issued shares of any class or seriesof the Company’s share capital; and (ii) more than 50% of the fair market value of the common shares was derived directly or indirectly from one or any combination of(A) real or immovable property situated in Canada, (B) Canadian resource properties, (C) timber resource properties, and (D) options in respect of, or interests in, or forcivil law rights in, property described in any of subparagraphs (ii)(A) to (C), whether or not the property exists. However, and despite the foregoing, in certaincircumstances the common shares may be deemed to be “taxable Canadian property” under the Tax Act. 73  Holders whose common shares may be “taxable Canadian property” should consult their own tax advisers. Certain U.S. Federal Income Tax Considerations The following discussion is generally limited to certain material U.S. federal income tax considerations relating to the purchase, ownership and disposition of ourcommon shares by U.S. Holders (as defined below). This discussion applies to U.S. Holders that hold our common shares as capital assets. This summary is for generalinformation purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S.Holder arising from and relating to the acquisition, ownership, and disposition of our common shares. Accordingly, this summary is not intended to be, and should notbe construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. Although this discussion is generally limited to the U.S. federal income taxconsiderations to U.S. Holders, the U.S. federal income tax treatment of dividends on and gain on sale or exchange of our common shares by certain “Non-U.S. Holders”(as defined below) is included below at “U.S. Federal Income Taxation of Non-U.S. Holders.” No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (IRS) has been requested, or will be obtained, regarding the U.S. federal income taxconsequences of the acquisition, ownership, and disposition of common shares. This summary is not binding on the IRS, and the IRS is not precluded from taking aposition that is different from, and contrary to, the positions presented in this summary. In addition, because the guidance on which this summary is based are subject tovarious interpretations, the IRS and the U.S. courts could disagree with one or more of the positions described in this summary. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (Code), U.S. Treasury regulations promulgated thereunder and administrative andjudicial interpretations thereof, and the income tax treaty between the United States and Canada (Convention), all as in effect on the date hereof and all of which aresubject to change, possibly with retroactive effect. This summary is applicable to U.S. Holders who are residents of the United States for purposes of the Conventionand who qualify for the full benefits of the Convention. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation. This discussion does not address all of the U.S. federal income tax considerations that may be relevant to specific U.S. Holders in light of their particular circumstancesor to U.S. Holders subject to special treatment under U.S. federal income tax law (such as certain financial institutions, insurance companies, broker-dealers and tradersin securities or other persons that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, retirement plans, regulatedinvestment companies, real estate investment trusts, certain former citizens or residents of the United States, persons who hold common shares as part of a “straddle,”“hedge,” “conversion transaction,” “synthetic security” or integrated investment, persons that have a “functional currency” other than the U.S. dollar, persons thatown (or are deemed to own) 10% or more (by voting power or value) of our common shares, persons that acquire their common shares as part of a compensationarrangement, corporations that accumulate earnings to avoid U.S. federal income tax, partnerships and other pass-through entities, and investors in such pass-throughentities). This discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift or alternative minimum taxconsiderations. In addition, except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. 74  As used in this discussion, the term “U.S. Holder” means a beneficial owner of common shares that is, for U.S. federal income tax purposes, (1) an individual who is acitizen or resident of the United States, (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the lawsof the United States, any state thereof, or the District of Columbia, (3) an estate the income of which is subject to U.S. federal income tax regardless of its source or (4) atrust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons havethe authority to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federalincome tax purposes. If an entity treated as a partnership for U.S. federal income tax purposes holds the common shares, the U.S. federal income tax considerations relating to an investment inthe common shares will depend in part upon the status and activities of such entity and the particular partner. Any such entity should consult its own tax advisorregarding the U.S. federal income tax considerations applicable to it and its partners of the purchase, ownership and disposition of the common shares. Persons holding common shares should consult their own tax advisors as to the particular tax considerations applicable to them relating to the purchase, ownershipand disposition of common shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws. Distributions Subject to the discussion below under “Passive Foreign Investment Company Considerations,” a U.S. Holder that receives a distribution with respect to the commonshares generally will be required to include the gross amount of such distribution (before reduction for any Canadian withholding taxes) in gross income as a dividendwhen actually or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined underU.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share of ourcurrent and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S.Holder’s common shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s common shares, the remainder will be taxed as capital gain.However, we cannot provide any assurance that we will maintain or provide earnings and profits determinations in accordance with U.S. federal income tax principles.Therefore, U.S. Holders should expect that a distribution will generally be treated as a dividend even if that distribution would otherwise be treated as a non-taxablereturn of capital or as capital gain under the rules described above. The U.S. dollar value of any distribution on the common shares made in Canadian dollars generally should be calculated by reference to the exchange rate between theU.S. dollar and the Canadian dollar in effect on the date of receipt (or deemed receipt) of such distribution by the U.S. Holder regardless of whether the Canadian dollarsso received are in fact converted into U.S. dollars at that time. If the Canadian dollars received are converted into U.S. dollars on the date of receipt (or deemed receipt), aU.S. Holder generally should not recognize currency gain or loss on such conversion. If the Canadian dollars received are not converted into U.S. dollars on the date ofreceipt (or deemed receipt), a U.S. Holder generally will have a basis in such Canadian dollars equal to the U.S. dollar value of such Canadian dollars on the date ofreceipt (or deemed receipt). Any gain or loss on a subsequent conversion or other disposition of such Canadian dollars by such U.S. Holder generally will be treated asordinary income or loss and generally will be income or loss from sources within the United States for U.S. foreign tax credit purposes. Different rules apply to U.S.Holders who use the accrual method of tax accounting. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences ofreceiving, owning, and disposing of foreign currency. 75  Distributions on the common shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposesand generally will constitute “passive category income.” Because we are not a United States corporation, such dividends will not be eligible for the “dividendsreceived” deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations. Dividends paid by a “qualified foreigncorporation” to a U.S. Holder who is an individual, trust or estate will generally be treated as “qualified dividend income” and are eligible for taxation at a reduced capitalgains rate rather than the marginal tax rates generally applicable to ordinary income provided that a holding period requirement (more than 60 days of ownership, withoutprotection from the risk of loss, during the 121-day period beginning 60 days before the ex-dividend date) and certain other requirements are met. However, if we are apassive foreign investment company (PFIC) for the taxable year in which the dividend is paid or the preceding taxable year (see discussion below under “PassiveForeign Investment Company Considerations”), we will not be treated as a qualified foreign corporation, and therefore the reduced capital gains tax rate described abovewill not apply. Each U.S. Holder is advised to consult its own tax advisors regarding the availability of the reduced tax rate on dividends. If a U.S. Holder is subject to Canadian withholding tax on dividends paid on the holder’s common shares (see discussion above under “Material Canadian FederalIncome Tax Considerations—Dividends”), the U.S. Holder may be eligible, subject to a number of complex limitations, to claim a credit against its U.S. federal income taxfor the Canadian withholding tax imposed on the dividends. However, if U.S. persons collectively own, directly or indirectly, 50% or more of the voting power or value ofour common shares it is possible that a portion of any dividends we pay will be considered U.S. source income in proportion to our U.S. source earnings and profits,which could limit the ability of a U.S. Holder to claim a foreign tax credit for the Canadian withholding taxes imposed in respect of such a dividend, although certainelections may be available under the Code and the Convention to mitigate these effects. A U.S. Holder may claim a deduction for the Canadian withholding tax in lieu ofa credit, but only for a year in which the U.S. Holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex. EachU.S. Holder is advised to consult its tax advisor regarding the availability of the foreign tax credit under its particular circumstances. Sale, Exchange or Other Disposition of Common Shares Subject to the discussion below under “Passive Foreign Investment Company Considerations,” a U.S. Holder generally will recognize capital gain or loss for U.S. federalincome tax purposes upon the sale, exchange or other disposition of common shares. The amount of gain recognized will equal the excess of the amount realized (i.e., theamount of cash plus the fair market value of any property received) over the U.S. Holder’s adjusted tax basis in the common shares sold or exchanged. The amount ofloss recognized will equal the excess of the U.S. Holder’s adjusted tax basis in the common shares sold or exchanged over the amount realized. Such capital gain or lossgenerally will be long-term capital gain or loss if, on the date of sale, exchange or other disposition, the common shares were held by the U.S. Holder for more than oneyear. Net long-term capital gain derived by a non-corporate U.S. Holder with respect to capital assets is currently is subject to tax at reduced rates. The deductibility of acapital loss is subject to limitations. Any gain or loss recognized from the sale, exchange or other disposition of common shares will generally be gain or loss fromsources within the United States for U.S. foreign tax credit purposes, except as otherwise provided in an applicable income tax treaty and if an election is properly madeunder the Code. 76  Passive Foreign Investment Company Considerations In general, a corporation organized outside the United States will be treated as a PFIC in any taxable year in which either (1) at least 75% of its gross income is “passiveincome” or (2) at least 50% of the average quarterly value of its assets is attributable to assets that produce passive income or are held for the production of passiveincome. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from commodities transactions and fromthe sale or exchange of property that gives rise to passive income. Assets that produce or are held for the production of passive income include cash, even if held asworking capital or raised in a public offering, marketable securities and other assets that may produce passive income. The average percentage of a corporation’s assetsthat produce or are held for the production of passive income generally is determined on the basis of the fair market value of the corporation’s assets at the end of eachquarter (which may be determined in part by the market value of our common shares, which is subject to change). In determining whether a foreign corporation is a PFIC,a proportionate share of the items of gross income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) are taken intoaccount. Although the tests for determining PFIC status are applied as of the end of each taxable year and are dependent upon a number of factors, some of which are beyondour control, including the value of our assets, the market price of our common shares, and the amount and type of our gross income (i) we believe that we were a PFICfor the taxable year ended December 31, 2016, and (ii) we do not believe that we were a PFIC for the taxable years ended December 31, 2019, 2018 and 2017. Our status asa PFIC is a fact-intensive determination made on an annual basis, and we cannot provide any assurance regarding our PFIC status for the taxable year ending December31, 2020 or for subsequent taxable years. U.S. Holders who own our common shares for any period during which we are a PFIC will be required to file IRS Form 8621 foreach tax year during which they hold our common shares. No opinion of legal counsel or ruling from the IRS concerning our status as a PFIC has been obtained or iscurrently planned to be requested. However, the determination of our PFIC status is made annually after the close of each taxable year and it is difficult to predict beforesuch determination whether we will be a PFIC for any given taxable year. Even if we determine that we are not a PFIC after the close of a taxable year, there can be noassurance that the IRS will agree with our conclusion. No assurance can be provided regarding our PFIC status, and neither we nor our United States counsel expressesany opinion with respect to our PFIC status. If we are a PFIC at any time when a non-corporate U.S. Holder owns common shares, and such U.S. Holder does not make a “qualified electing fund” election (“QEFelection”) or a “mark-to-market” election, both as described below, such U.S. Holder will generally be subject to federal tax under the excess distribution rules (describedbelow). Under such rules, additional taxes and interest charges would apply to certain distributions by us or to gain upon dispositions of our common shares. If neitherof such elections are made, the excess distribution rules apply to (1) distributions paid during a taxable year that are greater than 125% of the average annualdistributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period for the common shares, and (2) any gain recognized on a sale,exchange or other disposition (which would include a pledge or transfer by gift or death) of common shares. Under the excess distribution rules, the non-corporate U.S.Holder’s tax liability will be determined by allocating such distribution or gain ratably to each day in the U.S. Holder’s holding period for the common shares. Theamount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to the first taxable year in whichwe were a PFIC in the holding period will be taxed as ordinary income earned in the current taxable year and the preferential tax rate applicable to capital gains ordividends received on our common shares would not be available. The amount allocated to other taxable years (i.e., prior years in which we were a PFIC) will be taxed atthe highest marginal rate in effect (for individuals or corporations as applicable) for ordinary income in each such taxable year, and an interest charge, generallyapplicable to the underpayment of tax, will be added to the tax and the preferential tax rate applicable to capital gains or dividends received on our common shares wouldnot be available. These adverse tax consequences would not apply to a pension or profit-sharing trust or other tax-exempt organization that did not borrow funds orotherwise utilize leverage in connection with its acquisition of our common shares. In addition, if a non-electing U.S. Holder who is an individual dies while owning ourcommon shares, such U.S. Holder's successor generally would not receive a step-up in tax basis with respect to such common shares, but instead would have a tax basisequal to the lower of the fair market value of such common shares or the decedent’s tax basis in such common shares. 77  If we are a PFIC at any time when a U.S. Holder holds our common shares, we will generally continue to be treated as a PFIC with respect to the U.S. Holder for allsucceeding years during which the U.S. Holder holds our common shares even if we cease to meet the PFIC gross income test or asset test in a subsequent year.However, if we cease to meet these tests, a U.S. Holder can avoid the continuing impact of the PFIC rules by making a special election (a “Purging Election”) torecognize gain by making a “deemed sale” election with respect to all of the U.S. Holder’s common shares and have such common shares deemed to be sold at their fairmarket value on the last day of the last taxable year during which we were a PFIC. In addition, for a U.S. Holder making such an election, a new holding period would bedeemed to begin for our common shares for purposes of the PFIC rules. After the Purging Election, the common shares with respect to which the Purging Election wasmade will not be treated as shares in a PFIC unless we subsequently again become a PFIC. The tax considerations that would apply if we were a PFIC would be different from those described above if a U.S. Holder were able to make a valid QEF election. Foreach year that we meet the PFIC gross income test or asset test, an electing U.S. Holder would be required to include in gross income its pro rata share of our ordinaryincome and net capital gains, if any, as determined under U.S. federal income tax principles. The U.S. Holder’s adjusted tax basis in our common shares would beincreased by the amount of such inclusions. An actual distribution to the U.S. Holder out of such income generally would not be treated as a dividend and woulddecrease the U.S. Holder’s adjusted tax basis in our common shares. Gain realized from the sale of our common shares covered by a QEF election would be taxed as acapital gain and the denial of the basis step-up at death described above would not apply. Generally, a QEF election must be made by the U.S. Holder in a timely filed taxreturn for the first taxable year in which the U.S. Holder held our common shares that includes the close of our taxable year for which we met the PFIC gross income testor asset test. A separate QEF election would need to be made for any of our subsidiaries that are classified as a PFIC. A QEF election is made on IRS Form 8621. U.S.Holders will be eligible to make QEF elections only if we agree to provide U.S. Holders with the information they will need to comply with the QEF rules. In the event webecome a PFIC, we intend to provide all information and documentation that a U.S. Holder making a QEF election is required to obtain for U.S. federal income taxpurposes (e.g., the U.S. Holder’s pro rata share of ordinary income and net capital gain, and a “PFIC Annual Information Statement” as described in applicable U.S.Treasury regulations). As an alternative to a QEF election, a U.S. Holder may also mitigate the adverse tax consequences of PFIC status by timely making a “mark-to-market” election, providedthe U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury regulations. A U.S. Holder who makes the mark-to-market election generally must include as ordinary income each year the increase in the fair market value of the common shares and deduct from gross income thedecrease in the value of such shares during each of its taxable years, but with losses limited to the amount of previously recognized net gains. The U.S. Holder’s taxbasis in the common shares would be adjusted to reflect any income or loss recognized as a result of the mark-to-market election. If a mark-to-market election withrespect to our common shares is in effect on the date of a U.S. Holder’s death, the tax basis of the common shares in the hands of a U.S. Holder who acquired them froma decedent will be the lesser of the decedent’s tax basis or the fair market value of the common shares. Any gain from a sale, exchange or other disposition of thecommon shares in any taxable year in which we are a PFIC (i.e., when we meet the gross income test or asset test described above) would be treated as ordinary incomeand any loss from a sale, exchange or other disposition would be treated first as an ordinary loss (to the extent of any net mark-to-market gains previously included inincome) and thereafter as a capital loss. If we cease to be a PFIC, any gain or loss recognized by a U.S. Holder on the sale or exchange of the common shares would beclassified as a capital gain or loss. 78  A mark-to-market election is available to a U.S. Holder only for “marketable stock.” Generally, stock will be considered marketable stock if it is “regularly traded” on a“qualified exchange” within the meaning of applicable U.S. Treasury regulations. A class of stock is regularly traded during any calendar year during which such class ofstock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. The common shares should be marketable stock as long as they arelisted on The Nasdaq Capital Market and are regularly traded. A mark-to-market election will not apply to the common shares for any taxable year during which we arenot a PFIC but will remain in effect with respect to any subsequent taxable year in which we again become a PFIC. Such election will not apply to any subsidiary that weown. Accordingly, a U.S. Holder may continue to be subject to the PFIC rules with respect to any lower-tier PFICs notwithstanding the U.S. Holder’s mark-to-marketelection. Whether our common shares are regularly traded on a qualified exchange is an annual determination based on facts that, in part, are beyond our control.Accordingly, a U.S. Holder might not be eligible to make a mark-to-market election to mitigate the adverse tax consequences if we are characterized as a PFIC. Each U.S. person who is a shareholder of a PFIC generally must file an annual report (on IRS Form 8621) with the IRS containing certain information, and the failure tofile such report could result in the imposition of penalties on such U.S. person and in the extension of the statute of limitations with respect to federal income tax returnsfiled by such U.S. person. The U.S. federal income tax rules relating to PFICs are very complex. U.S. Holders are urged to consult their own tax advisors with respect to the purchase, ownershipand disposition of common shares, the consequences to them of an investment in a PFIC, any elections available with respect to the common shares and the IRSinformation reporting obligations with respect to the purchase, ownership and disposition of common shares in the event we are considered a PFIC. Additional Tax on Passive Income Certain U.S. Holders that are individuals, estates or trusts (other than trusts that are exempt from tax) with adjusted income exceeding certain thresholds, will be subjectto a 3.8% tax on all or a portion of their “net investment income,” which includes dividends on the common shares, and net gains from the disposition of the commonshares. Further, excess distributions treated as dividends, gains treated as excess distributions, and mark-to-market inclusions and deductions are all included in thecalculation of net investment income. Treasury regulations provide, subject to the election described in the following paragraph, that solely for purposes of this additional tax, that distributions of previouslytaxed income will be treated as dividends and included in net investment income subject to the additional 3.8% tax. Additionally, to determine the amount of any capitalgain from the sale or other taxable disposition of common shares that will be subject to the additional tax on net investment income, a U.S. Holder who has made a QEFelection will be required to recalculate its basis in the common shares excluding any QEF election basis adjustments. Alternatively, a U.S. Holder may make an election which will be effective with respect to all interests in controlled foreign corporations and PFICs that are subject to aQEF election and that are held in that year or acquired in future years. Under this election, a U.S. Holder pays the additional 3.8% tax on QEF election income inclusionsand on gains calculated after giving effect to related tax basis adjustments. U.S. Holders that are individuals, estates or trusts should consult their own tax advisorsregarding the applicability of this tax to any of their income or gains in respect of the common shares. 79  U.S. Federal Income Taxation of Non-U.S. Holders A beneficial owner of our common shares, other than a partnership or entity treated as a partnership for U.S. Federal income tax purposes, that is not a U.S. Holder isreferred to herein as a “Non-U.S. Holder”. Non-U.S. Holders generally will not be subject to U.S. federal income tax or withholding tax on dividends received from uswith respect to our common shares, unless that income is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States. Ingeneral, if the Non-U.S. Holder is entitled to the benefits of certain U.S. income tax treaties with respect to those dividends, that income is taxable only if it is attributableto a permanent establishment maintained by the Non-U.S. Holder in the United States. Non-U.S. Holders generally will not be subject to U.S. federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of ourcommon shares, unless:  ●the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States. In general, if the Non-U.S. Holder is entitled tothe benefits of certain income tax treaties with respect to that gain, that gain is taxable only if it is attributable to a permanent establishment maintained by theNon-U.S. Holder in the United States; or  ●the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions aremet. If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, the income from the common shares, including dividends and the gainfrom the sale, exchange or other disposition of the stock, that is effectively connected with the conduct of that trade or business will generally be subject to regular U.S.federal income tax in the same manner as discussed above relating to the general taxation of U.S. Holders. In addition, if you are a corporate Non-U.S. Holder, yourearnings and profits that are attributable to the effectively connected income, which are subject to certain adjustments, may be subject to an additional branch profits taxat a rate of 30%, or at a lower rate as may be specified by an applicable U.S. income tax treaty. Information Reporting with Respect to Foreign Financial Assets U.S. individuals that own “specified foreign financial assets” (as defined in Section 6038D of the Code) with an aggregate fair market value exceeding certain thresholdamounts generally are required to file an information report on IRS Form 8938 with respect to such assets with their tax returns. Significant penalties may apply topersons who fail to comply with these rules. Specified foreign financial assets include not only financial accounts maintained in foreign financial institutions, but also,unless held in accounts maintained by certain financial institutions, any stock or security issued by a non-U.S. person, such as our common shares. Upon the issuanceof future U.S. Treasury regulations, these information reporting requirements may apply to certain U.S. entities that own specified foreign financial assets. The failure toreport information required under the current regulations could result in substantial penalties and in the extension of the statute of limitations with respect to federalincome tax returns filed by a U.S. Holder. U.S. Holders should consult their own tax advisors regarding the possible implications of these U.S. Treasury regulations for aninvestment in our common shares. Special Reporting Requirements for Transfers to Foreign Corporations A U.S. Holder that acquires common shares generally will be required to file IRS Form 926 with the IRS if (1) immediately after the acquisition such U.S. Holder, directly orindirectly, owns at least 10% of our common shares, or (2) the amount of cash transferred in exchange for common shares during the 12-month period ending on the dateof the acquisition exceeds USD $100,000. Significant penalties may apply for failing to satisfy these filing requirements. U.S. Holders are urged to contact their taxadvisors regarding these filing requirements. 80  Information Reporting and Backup Withholding Dividends on and proceeds from the sale or other disposition of common shares may be reported to the IRS unless the U.S. Holder establishes a basis for exemption.Backup withholding may apply to amounts subject to reporting if (1) the U.S. holder fails to provide an accurate taxpayer identification number or otherwise establish abasis for exemption, (2) the U.S. Holder is notified by the IRS that backup withholding applies, or (3) the payment is described in certain other categories of persons. If you sell your common shares through a U.S. office of a broker, the payment of the proceeds is subject to both U.S. backup withholding and information reportingunless you certify that you are a non-U.S. person, under penalties of perjury, or you otherwise establish an exemption. If you sell your common shares through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then information reporting and backup withholding generally will notapply to that payment. However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment ismade to you outside the United States, if you sell your common shares through a non-U.S. office of a broker that is a U.S. person or has certain other contacts with theUnited States, unless you certify that you are a non-U.S. person, under penalty of perjury, or you otherwise establish an exemption. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S.Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS. THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A U.S. HOLDER. EACHU.S. HOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN COMMON SHARES INLIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES. 81  Item 6.Selected Financial Data The following tables present, as of the dates and for the periods indicated, our selected historical financial data as indicated therein. The consolidated statements ofoperations data for the years ended December 31, 2019 and 2018 and the consolidated balance sheet data as of December 31, 2019 and 2018 are derived from our auditedfinancial statements that are included elsewhere in this annual report on Form 10-K. Our historical results are not indicative of the results to be expected in the future. This information should be read together with our consolidated financial statements and the related notes, as well as the section entitled “Management’s Discussionand Analysis of Financial Condition and Results of Operations” included elsewhere in this report.   Year Ended December 31,   2019  2018   (in thousands, except share and per share data) Consolidated Statements of Operations Data:        Operating revenues:        License revenue $—  $500          Operating expenses:        Research and development  7,900   4,522 General and administrative  3,693   2,739 Total operating expenses  11,593   7,261          Loss from operations  (11,593)  (6,761)         Other (income) expense        Governmental assistance – research incentives  (856)  (1,214)Other (income) expense  (119)  68 Change in fair value of warrant liability  —   39 Total other (income) expense  (975)  (1,107)Loss before income tax and other comprehensive income  (10,618)  (5,654)Income tax  31   80 Unrealized gain on marketable securities  (2)  — Net loss and comprehensive loss $(10,647) $(5,734)Loss per share, basic and diluted $(0.89) $(0.74)Weighted average number of shares outstanding:        Basic and diluted  11,987,696   7,743,520    December 31,   2019  2018 Consolidated Balance Sheet:        Cash and short-term investments $7,878  $16,823 Working capital  7,518   16,676 Total assets  9,053   18,339 Total current liabilities  1,317   1,296 Total shareholders’ equity  7,617   17,025  82  Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon accounting principles generally accepted in theUnited States of America and discusses the financial condition and results of operations for DiaMedica Therapeutics Inc. and subsidiaries for the years endedDecember 31, 2019 and 2018. This discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. The following discussioncontains forward-looking statements that involve numerous risks and uncertainties. Our actual results could differ materially from the forward-looking statements as aresult of these risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for additional cautionary information. Business Overview We are a clinical stage biopharmaceutical company primarily focused on the development of novel recombinant proteins. Our goal is to use our patented and licensedtechnologies and trade secrets to establish our company as a leader in the development and commercialization of therapeutic treatments for novel recombinant proteins.Our current focus is on CKD and AIS. We plan to advance DM199, our lead drug candidate, through required clinical trials to create shareholder value by establishingits clinical and commercial potential as a therapy for CKD and AIS. DM199 is a recombinant form of human tissue kallikrein-1 (KLK1). KLK1 is a serine protease (protein) produced primarily in the kidneys, pancreas and salivary glands,which plays a critical role in the regulation of local blood flow and vasodilation (the widening of blood vessels which decreases vascular resistance) in the body, as wellas an important role in inflammation and oxidative stress (an imbalance between potentially damaging reactive oxygen species, or free radicals, and antioxidants in yourbody). We believe DM199 has the potential to treat a variety of diseases where healthy functioning requires sufficient activity of KLK1 and its system, the kallikrein-kinin system (KKS). Our DM199 product candidate is in clinical development as follows:  During 2019, DiaMedica initiated and completed a Phase Ib clinical trial of DM199 in 32 subjects with moderate or severe CKD caused by Type I or Type II diabetesmellitus. The study was performed at 3 sites in the U.S. and was designed to assess the pharmacokinetics (PK) of three dose levels of DM199 (3, 5 and 8 µg/kg),administered in a single subcutaneous (SC) dose, as well as the evaluation of safety, tolerability and secondary pharmacodynamic (PD) endpoints. Results from thestudy were also used to guide the design of Phase II CKD studies. 83  In October 2019, the FDA accepted our Phase II clinical trial protocol for the treatment of CKD caused by rare or significant unmet diseases. The trial named REDUX,Latin for restore, is a multi-center, open-label investigation of approximately 60 participants with CKD, who are being enrolled in two cohorts (30 participants per cohort).The study is being conducted in the United States at up to 12 sites and is focused on participants with CKD: Cohort I is focused on non-diabetic, hypertensive AfricanAmericans with Stage II or III CKD. African Americans are at greater risk for CKD than Caucasians, and those who have the APOL1 gene mutation are at an even higherrisk. The study is designed to capture the APOL1 gene mutation as an exploratory biomarker in this cohort; Cohort II is focused on participants with IgA Nephropathy(IgAN). The study will evaluate two dose levels of DM199 within each cohort. Study participants will receive DM199 by subcutaneous injection twice weekly for 95days. The primary study endpoints include safety, tolerability, blood pressure, albuminuria and kidney function, which will be evaluated by changes from baseline ineGFR and albuminuria, as measured by the UACR. Participant enrollment and dosing for this study commenced in December 2019. We are currently experiencing slower than expected enrollment in the REDUX clinical trial. In addition, the novel strain of coronavirus (COVID: 19) has adverselyaffected and may continue to adversely affect our ability to recruit or enroll subjects. If this slow enrollment continues, the completion of these studies will take longerthan expected. In February 2018, treatment was initiated for the first patient in our Phase II REMEDY trial assessing the safety, tolerability and markers of therapeutic efficacy of DM199in patients suffering from AIS. Our REMEDY trial was expected to enroll up to 100 patients to evaluate DM199 in patients with AIS. The study drug (DM199 or placebo)will be administered as an intravenous (IV) infusion within 24 hours of stroke symptom onset, followed by SC injections later that day and once every 3 days for 21days. The study was designed to measure safety and tolerability along with multiple tests designed to investigate DM199’s therapeutic potential including plasma-based biomarkers and standard functional stroke measures assessed at 90 days post-stroke. Standard functional stroke measurements include the Modified RankinScale, National Institutes of Health Stroke Scale, the Barthel Index and C-reactive protein, a measure of inflammation. In the fourth quarter of 2019, we completedenrollment in the REMEDY trial. Final enrollment was 92 participants. In September 2018, we entered into a license and collaboration agreement with Ahon Pharma, which granted Ahon Pharma exclusive rights to develop and commercializeDM199 for acute ischemic stroke in mainland China, Taiwan, Hong Kong S.A.R. and Macau S.A.R. Under the terms of the agreement, we received an upfront payment of$500,000 on signing and were entitled to receive an additional payment of $4.5 million upon the earlier of regulatory clearance to initiate a clinical trial in China or July 1,2019. On August 12, 2019, after extensive good faith discussions with Ahon Pharma, we were unable to agree upon mutually acceptable revised terms to the agreementand we terminated the agreement for non-payment of the $4.5 million milestone, thereby regaining worldwide rights for DM199 for acute ischemic stroke. On February 13, 2020, we issued and sold an aggregate of 2,125,000 common shares in a public underwritten offering at a public offering price of $4.00 per share,receiving gross proceeds of $8.5 million and net proceeds of approximately $7.7 million, after deducting the underwriting discount and offering expenses. See Note 16titled “Subsequent Event.” We have not generated any revenues from product sales. Since our inception, we have financed our operations from public and private sales of equity, the exercise ofwarrants and stock options, interest income on funds available for investment and government grants and tax credits. We have incurred losses in each year since ourinception. Our net losses were $10.6 million and $5.7 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, we had anaccumulated deficit of $56.6 million. Substantially all of our operating losses resulted from expenses incurred in connection with our product candidate developmentprograms, our primary research and development (R&D) activities, and general and administrative (G&A) support costs associated with our operations. 84  We expect to continue to incur significant expenses and increased operating losses for at least the next several years. In the near term, we anticipate that our expenseswill increase as we:  ●advance the ongoing clinical development of DM199; ●provide G&A support for our operations; and ●maintain, expand and protect our intellectual property portfolio. In addition, our operating expenses increased in 2019 compared to 2018 as a result of our Nasdaq-listed U.S. public reporting company status obtained in December2018. While we expect our rate of future negative cash flow per month will vary due to the timing of expenses incurred, we expect our current cash resources, together with the$7.7 million in net proceeds from our February 2020 public offering, to be sufficient to allow us to complete our current ongoing Phase II REMEDY trial in patients withAIS and the first two cohorts in the Phase II study in patients with CKD and to otherwise fund our planned operations through 2021. However, the amount and timing offuture funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, including enrollment in our clinical trials,the potential expansion of our current development programs, potential new development programs, and related G&A support. We may require significant additionalfunds earlier than we currently expect and there is no assurance that we will not need or seek additional funding prior to such time. We may elect to raise additionalfunds even before we need them if market conditions for raising additional capital are favorable. From a strategic perspective, we continue to believe that strategic alternatives with respect to our DM199 product candidate, including licenses and businesscollaborations, with other regional and global pharmaceutical and biotechnology companies can be important in advancing the clinical development of DM199.Therefore, as a matter of course and from time to time, we continue to engage in discussions with third parties regarding these matters. Financial Overview Revenues Since our inception, we have incurred losses while advancing the development of our therapeutic product candidates. We have not generated any revenues fromproduct sales and do not expect to do so for a number of years. We may never generate sales revenues from our current DM199 product candidate as we may neversucceed in obtaining regulatory approval or commercial sale of this product candidate. We received $500,000 in license revenue during 2018. Research and Development Expenses R&D expenses consist primarily of fees paid to external service providers such as contract research organizations and contract manufacturing organizations related toclinical trials, contractual obligations for clinical development, clinical sites, laboratory testing, preclinical trials, development of DM199 and the related manufacturingprocesses, salaries, benefits, share-based compensation and other personnel costs. We incurred $7.9 million and $4.5 million in R&D expenses for the years endedDecember 31, 2019 and 2018, respectively. Over the past approximately eight years, our R&D efforts have been primarily focused on developing DM199. At this time, due to the risks inherent in the clinical development process and the early stage of our product development programs, we are unable to estimate with anycertainty the costs we will incur in the continued development of DM199 or any of our preclinical development programs. We expect that our R&D expenses mayincrease if we are successful in advancing DM199, or any of our preclinical programs, into advanced stages of clinical development. The process of conducting clinicaltrials necessary to obtain regulatory approval and manufacturing scale-up to support expanded development and potential future commercialization is costly and timeconsuming. Any failure by us or delay in completing clinical trials, manufacturing scale-up or in obtaining regulatory approvals could lead to increased R&D expensesand, in turn, have a material adverse effect on our results of operations. 85  General and Administrative Expenses G&A expenses consist primarily of salaries and related benefits, including share-based compensation related to our executive, finance, business development andsupport functions. Other G&A expenses include rent and utilities, travel expenses and professional fees for auditing, tax and legal services. We expect that G&Aexpenses will increase in the future as we expand our operating activities. In 2019, our G&A expenses increased significantly due to increased costs associated with ourlisting on The Nasdaq Capital Market and U.S. public reporting company status, which commenced in December 2018. This increase in 2019 was partially offset by one-time costs of approximately $360,000 incurred in 2018, associated with the Nasdaq listing process and related legal and accounting fees. Other (Income) Expense Other (income) expense consists primarily of governmental assistance comprised of research and development incentives earned by DiaMedica Australia Pty Ltd.,interest income and foreign currency exchange gains and losses. Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been preparedin accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates andassumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and onvarious other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value ofassets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and anysuch differences may be material. While our significant accounting policies are more fully described in Note 3 to our consolidated financial statements included elsewhere in this report, we believe thefollowing discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results ofoperations and require our most difficult, subjective and complex judgments. Revenue Recognition We followed Accounting Standards Codification (ASC) 606, “Revenue from Contracts with Customers” in accounting for our former license and collaborationagreement with Ahon Pharma. Accordingly, the Company recognizes revenue upon transfer of control of the product to our customer in an amount that reflects theconsideration we expect to receive in exchange. We intend to enter into arrangements for the research and development and/or manufacture of products and product candidates. Such arrangements may require us todeliver various rights, services and/or goods, including (i) intellectual property rights or licenses, (ii) R&D services or (iii) manufacturing services. The underlying termsof these arrangements generally would provide for consideration to DiaMedica in the form of nonrefundable, up-front license fees, development and commercial-performance milestone payments, cost sharing, royalty payments and/or profit sharing. 86  In arrangements involving more than one performance obligation, each required performance obligation is evaluated to determine whether it qualifies as a distinctperformance obligation based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readilyavailable and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to eachseparate distinct performance obligation based on its respective relative stand-alone selling price. The estimated selling price of each deliverable reflects our bestestimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis or using an adjusted market assessment approach if sellingprice on a stand-alone basis is not available. The consideration allocated to each distinct performance obligation is recognized as revenue when control of the related goods or services is transferred. Considerationassociated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognizedwill not occur. We intend to utilize the sales and usage-based royalty exception in arrangements that result from the license of intellectual property, recognizing revenuesgenerated from royalties or profit sharing as the underlying sales occur. Research and Development Costs Research and development costs include expenses incurred in the conduct of human clinical trials, for third-party service providers performing various treatment, testingand data accumulation and for analysis related to clinical studies; sponsored non-clinical research agreements; developing the manufacturing process necessary toproduce sufficient amounts of the DM199 compound for use in our clinical studies; consulting resources with specialized expertise related to execution of ourdevelopment plan for our DM199 product candidate; and personnel costs, including salaries, benefits and share-based compensation. We charge research and development costs, including clinical trial costs, to expense when incurred.  Our human clinical trials are performed at clinical trial sites and areadministered jointly by us with assistance from contract research organizations.  Costs of setting up clinical trial sites are accrued upon execution of the studyagreement.  Expenses related to the performance of clinical trials are accrued based on estimates of work completed to date by CROs, outside contractors and clinicaltrial sites that manage and perform the trials, and those that manufacture the investigational product.  We obtain initial estimates of total costs based on the trialprotocol, extent of enrollment of subjects, trial duration, project management costs, manufacturing costs, patient treatment costs and other activities as required by thetrial protocol.  Additionally, actual costs may be charged to us and are recognized as the tasks are completed by the clinical trial site.  Accrued clinical trial costs may besubject to revisions as clinical trials progress and any revisions are recorded in the period in which the facts that give rise to the revisions become known. 87  Share-based Compensation We account for all share-based compensation awards using a fair value method. The cost of employee and non-employee services received in exchange for awards ofequity instruments is measured and recognized based on the estimated grant date fair value of those awards. Compensation cost is recognized ratably using thestraight-line attribution method over the vesting period, which is considered to be the requisite service period. We record forfeitures in the periods in which they occur. The fair value of share-based awards is estimated using the Black-Scholes option pricing model. The determination of the fair value of share-based awards is affected byour common share price, as well as assumptions regarding a number of complex and subjective variables. Risk-free interest rates are based upon United StatesGovernment bond rates appropriate for the expected term of each award. Expected volatility rates are based on the historical volatility equal to the expected life of theoption. The assumed dividend yield is zero, as we do not expect to declare any dividends in the foreseeable future. The expected term of options is estimatedconsidering the vesting period at the grant date, the life of the option and the average length of time similar grants have remained outstanding in the past. The assumptions used in calculating the fair value under the Black-Scholes option valuation model are set forth in the following table for options issued by us for theyears ended December 31, 2019 and 2018:  2019 2018Common share fair value$2.07-$4.60 $6.82-$7.20Risk-free interest rate 1.5–2.4%  2.1–2.2%Expected dividend yield 0%   0% Expected option life (in years) 4.2–5.1   4.8–5.0Expected stock price volatility 88.7–103.5%  123.5–135.7% Recently Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued a new accounting standard that amends the guidance for the recognition of revenue fromcontracts with customers to transfer goods and services. The FASB subsequently issued additional, clarifying standards to address issues arising from implementationof the new revenue recognition standard. The new revenue recognition standard and clarifying standards require an entity to recognize revenue when control ofpromised goods or services is transferred to the customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for thosegoods or services. We adopted this new standard as of January 1, 2018, but the adoption as of this date had no impact on our financial statements as we had no revenueuntil the third quarter of 2018. In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. The guidance in ASU 2016-02 supersedes the lease recognitionrequirements in the Accounting Standards Codification Topic 840, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for bothfinancing and operating leases, along with additional qualitative and quantitative disclosures. The new standard requires the immediate recognition of all excess taxbenefits and deficiencies in the income statement and requires classification of excess tax benefits as an operating activity as opposed to a financing activity in thestatements of cash flows. This standard became effective for us on January 1, 2019. 88  The FASB has subsequently issued the following amendments to ASU 2016-02, which have the same effective date and transition date of January 1, 2019, and which wecollectively refer to as the new leasing standards:  ●ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, which permits an entity to elect an optional transitionpractical expedient to not evaluate under Topic 842 land easements that existed or expired prior to adoption of Topic 842 and that were not previouslyaccounted for as leases under the prior standard, ASC 840, Leases.  ●ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which amends certain narrow aspects of the guidance issued in ASU 2016-02.  ●ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows for a transition approach to initially apply ASU 2016-02 at the adoption date andrecognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption as well as an additional practical expedient forlessors to not separate non-lease components from the associated lease component.  ●ASU No. 2018-20, Narrow-Scope Improvements for Lessors, which contains certain narrow scope improvements to the guidance issued in ASU 2016-02. We adopted the new leasing standards on January 1, 2019, using a modified retrospective transition approach to be applied to leases existing as of, or entered into after,January 1, 2019; and, consequently, financial information will not be updated and the disclosures required under Topic 842 will not be provided for dates and periodsprior to January 1, 2019. We have reviewed our existing lease contracts and the impact of the new leasing standards on our consolidated results of operations, financialposition and disclosures. Upon adoption of the new leasing standards, we recognized a lease liability and related right-of-use asset on our consolidated balance sheetof approximately $205,000. In June 2018, the FASB issued ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting,” to simplify the accounting for share-basedpayments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU is effective for public entitiesfor fiscal years beginning after December 15, 2018. Prior to the adoption of this ASU, share-based compensation awarded to non-employees was subject to revaluationover its vesting terms. Subsequent to the adoption of this ASU, non-employee share-based payment awards are measured on the date of grant, similar to share-basedpayment awards granted to employees. We adopted this standard on January 1, 2019 and the adoption of this ASU did not have a material impact on our financialposition or our consolidated statements of operations. Results of Operations Comparison of the Years Ended December 31, 2019 and 2018 The following table summarizes our results of operations for the years ended December 31, 2019 and 2018 (in thousands):   Year Ended December 31,   2019  2018 License revenue $—  $500 Research and development  7,900   4,522 General and administrative  3,693   2,739 Other (income) expense  (975)  (1,107) 89  License Revenue License revenue for 2018 was comprised of the initial $500,000 license payment we received upon signing of the September 27, 2018 license and collaboration agreementwith Ahon Pharma. No license revenue was recognized in 2019. Research and Development Expenses R&D expenses were $7.9 million for the year ended December 31, 2019 compared to $4.5 million for the year ended December 31, 2018, an increase of $3.4 million. Theincrease was due to costs of approximately $1.4 million incurred for a new production run of the DM199 drug substance, as well as costs incurred in conjunction withthe Phase Ib and Phase II clinical studies in CKD patients and related non-clinical testing. Increased non-cash share-based compensation costs also contributed to theincrease. These increases were partially offset by a reduction in cost incurred in conjunction with the REMEDY Phase II clinical study in AIS patients for which wecompleted enrollment in October 2019. General and Administrative Expenses G&A expenses were $3.7 million and $2.7 million for the years ended December 31, 2019 and 2018, respectively. This $1.0 million increase was primarily due to costsassociated with our status as a Nasdaq-listed U.S. public reporting company, which commenced in December 2018, including increased professional service, complianceand non-cash share-based compensation costs. Increased personnel costs also contributed to the increase on a year-to-date basis. This increase was partially offset byone-time costs of approximately $360,000 incurred in 2018, associated with the Nasdaq listing process and related legal and accounting fees. Other (Income) Expense Other income, net, was $1.0 million for the year ended December 31, 2019 compared to $1.1 million for 2018. This decrease is primarily related to the initial recognition ofR&D incentives, from the Australian Government, paid for qualifying research work performed by DiaMedica Australia Pty Ltd. during 2018, which included researchwork performed in 2017 and 2018. The decrease was partially offset by increased interest income earned on marketable securities during 2019. Liquidity and Capital Resources The following table summarizes our liquidity and capital resources as of December 31, 2019 and 2018 and for each of the years ended December 31, 2019 and 2018, and isintended to supplement the more detailed discussion that follows (in thousands): Liquidity and Capital Resources 2019  2018 Cash, cash equivalents and marketable securities $7,878  $16,823 Total assets  9,053   18,339 Total current liabilities  1,318   1,296 Total shareholders’ equity  7,617   17,025 Working capital  7,518   16,676  90    Year Ended December 31, Cash Flow Data 2019  2018 Cash flow provided by (used in):        Operating activities $(9,102) $(5,696)Investing activities  (3,908)  (50)Financing activities  70   21,216 Net increase (decrease) in cash $(12,940) $15,470  Working Capital We had cash, cash equivalents and marketable securities of $7.9 million, current liabilities of $1.3 million and working capital of $7.5 million as of December 31, 2019,compared to $16.8 million in cash and cash equivalents and marketable securities, $1.3 million in current liabilities and $16.7 million in working capital as of December 31,2018. The decreases in cash, cash equivalents and marketable securities and working capital are mainly due to our use of cash to fund operating activities during 2019. On February 13, 2020, we issued and sold an aggregate of 2,125,000 common shares in a public underwritten offering at a public offering price of $4.00 per share,receiving gross proceeds of $8.5 million and net proceeds of approximately $7.7 million, after deducting the underwriting discount and offering expenses. See Note 16titled “Subsequent Event.” On December 27, 2019, we entered into a litigation funding agreement with LEGALIST FUND II, L.P. (the Funder) for the purpose of funding our currently pendinglawsuit against PRA Netherlands. Our management believes, but cannot guarantee, that this litigation funding agreement will allow us to pursue this litigation moreeffectively. Although the Funder made its evaluation as to the likelihood of success, litigation is very uncertain, and no assurance can be provided that, just because wehave obtained litigation funding, we will be successful or that any recovery we may obtain will be significant. Under the terms of the litigation funding agreement, theFunder agreed to pay up to an aggregate of $1.0 million to fund reasonable legal fees, court costs, and other expenses incurred by us in connection with the litigation,including $200,000 for fees and costs previously paid by us. These payments, however, are conditioned upon the transfer of venue of the litigation from Delaware toMinnesota and if the venue is not transferred we will not be entitled to receive any payments under the litigation funding agreement. If the venue is transferred, weagreed to repay the Funder from any proceeds arising from the litigation the amount of costs actually paid or otherwise funded by the Funder in connection with thelitigation, plus the reimbursement of $10,000 for its diligence and underwriting costs. Additionally, we agreed to pay the Funder from the Claim Proceeds the greater of:(i) $1.0 million if repayment occurs within nine months of the Transfer, $2.0 million if repayment occurs more than nine months after the Transfer but before trial hasbegun, or $3.0 million thereafter; or (ii) 20% of the Claim Proceeds. In the event the Funder has not been repaid 3½ years after the Transfer, the Funder is entitled toreceive interest on the unpaid amounts equal to 20% per annum commencing on the 3½ year anniversary of the Transfer. Our obligation under the litigation fundingagreement to make the foregoing payments to the Funder is non-recourse and limited only to the Claim Proceeds. As a result of the agreement, if we obtain ClaimProceeds, it is possible, depending on the amount of the Claim Proceeds, that we will receive no net recovery after all payments have been made to the Funder. Cash Flows Operating Activities Net cash used in operating activities for the year ended December 31, 2019 was $9.1 million compared to $5.7 million for the year ended December 31, 2018. This increaserelates primarily to an increase in the net loss, partially offset by non-cash expenses and the effects of the changes in operating assets and liabilities. 91  Investing Activities Investing activities consist primarily of purchases of marketable securities and property and equipment. Net cash used in investing activities was $3.9 million for theyear ended December 31, 2019 compared to $50,000 for the year ended December 31, 2018. This increase relates primarily to the investment of excess cash in short-termmarketable securities. Financing Activities Financing activities consist primarily of net proceeds from the sale of common shares and warrants and proceeds from the exercise of stock options and warrants. Netcash provided by financing activities was $70,000 for the year ended December 31, 2019 compared to $21.2 million for the year ended December 31, 2018. Cash flows fromfinancing activities for 2018 included net proceeds from our December 2018 initial public offering and private placements of our common shares and warrants topurchase common shares in March 2018. In December 2018, we completed an initial public offering of our common shares in the United States by issuing 4,100,000 common shares at an offering price of $4.00 pershare, resulting in net proceeds to us of approximately $14.7 million, after deducting the underwriting discount and offering expenses. On March 29, 2018, we completed, in two tranches, a brokered and non-brokered private placement of 1,322,965 units at a price of $4.90 per unit for aggregate grossproceeds of approximately $6.3 million. Each unit consisted of one common share and one-half of one common share purchase warrant. Each whole warrant entitles theholder to purchase one common share at a price of $7.00 at any time prior to expiration on March 19, 2020 and March 29, 2020 for tranche 1 and tranche 2, respectively.The warrants are subject to early expiration under certain conditions. In connection with the offering, we paid an aggregate cash fee of approximately $384,000 to brokersand issued an aggregate of 80,510 compensation options. Each compensation option entitles the holder to purchase one common share at $4.90, the offering price, for aperiod of two years from the closing of the offering, subject to acceleration on the same terms as the warrants issued to the investors. Capital Requirements Since our inception, we have incurred losses while advancing the R&D of our product candidates. We have not generated any revenues from product sales and do notexpect to do so for a number of years. We do not know when, or if, we will generate any revenues from product sales of our DM199 product candidate or any futureproduct candidates. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval. We expect to continue to incursubstantial operating losses until such time as any future product sales, royalty payments, licensing fees, and/or milestone payments are sufficient to generate revenuesto fund our continuing operations. We expect our operating losses to increase in the near term as we continue the research, development and clinical trials of, and seekregulatory approval for, our DM199 product candidate. In addition, our operating expenses increased in 2019 compared to 2018 as a result of our recently obtainedNasdaq-listed U.S. public reporting company status and we expect to continue to incur costs at or above this level. In the long-term, subject to obtaining regulatoryapproval of our DM199 product candidate or any other future product candidates, we expect to incur significant commercialization expenses for product sales,marketing, manufacturing and distribution. 92  Accordingly, we expect we will need substantial additional capital to further our R&D activities, planned clinical trials, regulatory activities and otherwise develop ourproduct candidate, DM199, or any future product candidates, to a point where they may be commercially sold. While we are striving to achieve these plans, there is noassurance these and other strategies will be achieved or that additional funding will be obtained on favorable terms or at all. While our rate of future negative cash flowper month will vary due to the timing of expenses incurred, we expect our current cash, cash equivalents and marketable securities, supplemented by the net proceeds ofour February 2020 public offering, to be sufficient to allow us to complete our current ongoing Phase II REMEDY trial in patients with AIS and our current Phase Ib trialin patients with CKD and a Phase II study in patients with CKD and to otherwise fund our planned operations through 2021. However, the amount and timing of futurefunding requirements will depend on many factors, including the timing and results of our ongoing development efforts, the potential expansion of our currentdevelopment programs, potential new development programs and related G&A support. We may require significant additional funds earlier than we currently expect andthere is no assurance that we will not need or seek additional funding prior to such time. We may elect to raise additional funds even before we need them if marketconditions for raising additional capital are favorable. Since our inception, we have financed our operations primarily from public and private sales of equity, the exercise of warrants and stock options, interest income onfunds available for investment, and government grants and tax incentives, and we expect to continue this practice for the foreseeable future. We do not have anyexisting credit facilities under which we could borrow funds. We may seek to raise additional funds through various sources, such as equity and debt financings, orthrough strategic collaborations and license agreements. We can give no assurances that we will be able to secure additional sources of funds to support ouroperations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. This is particularly true ifour clinical data is not positive or economic and market conditions deteriorate. To the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our shareholders will be diluted. Debtfinancing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such asincurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketingand distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to ourtechnologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. The availability of financingwill be affected by our clinical data and other results of scientific and clinical research; the ability to attain regulatory approvals; market acceptance of our productcandidates; the state of the capital markets generally with particular reference to pharmaceutical, biotechnology, and medical companies; the status of strategic allianceagreements; and other relevant commercial considerations. If adequate funding is not available, we may be required to implement cost reduction strategies; delay,reduce, or eliminate one or more of our product development programs; relinquish significant rights to our technologies, future revenue streams, research programs orproduct candidates or grant licenses on terms that may not be favorable to us; and/or divest assets or cease operations through a merger, sale, or liquidation of ourcompany. Commitments and Contingencies In the normal course of business, we incur obligations to make future payments as we execute our business plan. As of December 31, 2019, we had outstandingcommitments, including R&D contracts and other commitments, that are known and committed of approximately $4.9 million over the next 12 months and $0 in thefollowing 12 months. These contracts relate to clinical, and development activities, including the clinical study sites and related professional service providersconducting or supporting the conduct of the REDUX study and the clinical research organization conducting the Phase II clinical trial for DM199 related to AIS. Thesecommitments are subject to significant change and the ultimate amounts due may be materially different as these obligations are affected by, among other factors, thenumber and pace of patients enrolled, the number of clinical study sites, the amount of time to complete study enrollments and the time required to finalize the analysisand reporting of study results. These commitments are generally cancelable upon 30 days’ notice, with our obligation then limited to costs incurred up to that date. Asof December 31, 2019, we had future operating lease commitments totaling approximately $158,000 over the remainder of the lease, of which $66,000 is due over the next12 months. 93  We have entered into a license agreement with Catalent Pharma Solutions, LLC whereby we have licensed certain gene expression technology and we contract withCatalent for the manufacture of DM199. Under the terms of this license, certain milestone and royalty payments may become due under this agreement and aredependent upon, among other factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and timing of which isuncertain. As of December 31, 2019, two milestones remain which include $185,000 due upon the initiation of dosing in our first Phase III trial and $185,000 upon our firstregulatory approval for commercial sale. Following the launch of our first product, we will also incur a royalty of less than 1% on net sales. The royalty term is indefinitebut the license agreement may be canceled by us on 90 days’ prior written notice. The license may not be terminated by Catalent unless we fail to make requiredmilestone and royalty payments. Off-Balance Sheet Arrangements During 2019 and 2018, we did not have any off-balance sheet arrangements (as defined by applicable SEC regulations) that are reasonably likely to have a current orfuture material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. Item 7A.Quantitative and Qualitative Disclosures About Market Risk This Item 7A is inapplicable to DiaMedica as a smaller reporting company and has been omitted pursuant to Item 305(e) of SEC Regulation S-K. 94  Item 8.Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  Page  Report of Independent Registered Public Accounting Firm    96Consolidated Balance Sheets as of December 31, 2019 and 2018   97Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2019 and 201898Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2019 and 201899Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018    100Notes to Consolidated Financial Statements 101-119 95  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders ofDiaMedica Therapeutics Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of DiaMedica Therapeutics Inc. and Subsidiaries (the “Company”) as of December 31, 2019 and 2018,and the related consolidated statements of operations and comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years then ended, and therelated notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial positionof the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years then ended in conformity with accountingprinciples generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statementsbased on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board of the United States of America (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged toperform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financialreporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express nosuch opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Baker Tilly Virchow Krause, LLP We have served as the Company’s auditors since 2016.Minneapolis, MNMarch 23, 2020 96  DiaMedica Therapeutics Inc.Consolidated Balance Sheets(In thousands, except share amounts)    December 31, 2019  December 31, 2018          ASSETS        Current assets:        Cash and cash equivalents $3,883  $16,823 Marketable securities  3,995   — Amounts receivable  823   780 Deposits  88   — Prepaid expenses and other assets  47   369 Total current assets  8,836   17,972          Non-current assets:        Operating lease right-of-use asset  153   — Property and equipment, net  64   96 Deposits  —   271 Total non-current assets  217   367          Total assets $9,053  $18,339          LIABILITIES AND EQUITY        Current liabilities:        Accounts payable $182  $483 Accrued liabilities  1,076   808 Finance lease obligation  6   5 Operating lease obligation  54   — Total current liabilities  1,318   1,296          Non-current liabilities:        Finance lease obligation, non-current  13   18 Operating lease obligation, non-current  105   — Total non-current liabilities  118   18          Commitments and contingencies (Note 11)                 Shareholders’ equity:        Common shares, no par value; unlimited authorized; 12,006,874 and 11,956,874 shares issued and outstanding, asof December 31, 2019 and 2018, respectively  —   — Paid-in capital  64,232   62,993 Accumulated other comprehensive income  2   — Accumulated deficit  (56,617)  (45,968)Total shareholders’ equity  7,617   17,025 Total liabilities and shareholders’ equity $9,053  $18,339   See accompanying notes to consolidated financial statements. 97  DiaMedica Therapeutics Inc.Consolidated Statements of Operations and Comprehensive Loss(In thousands, except share and per share amounts)    Year Ended December 31,   2019  2018 Operating revenues:        License revenues $—  $500          Operating expenses:        Research and development  7,900   4,522 General and administrative  3,693   2,739 Total operating expenses  11,593   7,261          Operating loss  (11,593)  (6,761)         Other (income) expense:        Governmental assistance - research incentives  (856)  (1,214)Other (income) expense, net  (119)  68 Change in fair value of warrant liability  —   39 Total other income, net  (975)  (1,107)         Loss before income tax expense  (10,618)  (5,654)         Income tax expense  31   80          Net loss  (10,649)  (5,734)         Other comprehensive income        Unrealized gain on marketable securities  (2)  —          Net loss and comprehensive loss $(10,647) $(5,734)         Basic and diluted net loss per share $(0.89) $(0.74)Weighted average shares outstanding – basic and diluted  11,987,696   7,743,520   See accompanying notes to consolidated financial statements. 98  DiaMedica Therapeutics Inc.Consolidated Statements of Shareholders’ Equity(In thousands, except share amounts)    CommonShares  Paid-InCapital  Accumulated OtherComprehensiveIncome  AccumulatedDeficit  TotalShareholders’Equity Balances at December 31, 2017  6,370,661  $41,033  $—  $(40,234) $799 Issuance of common shares and warrants, net of offering costs of $529  1,322,965   5,840   —   —   5,840 Issuance of common shares, net of offering costs of $1,674  4,100,000   14,726   —   —   14,726 Exercise of common share purchase warrants  146,294   731   —   —   731 Exercise of common stock options  16,954   43   —   —   43 Share-based compensation expense  —   620   —   —   620 Net loss  —   —   —   (5,734)  (5,734)Balances at December 31, 2018  11,956,874  $62,993  $—  $(45,968) $17,025 Exercise of common stock options  50,000   75   —   —   75 Share-based compensation expense  —   1,164   —   —   1,164 Unrealized gain on marketable securities  —   —   2   —   2 Net loss  —   —   —   (10,649)  (10,649)Balances at December 31, 2019  12,006,874  $64,232  $2  $(56,617) $7,617   See accompanying notes to consolidated financial statements. 99  DiaMedica Therapeutics Inc.Consolidated Statements of Cash Flows(In thousands, except share amounts)    Year Ended December 31,   2019  2018 Cash flows from operating activities:        Net loss $(10,649) $(5,734)Adjustments to reconcile net loss to net cash used in operating activities:        Share-based compensation  1,164   620 Amortization of discount on marketable securities  (74)  — Non-cash lease expense  49   — Depreciation  21   15 Change in fair value of warrant liability  —   39 Changes in operating assets and liabilities:        Amounts receivable  (43)  (700)Prepaid expenses  322   (308)Deposits  183   — Accounts payable  (301)  (30)Accrued liabilities  226   402 Net cash used in operating activities  (9,102)  (5,696)         Cash flows from investing activities:        Purchase of marketable securities  (12,919)  — Maturities of marketable securities  9,000   — Disposition of property and equipment, net  13   — Purchase of property and equipment  (2)  (50)Net cash used in investing activities  (3,908)  (50)         Cash flows from financing activities:        Proceeds from exercise of stock options  75   43 Principal payments on finance lease obligations  (5)  — Proceeds from issuance of common shares, net of offering costs  —   14,726 Proceeds from issuance of common shares and warrants, net offering costs  —   5,840 Proceeds from the exercise of common share purchase warrants  —   607 Net cash provided by financing activities  70   21,216          Net increase (decrease) in cash and cash equivalents  (12,940)  15,470 Cash and cash equivalents at beginning of period  16,823   1,353 Cash and cash equivalents at end of period $3,883  $16,823          Supplemental disclosure of cash flow information:        Cash paid for income taxes $26  $80 Cash paid for interest $2  $11          Supplemental disclosure of non-cash transactions:        Reclassification of warrant liability upon warrant exercise $—  $123 Assets acquired under capital lease $—  $24   See accompanying notes to consolidated financial statements. 100  DiaMedica Therapeutics Inc.Notes to Consolidated Financial Statements 1.Business DiaMedica Therapeutics Inc. and its wholly-owned subsidiaries, DiaMedica USA, Inc. and DiaMedica Australia Pty Ltd. (collectively “we,” “us,” “our,” “DiaMedica”and the “Company”), exist for the primary purpose of advancing the clinical and commercial development of a proprietary recombinant KLK1 protein for the treatment ofkidney and neurological diseases. Currently, our primary focus is on chronic kidney disease (CKD) and acute ischemic stroke (AIS). Our parent company is governedunder the British Columbia Business Corporations Act and, commencing on December 7, 2018, our common shares are publicly traded on The Nasdaq Capital Marketunder the symbol “DMAC.” The Company’s shares were previously traded on the TSX Venture Exchange in Canada and on the OTCQB in the United States. Effective November 15, 2018, we implemented a 1-for-20 consolidation of our common shares. No fractional shares were issued in connection with the shareconsolidation. Instead, the Company rounded to the nearest whole number the number of shares shareholders were entitled to receive in connection with theconsolidation. The share consolidation was approved by our shareholders as of November 6, 2018 and was implemented to increase the market price per common shareto a level that qualified for listing on The Nasdaq Capital Market. Proportional adjustments were also made to common shares reserved for issuance under theCompany’s equity-based compensation plans and outstanding stock options, deferred share units and warrants. All references to share and per share amounts includedin these consolidated financial statements have been retroactively restated to reflect the share consolidation. 2.Risks and Uncertainties DiaMedica operates in a highly regulated and competitive environment. The development, manufacturing and marketing of pharmaceutical products require approvalfrom, and are subject to ongoing oversight by, the Food and Drug Administration (FDA) in the United States, the European Medicines Agency (EMA) in the EuropeanUnion and comparable agencies in other countries. We are in the clinical stage of development of our initial product candidate, DM199, for the treatment of CKD andAIS. The Company has not completed the development of any product candidate and, accordingly, has not begun to commercialize any product candidate or generateany revenues from the commercial sale of any product candidate. DM199 requires significant additional clinical testing and investment prior to seeking marketingapproval and is not expected to be commercially available for at least three to five years, if at all. The Company’s future success is dependent upon the success of itsdevelopment efforts, its ability to demonstrate clinical progress for its DM199 product candidate in the United States or other markets, its ability to obtain requiredgovernmental approvals of its product candidate, its ability to license or market and sell its DM199 product candidate and its ability to obtain additional financing tofund these efforts. As of December 31, 2019, we have incurred losses of $56.6 million since our inception in 2000. For the year ended December 31, 2019, we incurred a net loss of$10.6 million and negative cash flows from operating activities of $9.1 million. We expect to continue to incur operating losses until such time as any future productsales, royalty payments, licensing fees and/or milestone payments are sufficient to generate revenue to fund our continuing operations. Further, we expect our operatinglosses to continue as we pursue the research, development and clinical trials of, and to seek regulatory approval for, our product candidate. In addition, we expect ouroperating expenses to increase in 2020 compared to 2019 to support our ongoing clinical and organizational development. As of December 31, 2019, we had cash, cashequivalents and short-term investments of $7.9 million, working capital of $7.5 million and shareholders’ equity of $7.6 million. On February 13, 2020, we issued and soldan aggregate of 2,125,000 common shares in a public underwritten offering at a public offering price of $4.00 per share, receiving gross proceeds of $8.5 million and netproceeds of approximately $7.7 million, after deducting the underwriting discount and offering expenses. See Note 17 titled “Subsequent Event.” 101  Our principal sources of cash have included net proceeds from the issuance of equity securities. See Note 12 titled “Shareholders’ Equity” and Note 17 titled“Subsequent Event” for additional information. Although the Company has previously been successful in obtaining financing through equity securities offerings, thereis no assurance that we will be able to do so in the future. This is particularly true if our clinical data is not positive or economic and market conditions deteriorate. We expect that we will need substantial additional capital to further our research and development activities, complete the required clinical trials, regulatory activitiesand otherwise develop our product candidate, DM199, or any future product candidates, to a point where they may be commercially sold. We expect our current cash,supplemented by the net proceeds of our February 2020 public offering, to be sufficient to allow us to complete our currently ongoing Phase II REMEDY trial in patientswith AIS and currently ongoing Phase II study in patients with CKD and to otherwise fund our planned operations through 2021. However, the amount and timing ofour future funding requirements will depend on many factors, including the timing and results of ongoing development efforts, the potential expansion of currentdevelopment programs, potential new development programs and related general and administrative support. We may require significant additional funds earlier than wecurrently expect and there is no assurance that we will not need or seek additional funding prior to such time. 3.Summary of Significant Accounting Policies Basis of consolidation The accompanying consolidated financial statements include the assets, liabilities and expenses of DiaMedica Therapeutics Inc., and our wholly-owned subsidiaries,DiaMedica USA, Inc. and DiaMedica Australia Pty Ltd. All significant intercompany transactions and balances have been eliminated in consolidation. Functional currency The United States dollar is our functional currency as it represents the economic effects of the underlying transactions, events and conditions and various other factorsincluding the currency of historical and future expenditures and the currency in which funds from financing activities are mostly generated by the Company. A change inthe functional currency occurs only when there is a material change in the underlying transactions, events and condition. A change in functional currency could resultin material differences in the amounts recorded in the consolidated statement of loss and comprehensive loss for foreign exchange gains and losses. All amounts in theaccompanying consolidated financial statements are in U.S. dollars unless otherwise indicated. Use of estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires managementto make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from thoseestimates. 102  Cash and cash equivalents The Company considers all bank deposits, including money market funds, and other investments, purchased with an original maturity to the Company of three monthsor less, to be cash and cash equivalents. The carrying amount of our cash equivalents approximates fair value due to the short maturity of the investments. Concentration of credit risk Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash, cash equivalents and marketable securities. TheCompany maintains its cash balances primarily with two financial institutions. These balances generally exceed federally insured limits. The Company has notexperienced any losses in such accounts and believes it is not exposed to any significant credit risk in cash and cash equivalents. The Company believes that the creditrisk related to marketable securities is limited due to the adherence to an investment policy focused on the preservation of principal. Marketable securities The Company’s marketable securities typically consist of obligations of the United States government and its agencies and investment grade corporate obligations,which are classified as available-for-sale and included in current assets as they are intended to fund current operations. Securities are valued based on market prices forsimilar assets using third party certified pricing sources. Available-for-sale securities are carried at fair value with unrealized gains and losses reported as a component ofshareholders’ equity in accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion ofdiscounts to maturity. Such amortization or accretion is included in interest income. Realized gains and losses, if any, are calculated on the specific identification methodand are included in other income in the consolidated statements of operations. Available-for-sale securities are reviewed for possible impairment at least quarterly, or more frequently if circumstances arise that may indicate impairment. When the fairvalue of the securities declines below the amortized cost basis, impairment is indicated and it must be determined whether it is other than temporary. Impairment isconsidered to be other than temporary if the Company: (i) intends to sell the security, (ii) will more likely than not be forced to sell the security before recovering its cost,or (iii) does not expect to recover the security’s amortized cost basis. If the decline in fair value is considered other than temporary, the cost basis of the security isadjusted to its fair market value and the realized loss is reported in earnings. Subsequent increases or decreases in fair value are reported as a component ofshareholders’ equity in accumulated other comprehensive income (loss). There were no other-than-temporary unrealized losses as of December 31, 2019. Fair value measurements Under the authoritative guidance for fair value measurements, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a hierarchy for inputsused in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs beused when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sourcesindependent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing theasset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and financial liabilities within thevaluation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. 103  The hierarchy is broken down into three levels defined as follows: Level 1 Inputs — quoted prices in active markets for identical assets and liabilitiesLevel 2 Inputs — observable inputs other than quoted prices in active markets for identical assets and liabilitiesLevel 3 Inputs — unobservable inputs As of December 31, 2019, the Company believes that the carrying amounts of its other financial instruments, including amounts receivable, accounts payable andaccrued liabilities, approximate their fair value due to the short-term maturities of these instruments. See Note 5, titled “Marketable Securities” for additionalinformation. Long-lived assets Property and equipment are stated at purchased cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line methodover their estimated useful lives of three to ten years for office equipment and four years for computer equipment. Upon retirement or sale, the cost and relatedaccumulated depreciation are removed from the consolidated balance sheets and the resulting gain or loss is reflected in the consolidated statements of operations.Repairs and maintenance are expensed as incurred. Long-lived assets are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the asset or related group of assets maynot be recoverable. If the expected future undiscounted cash flows are less than the carrying amount of the asset, an impairment loss is recognized at that time.Measurement of impairment may be based upon appraisal, market value of similar assets or discounted cash flows. Revenue recognition We followed ASC 606, “Revenue from Contracts with Customers” in accounting for our former license and collaboration agreement with Ahon Pharmaceutical Co Ltd.Accordingly, the Company recognizes revenue upon transfer of control of the product to our customer in an amount that reflects the consideration we expect to receivein exchange. We intend to enter into arrangements for the research and development (R&D) and/or manufacture of products and product candidates. Such arrangements may requireus to deliver various rights, services and/or goods, including (i) intellectual property rights or licenses, (ii) R&D services or (iii) manufacturing services. The underlyingterms of these arrangements generally would provide for consideration to DiaMedica in the form of nonrefundable, up-front license fees, development and commercial-performance milestone payments, cost sharing, royalty payments and/or profit sharing. In arrangements involving more than one performance obligation, each required performance obligation is evaluated to determine whether it qualifies as a distinctperformance obligation based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readilyavailable and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to eachseparate distinct performance obligation based on its respective relative stand-alone selling price. The estimated selling price of each deliverable reflects our bestestimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis or using an adjusted market assessment approach if sellingprice on a stand-alone basis is not available. 104  The consideration allocated to each distinct performance obligation is recognized as revenue when control of the related goods or services is transferred. Considerationassociated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognizedwill not occur. We intend to utilize the sales and usage-based royalty exception in arrangements that resulted from the license of intellectual property, recognizingrevenues generated from royalties or profit sharing as the underlying sales occur. Research and development costs Research and development costs include expenses incurred in the conduct of human clinical trials, for third-party service providers performing various treatment, testingand data accumulation and for analysis related to clinical studies; sponsored non-clinical research agreements; developing the manufacturing process necessary toproduce sufficient amounts of the DM199 compound for use in our clinical studies; consulting resources with specialized expertise related to execution of ourdevelopment plan for our DM199 product candidate; and personnel costs, including salaries, benefits and share-based compensation. We charge research and development costs, including clinical trial costs, to expense when incurred. Our human clinical trials are performed at clinical trial sites and areadministered jointly by us with assistance from contract research organizations. Costs of setting up clinical trial sites are accrued upon execution of the studyagreement. Expenses related to the performance of clinical trials are accrued based on estimates of work completed to date by CROs, outside contractors and clinical trialsites that manage and perform the trials, and those that manufacture the investigational product. We obtain initial estimates of total costs based on the trial protocol,extent of enrollment of subjects, trial duration, project management costs, manufacturing costs, patient treatment costs and other activities as required by the trialprotocol. Additionally, actual costs may be charged to us and are recognized as the tasks are completed by the clinical trial site. Accrued clinical trial costs may besubject to revisions as clinical trials progress and any revisions are recorded in the period in which the facts that give rise to the revisions become known. Patent costs Costs associated with applying for, prosecuting and maintaining patents are expensed as incurred given the uncertainty of patent approval and, if approved, theresulting probable future economic benefit to the Company. Patent-related costs, consisting primarily of legal expenses and filing/maintenance fees, are included inresearch and development costs and were $87,000 and $156,000 for the years ended December 31, 2019 and 2018, respectively. Share-based compensation The cost of employee and non-employee services received in exchange for awards of equity instruments is measured and recognized based on the estimated grant datefair value of those awards. Compensation cost is recognized ratably using the straight-line attribution method over the vesting period, which is considered to be therequisite service period. We record forfeitures in the periods in which they occur. The fair value of share-based awards is estimated at the date of grant using the Black-Scholes option pricing model. The determination of the fair value of share-basedawards is affected by our share price, as well as assumptions regarding a number of complex and subjective variables. Risk free interest rates are based upon UnitedStates Government bond rates appropriate for the expected term of each award. Expected volatility rates are based on the historical volatility over a term equal to theexpected life of the option. The assumed dividend yield is zero, as we do not expect to declare any dividends in the foreseeable future. The expected term of options isestimated considering the vesting period at the grant date, the life of the option and the average length of time similar grants have remained outstanding in the past. 105  Warrants We account for common share purchase warrants as either equity instruments or as liabilities depending on the specific terms of the warrant agreements. Generally,warrants are classified as equity, as opposed to liabilities, as the agreements do not include the potential for a cash settlement or an adjustment to the exercise price andare therefore deemed to be indexed to the Company’s own shares. Certain of the Company’s common share purchase warrants which matured in February 2018 weredeemed to be derivative instruments and required to be reported at fair value. The fair value of common share purchase warrants is disclosed in Note 10 titled “WarrantLiability.” Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequencesattributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operatingloss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted rates, for each of the jurisdictions in which the Company operates,expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets andliabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Valuation allowances are established when necessary toreduce deferred tax assets to the amount that is more likely than not to be realized. The Company has provided a full valuation allowance against the gross deferred taxassets as of December 31, 2019 and 2018. See Note 16, “Income Taxes” for additional information. The Company’s policy is to classify interest and penalties related toincome taxes as income tax expense. Government assistance Government assistance relating to research and development performed by DiaMedica Australia Pty Ltd. is recorded as a component of Other (income) expense.Government assistance is recognized when the related expenditures are incurred. We recognized $856,000 and $621,000 of other income related to research activitiesperformed in 2019 and 2018, respectively. Net loss per share We compute net loss per share by dividing our net loss (the numerator) by the weighted-average number of common shares outstanding (the denominator) during theperiod. Shares issued during the period and shares reacquired during the period, if any, are weighted for the portion of the period that they were outstanding. Thecomputation of diluted earnings per share, or EPS, is similar to the computation of basic EPS except that the denominator is increased to include the number of additionalcommon shares that would have been outstanding if the dilutive potential common shares had been issued. Our diluted EPS is the same as basic EPS due to theexclusion of common share equivalents as their effect would be anti-dilutive. The following table summarizes our calculation of net loss per common share for the periods presented (in thousands, except share and per share data):   Year Ended December 31,   2019  2018 Net loss $(10,649) $(5,734)Weighted average shares outstanding—basic and diluted  11,987,696   7,743,520 Basic and diluted net loss per share $(0.89) $(0.74) 106  The following outstanding potential common shares were not included in the diluted net loss per share calculations as their effects were not dilutive:   Year Ended December 31,   2019  2018 Employee and non-employee stock options  1,220,359   639,359 Common shares issuable under common share purchase warrants  971,953   807,563 Common shares issuable under deferred unit plan  21,183   21,183    2,213,495   1,468,105  Recently adopted accounting pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued a new accounting standard that amended the guidance for the recognition of revenue fromcontracts with customers to transfer goods and services. The FASB subsequently issued additional, clarifying standards to address issues arising from implementationof the new revenue recognition standard. The new revenue recognition standard and clarifying standards require an entity to recognize revenue when control ofpromised goods or services is transferred to the customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for thosegoods or services. We adopted this new standard as of January 1, 2018. The adoption as of this date had no impact on our consolidated financial statements, as we hadno revenue until the third quarter of 2018. We followed ASC 606, “Revenue from Contracts with Customers” in accounting for our former license and collaborationagreement with Ahon Pharmaceutical Co Ltd. (Note 13). In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. The guidance in ASU 2016-02 supersedes the lease recognitionrequirements in the Accounting Standards Codification Topic 840, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for bothfinancing and operating leases, along with additional qualitative and quantitative disclosures. The new standard requires the immediate recognition of all excess taxbenefits and deficiencies in the income statement and requires classification of excess tax benefits as an operating activity as opposed to a financing activity in thestatements of cash flows. This standard became effective for us on January 1, 2019. The FASB has subsequently issued the following amendments to ASU 2016-02, which have the same effective date and transition date of January 1, 2019, and which wecollectively refer to as the new leasing standards:  ●ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, which permits an entity to elect an optional transitionpractical expedient to not evaluate under Topic 842 land easements that existed or expired prior to adoption of Topic 842 and that were not previouslyaccounted for as leases under the prior standard, ASC 840, Leases.  ●ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which amends certain narrow aspects of the guidance issued in ASU 2016-02.  ●ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows for a transition approach to initially apply ASU 2016-02 at the adoption date andrecognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption as well as an additional practical expedient forlessors to not separate non-lease components from the associated lease component. 107   ●ASU No. 2018-20, Narrow-Scope Improvements for Lessors, which contains certain narrow scope improvements to the guidance issued in ASU 2016-02. We adopted the new leasing standards on January 1, 2019, using a modified retrospective transition approach to be applied to leases existing as of, or entered into after,January 1, 2019; and, consequently, financial information will not be updated and the disclosures required under Topic 842 will not be provided for dates and periodsprior to January 1, 2019. We have reviewed our existing lease contracts and the impact of the new leasing standards on our consolidated results of operations, financialposition and disclosures. Upon adoption of the new leasing standards, we recognized a lease liability and related right-of-use asset on our consolidated balance sheetof approximately $205,000. In June 2018, the FASB issued ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting,” to simplify the accounting for share-basedpayments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU is effective for public entitiesfor fiscal years beginning after December 15, 2018. Prior to the adoption of this ASU, share-based compensation awarded to non-employees was subject to revaluationover its vesting terms. Subsequent to the adoption of this ASU, non-employee share-based payment awards are measured on the date of grant, similar to share-basedpayment awards granted to employees. We adopted this standard on January 1, 2019 and the adoption of this ASU did not have a material impact on our financialposition or our consolidated statements of operations. 4.Amounts Receivable Amounts receivable consisted of the following (in thousands):   December 31, 2019  December 31, 2018 Research and development incentives $793  $622 Sales-based taxes receivable  13   134 Other  17   24 Total amounts receivable $823  $780  5.Marketable Securities The available-for-sale marketable securities are primarily comprised of investments in commercial paper, corporate bonds and government securities and consist of thefollowing, measured at fair value on a recurring basis:       Fair Value Measurements as of December 31, 2019Using Inputs Considered as   Fair Value  Level 1  Level 2  Level 3 Commercial paper and corporate bonds $1,997  $—  $1,997  $— Government securities  1,998   —   1,998   — Total marketable securities $3,995  $—  $3,995  $—  Accrued interest receivable on available-for-sale securities was $25,000 as of December 31, 2019 and is included in amounts receivable. There were no transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy during the year ended December 31, 2019. Under the terms of the Company’s investment policy, purchases of marketable securities are limited to investment grade governmental and corporate obligations with aprimary objective of principal preservation. Maturities of individual securities are less than one year and the amortized cost of all securities approximated fair value as ofDecember 31, 2019. 108  6.Deposits Deposits consisted of the following (in thousands):   December 31, 2019  December 31, 2018 Advances to vendors, current $88  $—          Advances to vendors, non-current $—  $271  We periodically advance funds to vendors engaged to support the performance of our clinical trials and related supporting activities. The funds advanced are held,interest free, for varying periods of time and may be recovered by DiaMedica through partial reductions of ongoing invoices, application against final study/projectinvoices or refunded upon completion of services to be provided. Deposits are classified as current or non-current based upon their expected recovery time. 7.Property and Equipment Property and equipment consisted of the following (in thousands):   December 31, 2019  December 31, 2018 Furniture and equipment $51  $49 Computer equipment  56   71    107   120 Less accumulated depreciation  (43)  (24)Property and equipment, net $64  $96  Depreciation expense for the years ended December 31, 2019 and 2018 was $21,000 and $15,000, respectively. During 2019 and 2018, we disposed of $14,000 and $17,000of equipment, respectively. 8.Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following (in thousands):   December 31, 2019  December 31, 2018 Trade and other payables $182  $483 Accrued clinical study costs  433   292 Accrued compensation  419   417 Accrued research and other professional fees  172   65 Accrued taxes and other liabilities  52   34 Total accrued liabilities $1,258  $1,291  9.Operating Lease We lease certain office space under a non-cancelable operating lease. This lease does not have significant rent escalation holidays, concessions, leasehold improvementincentives or other build-out clauses. Further this lease does not contain contingent rent provisions. This lease terminates on August 31, 2022 and we do not have anoption to renew. This lease does include both lease (e.g., fixed rent) and non-lease components (e.g., common-area and other maintenance costs). The non-leasecomponents are deemed to be executory costs and are therefore excluded from the minimum lease payments used to determine the present value of the operating leaseobligation and related right-of-use asset. 109  This lease does not provide an implicit rate and, due to the lack of a commercially salable product, we are generally considered unable to obtain commercial credit.Therefore, considering the quoted rates for the lowest investment-grade debt and the interest rates implicit in recent financing leases, we estimated our incrementalborrowing rate to be 9%. We used our estimated incremental borrowing rate and other information available at the lease commencement date in determining the presentvalue of the lease payments. Our operating lease cost and variable lease costs were $65,000 and $54,000, respectively, for the year ended December 31, 2019. Variable lease costs consist primarily ofcommon area maintenance costs, insurance and taxes which are paid based upon actual costs incurred by the lessor. Maturities of our operating lease obligation are as follows as of December 31, 2019 (in thousands): 2020 $66 2021  68 2022  46 Total lease payments $180 Less interest portion  (21)Present value of lease obligation $159  10.Warrant Liability In February 2016, we completed, a non-brokered private placement of 234,375 units with each unit consisting of one common share and one half of one common sharepurchase warrant. Accordingly, we issued 117,188 warrants. In conjunction with this offering, the Company also issued an aggregate of 10,915 compensation warrants.Each warrant entitled the holder to purchase one common share at a price of CAD$5.00 at any time prior to expiry in February 2018. As the warrant exercise price was stated in Canadian dollars and not the Company’s functional currency, the warrants were deemed to be derivative instruments.Accordingly, we recorded a warrant liability on the Company’s consolidated balance sheet for the initial estimated fair value of the warrants with subsequent changes inthe estimated fair value recognized in the consolidated statements of operations and comprehensive loss. We allocated $281,000 of the net proceeds to the warrantliability and, for the compensation warrants, $24,000 was included in the issuance costs. The balance of the net proceeds were allocated to the common shares. TheCompany estimated the value of these warrants by using a Black-Scholes pricing model with the following assumptions: expected volatilities of 191.8 – 225.0%, risk-freeinterest rates of 0.43 – 0.49%, and expected life of 2 years. During February 2018, 121,256 common shares were issued on the exercise of warrants for gross proceeds of approximately $483,000 and the remaining 4,346 warrantsexpired. The fair values at the time of exercise of the warrants were estimated using the following valuation assumptions: expected volatilities of 16.7%, risk-free interest rates of1.8%, and expected life of 0.01-0.03 years. 110   The following is a rollforward of the fair value of the warrants (in thousands):   Warrant Liability Ending balance December 31, 2017 $84 Change in fair value  39 Exercises  (123)Ending balance December 31, 2018 $—  11.Commitments and Contingencies Clinical trials and product development In the normal course of business, the Company incurs obligations to make future payments as it executes its business plan. These contracts may relate to preclinical orclinical studies, manufacturing or manufacturing process development and other product development activities. Currently, these contracts include the clinical researchorganization conducting our Phase II clinical trial for acute ischemic stroke, clinical study sites in our Phase II CKD study and various vendors supporting theperformance of these studies. These commitments are subject to significant change and the ultimate amounts due may be materially different as these obligations areaffected by, among other factors, the number and pace of patients enrolled, the number of clinical study sites enrolling subjects, the amount of time to complete studyenrollments and the time required to finalize, analyze and report of study results. Clinical research agreements are generally cancelable upon 30 days’ notice, with theCompany’s obligation limited to costs incurred up to that date, including any non-cancelable costs. Cancelation terms for product manufacturing and processdevelopment contracts vary and are generally dependent upon timelines for sourcing research materials and reserving laboratory time. As of December 31, 2019, theCompany estimates that its outstanding commitments, including such cancellable contracts, are approximately $4.9 million over the next 12 months and $0 in thefollowing 12 months. On September 11, 2017, we announced the initiation of REMEDY, a Phase II clinical trial evaluating DM199 in patients with acute ischemic stroke. The study drug(DM199 or placebo) was administered as an intravenous infusion within 24 hours of stroke symptom onset, followed by subcutaneous (under the skin) injections laterthat day and once every 3 days for 21 days. The study was designed to evaluate safety and tolerability of DM199 along with multiple tests designed to investigateDM199’s therapeutic potential including plasma-based biomarkers and standard functional stroke measures assessed at 90 days post-stroke (Modified Rankin Scale,National Institutes of Health Stroke Scale, Barthel Index, and C-reactive protein, a measure of inflammation). Enrollment completed in October 2019 and a total of 92subjects were enrolled. On December 17, 2019, we announced the enrollment of the first subject in REDUX, a multi-center, open-label, Phase II clinical trial investigating 60 participants withStage II or III CKD, who will be enrolled in two equal cohorts. The study will evaluate two dose levels of DM199 within each cohort. Study participants will receiveDM199 by subcutaneous injection twice weekly for 95 days. The primary study endpoints include safety, tolerability, blood pressure, albuminuria and kidney function,which will be evaluated by changes from baseline in the estimated glomerular flow rate (eGFR) and albuminuria, as measured by the urinary albumin to creatinine ratio(UACR). Additional clinical trials will be subsequently required if the results of Phase II are positive. However, at this time, we are unable to reasonably estimate the total costs offuture trials. Such costs are contingent on and subject to change depending on the results of current and future clinical trials as well as developments in the regulatoryrequirements. 111  Technology license The Company has entered into a license agreement with Catalent Pharma Solutions, LLC (Catalent) whereby we have licensed certain gene expression technology andwe contract with Catalent for the manufacture of DM199. Under the terms of this license, certain milestone and royalty payments may become due under this agreementand are dependent upon, among other factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and timing ofwhich is uncertain. As of December 31, 2019, two milestones remain which include $185,000 due upon the initiation of dosing in our first Phase III trial and $185,000 uponour first regulatory approval for commercial sale. Following the launch of our first product, we will also incur a royalty of less than 1% on net sales. The royalty term isindefinite but the license agreement may be canceled by us on 90 days’ prior written notice. The license may not be terminated by Catalent unless we fail to makerequired milestone and royalty payments. There were no amounts due or payable under this agreement during 2019 and 2018. Litigation funding agreement On December 27, 2019, we entered into a litigation funding agreement with LEGALIST FUND II, L.P. (Funder) for the purpose of funding our currently pending lawsuitagainst PRA Netherlands. Our management believes, but cannot guarantee, that this litigation funding agreement will allow us to pursue this litigation more effectively.Although the Funder made its evaluation as to the likelihood of success, litigation is very uncertain, and no assurance can be provided that, just because we haveobtained litigation funding, we will be successful or that any recovery we may obtain will be significant. Under the terms of the litigation funding agreement, the Funder agreed to pay up to an aggregate of $1.0 million to fund reasonable legal fees, court costs, and otherexpenses incurred by us in connection with the litigation, including $200,000 for fees and costs previously paid by us. These payments, however, are conditioned uponthe transfer of venue of the litigation from Delaware to Minnesota (the Transfer) and if the venue is not transferred we will not be entitled to receive any payments underthe litigation funding agreement. If the venue is transferred, we agreed to repay the Funder from any proceeds arising from the litigation (Claim Proceeds) the amount ofcosts actually paid or otherwise funded by the Funder in connection with the litigation, plus the reimbursement of $10,000 for its diligence and underwriting costs.Additionally, we agreed to pay the Funder from the Claim Proceeds the greater of: (i) $1.0 million if repayment occurs within nine months of the Transfer, $2.0 million ifrepayment occurs more than nine months after the Transfer but before trial has begun, or $3.0 million thereafter; or (ii) 20% of the Claim Proceeds. In the event theFunder has not been repaid 3½ years after the Transfer, the Funder is entitled to receive interest on the unpaid amounts equal to 20% per annum commencing on the 3½year anniversary of the Transfer. Our obligation under the litigation funding agreement to make the foregoing payments to the Funder is non-recourse and limited onlyto the Claim Proceeds. As a result of the agreement, if we obtain Claim Proceeds, it is possible, depending on the amount of the Claim Proceeds, that we will receive nonet recovery after all payments have been made to the Funder. Indemnification of directors and officers The Company, as permitted under laws of British Columbia and in accordance with the Company’s articles and indemnification agreements, will indemnify and advanceexpenses to its directors and officers to the fullest extent permitted by law and may choose to indemnify other employees or agents from time to time. The Company hassecured insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to theCompany. As of December 31, 2019, there was no pending litigation or proceeding involving any director or officer of the Company as to which indemnification isrequired or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification. Insofar as indemnification forliabilities arising under the United States Securities Act of 1933, as amended (Securities Act) may be permitted to directors, officers and controlling persons of theCompany, the Company has been advised that, in the opinion of the United States Securities and Exchange Commission, such indemnification is against public policy asexpressed in the Securities Act and is therefore unenforceable. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, theCompany had not recorded any liabilities for these obligations as of December 31, 2019 or 2018. 112  12.Shareholders’ Equity Authorized capital stock DiaMedica has authorized share capital of an unlimited number of common voting shares and the shares do not have a stated par value. Common shareholders are entitled to receive dividends as declared by the Company, if any, and are entitled to one vote per share at the Company's annual generalmeeting and any extraordinary general meeting. Shareholders rights plan The Company adopted a shareholder rights plan agreement (Rights Plan). The Rights Plan is designed to provide adequate time for the Board of Directors and theshareholders to assess an unsolicited takeover bid for the Company, to provide the Board of Directors with sufficient time to explore and develop alternatives formaximizing shareholder value if a takeover bid is made, and to provide shareholders with an equal opportunity to participate in a takeover bid and receive full and fairvalue for their common shares. The Rights Plan was renewed at the Company’s annual meeting of shareholders in December 2017 and is set to expire at the close of theCompany’s annual meeting of shareholders in 2020. The rights issued under the Rights Plan will initially attach to and trade with the common shares and no separate certificates will be issued unless an event triggeringthese rights occurs. The rights will become exercisable only when a person, including any related person or entity, acquires or attempts to acquire 20% or more of theoutstanding common shares without complying with the “Permitted Bid” provisions of the Rights Plan or without approval of the Board of Directors. Should such anacquisition occur or be announced, each right would, upon exercise, entitle a rights holder, other than the acquiring person and related persons, to purchase commonshares at a 50% discount to the market price at the time. Under the Plan, a Permitted Bid is a bid made to all holders of the common shares and which is open for acceptance for not less than 60 days. If at the end of 60 days atleast 50% of the outstanding common shares, other than those owned by the offeror and certain related parties have been tendered, the offeror may take up and pay forthe common shares but must extend the bid for a further 10 days to allow other shareholders to tender. The issuance of common shares upon the exercise of the rights is subject to receipt of certain regulatory approvals. Equity issued during the year ended December 31, 2019 During the year ended December 31, 2019, 50,000 common shares were issued upon the exercise of options for gross proceeds of $75,000 and no warrants wereexercised. 113  Equity issued during the year ended December 31, 2018 Public offering during 2018 On December 11, 2018, the Company issued and sold an aggregate of 4,100,000 common shares in an initial public offering at a price to the public of $4.00 per share. As aresult of the offering, the Company received gross proceeds of $16.4 million, which resulted in net proceeds to the Company of approximately $14.7 million, afterdeducting the underwriting discount and offering expenses. None of the expenses associated with the initial public offering were paid to directors, officers, personsowning ten percent or more of any class of equity securities, or to their associates, or to our affiliates. On December 11, 2018, as additional underwriting compensationand in exchange for cash consideration of $50, the Company granted the underwriter a warrant to purchase 205,000 common shares (equal to 5.0% of the common sharessold in the initial public offering) at an exercise price of $4.80 per share (equal to 120% of the initial public offering price per common share in the initial public offering),subject to customary anti-dilution provisions. The warrant is exercisable for a term of five years. The warrant includes a cashless exercise provision entitling theunderwriter to surrender a portion of the underlying common shares that has a value equal to the aggregate exercise price in lieu of paying cash upon exercise. Private placements during 2018 On March 29, 2018, the Company completed, in two tranches, a brokered and non-brokered private placement of 1,322,965 units at a price of $4.90 per unit for aggregategross proceeds of approximately $6.3 million. Each unit consisted of one common share and one half of one common share purchase warrant. The Company issued661,482 warrants. Each warrant entitles the holder to purchase one common share at a price of $7.00 at any time prior to expiry on March 19, 2020 and March 29, 2020 forTranche 1 and Tranche 2, respectively. The warrants are subject to early expiry under certain conditions. The warrant expiry date can be accelerated at the option of theCompany, in the event that the volume-weighted average trading price of the Company’s common shares exceeds $12.00 per common share for any 21 consecutivetrading days. In connection with this offering, the Company paid aggregate finder’s fees of approximately $384,000 and issued an aggregate of 80,510 compensationwarrants. Each compensation warrant entitles the holder to purchase one common share at $4.90 for a period of 2 years from the closing of this offering, subject toacceleration on the same terms as the common share purchase warrants. During the year ended December 31, 2018, 128,594 common shares were issued on the exercise of warrants for gross proceeds of $607,000 and 16,954 common shareswere issued on the exercise of options for gross proceeds of $43,000. Shares reserved Common shares reserved for future issuance are as follows:   December 31, 2019 Stock options outstanding  1,220,359 Deferred share units outstanding  21,183 Shares available for grant under the 2019 Omnibus Incentive Plan  1,384,822 Common shares issuable under common share purchase warrants  971,953 Total  3,598,317  114  13.Former License and Collaboration Agreement with Related Party On September 27, 2018, the Company entered into a license and collaboration agreement (License Agreement) with Ahon Pharmaceutical Co Ltd. (Ahon Pharma), whichgranted Ahon Pharma exclusive rights to develop and commercialize DM199 for acute ischemic stroke in mainland China, Taiwan, Hong Kong S.A.R. and Macau S.A.R.Under the terms of the agreement, the Company received a non-refundable upfront payment of $500,000 upon signing the License Agreement and was entitled to receivean additional non-refundable payment of $4.5 million upon the earlier of regulatory clearance to initiate a clinical trial in China or July 1, 2019. The Company also had thepotential to receive up to an additional $27.5 million in development and sales related milestones and up to approximately 10% royalties on net sales of DM199 in thelicensed territories. All development, regulatory, sales, marketing and commercial activities and associated costs in the licensed territories were the sole responsibility ofAhon Pharma. By its terms, the License Agreement could be terminated at any time by Ahon Pharma by providing 120 days written notice. On August 12, 2019, after extensive good faith discussions between Ahon Pharma and the Company, the parties were unable to agree upon mutually acceptable revisedterms to the agreement and we terminated the License Agreement for non-payment of the $4.5 million milestone, thereby regaining worldwide rights to DM199 for acuteischemic stroke. Ahon Pharma is a subsidiary of Shanghai Fosun Pharmaceutical (Group) co. Ltd. (Fosun Pharma) which, through its partnership with SK Group, a South Korea basedcompany, is an investor in DiaMedica, holding approximately 8.3% of our common shares as of December 31, 2019. This investment was made in 2016. 14.Share-Based Compensation 2019 Omnibus Incentive Plan The DiaMedica Therapeutics Inc. 2019 Omnibus Incentive Plan (2019 Plan) was adopted by the Board of Directors in March 2019 and approved by our shareholders atour annual general and special meeting of shareholders held on May 22, 2019. The 2019 Plan permits the Board, or a committee or subcommittee thereof, to grant to theCompany’s eligible employees, non-employee directors and consultants non-statutory and incentive stock options, stock appreciation rights, restricted stock awards,restricted stock units, deferred stock units, performance awards, non-employee director awards and other stock-based awards. We grant options to purchase commonshares under the 2019 Plan at no less than the fair market value of the underlying common shares as of the date of grant. Options granted to employees and non-employee directors have a maximum term of ten years and generally vest in approximately equal quarterly installments over one to three years. Options granted to non-employees have a maximum term of five years and generally vest in approximately equal quarterly installments over one year. Subject to adjustment as provided in the2019 Plan, the maximum number of the Company’s common shares authorized for issuance under the 2019 Plan is 2,000,000 shares. As of December 31, 2019, options topurchase 615,178 common shares were outstanding under the 2019 Plan. Stock option plan The DiaMedica Therapeutics Inc. Stock Option Plan, Amended and Restated November 6, 2018 (Prior Plan), was terminated by the Board of Directors in conjunctionwith the shareholder approval of the 2019 Plan. Awards outstanding under the Prior Plan remain outstanding in accordance with and pursuant to the terms thereof.Options granted under the Prior Plan have terms similar to those used under the 2019 Plan. As of December 31, 2019, options to purchase 605,181 common shares wereoutstanding under the Prior Plan. 115  Deferred share unit plan The DiaMedica Therapeutics Inc. Amended and Restated Deferred Share Unit Plan (DSU Plan) was terminated by the Board of Directors in conjunction with theshareholder approval of the 2019 Plan. Awards outstanding under the DSU Plan remain outstanding in accordance with and pursuant to the terms thereof. As ofDecember 31, 2019, there were 21,183 common shares reserved for deferred share units (DSUs) outstanding. The aggregate number of common shares reserved for issuance for awards granted under the 2019 Plan, the Prior Plan and the DSU Plan as of December 31, 2019 was1,241,542. As the TSX Venture Exchange was the principal trading market for the Company’s common shares, all options granted prior to December 31, 2018 under the Prior Planwere priced in Canadian dollars. Options granted after December 31, 2018 under the 2019 Plan and the Prior Plan have been priced in United States dollars. Share-based compensation expense for each of the periods presented is as follows (in thousands):   December 31, 2019  December 31, 2018 Research and development $370  $170 General and administrative  794   450 Total share-based compensation $1,164  $620  We recognize share-based compensation based on the fair value of each award as estimated using the Black-Scholes option valuation model. Ultimately, the actualexpense recognized over the vesting period will only be for those shares that actually vest. A summary of option activity is as follows (in thousands except share and per share amounts):   SharesUnderlyingOptions  WeightedAverage ExercisePrice Per Share  AggregateIntrinsic Value Balances at December 31, 2017  480,035  $4.98  $508 Granted  196,800   8.55     Exercised  (16,954)  2.54     Expired/cancelled  —   —     Forfeited  (20,522)  6.94     Balances at December 31, 2018  639,359  $6.07  $— Granted  725,825   4.52     Exercised  (50,000)  1.50     Expired/cancelled  (7,353)  5.49     Forfeited  (87,472)  5.22     Balances at December 31, 2019  1,220,359  $5.33  $678  116  A summary of the status of our unvested shares during the year ended and as of December 31, 2019 is as follows:   SharesUnderlyingOptions  WeightedGrant Date FairValue Per Share Unvested at December 31, 2018  242,332  $5.75 Granted  725,825   3.21 Vested  (301,938)  4.07 Forfeited  (87,472)  3.94 Unvested at December 31, 2019  578,747  $3.73  Information about stock options outstanding, vested and expected to vest as of December 31, 2019, is as follows:     Outstanding, Vested and Expected to Vest  Options Vested and Exercisable Per Share ExercisePrice Shares  WeightedAverageRemainingContractualLife (Years)  WeightedAverage ExercisePrice  OptionsExercisable  Weighted AverageRemainingContractual Life(Years) $2.00-$2.99  132,900   6.0  $2.29   132,483   6.0 $3.00-$3.99  120,822   7.0   3.90   120,822   7.0 $4.00-$4.99  746,407   9.2   4.55   248,403   8.8 $5.00-$10.00   170,080   8.4   8.33   89,755   8.4 $10.01-$34.00  50,150   2.9   18.22   50,150   2.9      1,220,359   8.2  $5.33   641,613   7.3  The cumulative grant date fair value of employee options vested during the years ended December 31, 2019 and 2018 was $918,000 and $508,000, respectively. Totalproceeds received for options exercised during the years ended December 31, 2019 and 2018 were $75,000 and $43,000, respectively. As of December 31, 2019, total compensation expense related to unvested employee stock options not yet recognized was $2.1 million, which is expected to be allocatedto expenses over a weighted-average period of 2.3. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2019 and 2018 was $75,000 and $104,000, respectively. The assumptions used in calculating the fair value under the Black-Scholes option valuation model are set forth in the following table for options issued by theCompany for the years ended December 31, 2018 and 2017:   2019 2018Common share fair value $2.07-$4.60 $6.82-$7.20Risk-free interest rate 1.5–2.4%  2.1–2.2%Expected dividend yield  0%   0% Expected option life 4.2–5.1  4.8–5.0Expected stock price volatility 88.7–103.5%  123.5–135.7% 117  15.Employee Benefit Plan We maintain an employee 401(k) retirement savings plan (401(k) Plan). The 401(k) Plan provides eligible employees with an opportunity to make tax-deferredcontributions into a long-term investment and savings program. All employees over the age of 21 may elect to participate in the 401(k) Plan beginning on their hire date.The 401(k) Plan allows eligible employees to contribute a portion of their annual compensation, subject only to maximum limits required by law. We contribute an amountup to 4% of each employees’ compensation under the safe harbor provisions provided by the Internal Revenue Service rules governing 401(k) plans. Employee andemployer safe harbor contributions vest immediately. We have recorded contribution expenses of $62,000 and $45,000 for the years ended December 31, 2019 and 2018, respectively. 16.Income Taxes The Company has incurred net operating losses since inception. The Company has not reflected the benefit of net operating loss carryforwards in the accompanyingconsolidated financial statements and has established a full valuation allowance against its deferred tax assets. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and theamounts used for income tax purposes as well as operating losses and tax credit carryforwards. The significant components of our deferred tax assets and liabilities are as follows (in thousands):   December 31,   2019  2018 Deferred tax assets (liabilities):        Non-capital losses carried forward $11,211  $9,280 Research and development expenditures  817   887 Share issue costs  395   529 Patents and other  294   293 Accruals  13   (97)Property and equipment  3   (6)Total deferred tax asset, net  12,733   10,886 Valuation allowance  (12,733)  (10,886)Net deferred tax asset $—  $—  Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period. Because of our history of operatinglosses, management believes that the deferred tax assets arising from the above-mentioned future tax benefits are currently not likely to be realized and, accordingly, wehave provided a full valuation allowance. The reconciliation of the Canadian statutory income tax rate applied to the net loss for the year to the income tax expense is as follows:   December 31,   2019  2018 Statutory income tax rate  27.0%  27.0%Income tax recovery based on statutory rate $(2,841) $(1,119)Share-based compensation  315   243 Gain on revaluation of warrant liability  —   (450)Australian research and development incentive  137   103 Other  (9)  172 Change in valuation allowance  2,429   1,131 Income tax expense $31  $80  118  Net operating losses and tax credit carryforwards as of December 31, 2019, are as follows:   Amount(In thousands) Expiration YearsNon-capital income tax losses, net $38,425 Beginning 2026Research and development expense carry forwards  3,026 IndefinitelyTax credits  484 Beginning 2020 The Company is subject to taxation in the Canada, the United States and Australia. Tax returns, since the inception of DiaMedica Therapeutics Inc., are subject toexaminations by Canadian tax authorities and may change upon examination. Tax returns of DiaMedica USA, Inc., since its inception in 2012 and thereafter, are subjectto examination by the U.S. federal and state tax authorities. Tax returns of DiaMedica Therapeutics Australia Pty Ltd., since its inception in 2016 and thereafter, aresubject to examination by the Australian tax authorities. 17.Subsequent Event On February 13, 2020, we issued and sold an aggregate of 2,125,000 common shares in a public, underwritten offering at a public offering price of $4.00 per share. As aresult of the offering, we received gross proceeds of $8.5 million, which resulted in net proceeds to us of approximately $7.7 million, after deducting the underwritingdiscount and offering expenses. None of the expenses associated with the public offering were paid to directors, officers, persons owning ten percent or more of anyclass of equity securities, or to their associates, or to our affiliates. 119  Item 9.Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. Item 9A.Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended(Exchange Act)) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the ExchangeAct, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated andcommunicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate toallow timely decisions regarding required disclosure. Our management evaluated, with the participation of its Chief Executive Officer and its Chief Financial Officer, theeffectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered in this report. Based on that evaluation, ourChief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of such period to providereasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized andreported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including ourChief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under theExchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concludedthat, as of December 31, 2019, our internal control over financial reporting was effective. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm on internal control over financial reportingdue to an exemption established by the JOBS Act for “emerging growth companies.” Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the fourth quarter ended December 31, 2019 that has materially affected or isreasonably likely to materially affect our internal control over financial reporting. 120  Item 9B.Other Information On February 21, 2020, the Compensation Committee approved the following officer payouts under the DiaMedica Therapeutics Inc. Short-Term Incentive Plan for 2019performance, in each case representing 80% of the officer’s respective target bonus opportunity:   Officer Name and Position  2019 BaseSalary  Target IncentivePercentage ofBase Salary   Target BonusOpportunity   2019 ActualPayout Rick PaulsPresident and Chief Executive Officer $445,000   50% $225,500  $178,000 Scott KellenChief Financial Officer and Secretary  270,000   30%  81,000   64,800 Harry Alcorn, Jr., Pharm.D.Chief Medical Officer  285,000   30%  85,500   68,400  121  PART III Item 10.Directors, Executive Officers and Corporate Governance Directors The information in the “Voting Proposal One – Election of Directors” section of our definitive proxy statement to be filed with the SEC with respect to our next annualgeneral meeting of shareholders, which involves the election of directors, is incorporated in this annual report on Form 10-K by reference. Executive Officers Information concerning our executive officers is included in this annual report on Form 10-K under Item 1 of Part I under “Information About Our Executive Officers.” Code of Ethics We have adopted a code of business conduct and ethics applicable to all of our directors, officers and employees, in accordance with Section 406 of the Sarbanes-OxleyAct, the rules of the SEC promulgated thereunder, and the Nasdaq Listing Rules. In the event that any changes are made or any waivers from the provisions of the codeof business conduct and ethics are made, these events would be disclosed on our website or in a report on Form 8-K within four business days of such event. The codeof business conduct and ethics is posted on our website at www.diamedica.com. Copies of the code of business conduct and ethics will be provided free of charge uponwritten request directed to Investor Relations, DiaMedica Therapeutics Inc., Two Carlson Parkway, Suite 260, Minneapolis, Minnesota 55447. Changes to Nomination Procedures During the fourth quarter of fiscal 2019, we made no material changes to the procedures by which shareholders may recommend nominees to the Company’s Board ofDirectors. Audit Committee Matters The information in the “Corporate Governance—Audit Committee” section of our definitive proxy statement to be filed with the SEC with respect to our next annualgeneral meeting of shareholders, which involves the election of directors, is incorporated in this annual report on Form 10-K by reference. Item 11.Executive Compensation The information in the “Director Compensation” and “Executive Compensation” sections of our definitive proxy statement to be filed with the SEC with respect to ournext annual general meeting of shareholders, which involves the election of directors, is incorporated in this annual report on Form 10-K by reference. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Stock Ownership The information in the “Stock Ownership—Security Ownership of Significant Beneficial Owners” and “Stock Ownership—Security Ownership of Management”sections of our definitive proxy statement to be filed with the SEC with respect to our next annual general meeting of shareholders, which involves the election ofdirectors, is incorporated in this annual report on Form 10-K by reference. 122  Securities Authorized for Issuance under Equity Compensation Plans The following table summarizes outstanding options and other awards under our equity compensation plans as of December 31, 2019. Our equity compensation plans asof December 31, 2019 were the DiaMedica Therapeutics Inc. 2019 Omnibus Incentive Plan (2019 Plan), the DiaMedica Therapeutics Inc. Stock Option Plan Amended andRestated November 6, 2018 (Prior Plan) and the DiaMedica Therapeutics Inc. Amended and Restated Deferred Share Unit Plan (DSU Plan).   (a)  (b)  (c)    Plan Category Number of Securitiesto be Issued UponExercise ofOutstanding Options,Warrants and Rights  Weighted-AverageExercise Price ofOutstandingOptions, Warrantsand Rights  Number of SecuritiesRemaining Available forFuture Issuance UnderEquity CompensationPlans (excludingsecurities reflected incolumn (a)) Equity compensation plans approved by security holders  1,241,542(1)  $5.32(2)   1,384,822(3) Equity compensation plans not approved by security holders  —  $—   — Total  1,241,542(1)  $5.32(2)   1,384,822(3)    (1)Amount includes 615,178 common shares issuable upon the exercise of stock options outstanding under the 2019 Plan, 605,181 common shares issuable uponthe exercise of stock options under the Prior Plan and 21,183 common shares issuable under the DSU Plan. (2)Not included in the weighted-average exercise price calculation are the 21,183 deferred share unit awards under the DSU Plan. (3)Amount includes 1,384,822 shares remaining available for future issuance under the 2019 Plan. Item 13.Certain Relationships and Related Transactions, and Director Independence The information in the “Related Person Relationships and Transactions” and “Corporate Governance—Director Independence” sections of our definitive proxystatement to be filed with the SEC with respect to our next annual general meeting of shareholders, which involves the election of directors, is incorporated in thisannual report on Form 10-K by reference. Item 14.Principal Accounting Fees and Services The information in the “Voting Proposal Two—Appointment of Baker Tilly Virchow Krause, LLP as our Independent Registered Public Accounting Firm andAuthorization to Fix Remuneration” section of our definitive proxy statement to be filed with the SEC with respect to our next annual general meeting of shareholders,which involves the election of directors, is incorporated in this annual report on Form 10-K by reference. 123  PART IV Item 15.Exhibits, Financial Statement Schedules Financial Statements Our consolidated financial statements are included in “Part II, Item 8. Financial Statements and Supplementary Data.” Financial Statement Schedules All financial statement schedules are omitted because they are inapplicable since we are a smaller reporting company. Exhibits The exhibits being filed or furnished with this report are listed below, along with an indication as to each management contract or compensatory plan or arrangement. A copy of any of the exhibits listed or referred to herein will be furnished at a reasonable cost to any person who is a shareholder upon receipt from any such person ofa written request for any such exhibit. Such request should be sent to: Mr. Scott Kellen, Chief Financial Officer and Corporate Secretary, DiaMedica Therapeutics Inc.,Two Carlson Parkway, Suite 260, Minneapolis, Minnesota 55447, Attn: Shareholder Information. Item No.ItemMethod of Filing3.1Notice of Articles of DiaMedica Therapeutics Inc. dated May 31, 2019Incorporated by reference to Exhibit 3.1 to DiaMedica’s CurrentReport on Form 8-K as filed with the Securities and ExchangeCommission on June 4, 2019 (File No. 001-36291) 3.2Articles of DiaMedica Therapeutics Inc. dated May 31, 2019Incorporated by reference to Exhibit 3.2 to DiaMedica’s CurrentReport on Form 8-K as filed with the Securities and ExchangeCommission on June 4, 2019 (File No. 001-36291) 4.1Description of Securities Registered Pursuant to Section 12 of the SecuritiesExchange Act of 1934Filed herewith  4.2Specimen Certificate representing Voting Common Shares of DiaMedicaTherapeutics Inc.Incorporated by reference to Exhibit 4.2 to DiaMedica’s CurrentReport on Form 8-K as filed with the Securities and ExchangeCommission on June 4, 2019 (File No. 001-36291)  124  Item No.ItemMethod of Filing4.3Shareholder Rights Plan Agreement dated December 21, 2017 betweenDiaMedica Therapeutics Inc. and Computershare Investor Services Inc.Incorporated by reference to Exhibit 4.2 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 4.4Investment Agreement dated July 16, 2016 between Hermeda Industrial Co.,Ltd. and DiaMedica Inc.Incorporated by reference to Exhibit 4.1 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 4.5Form of Investor Warrant issued in connection with the March 2018 privateplacementIncorporated by reference to Exhibit 4.9 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 4.6Form of Broker Warrant issued in connection with the March 2018 privateplacementIncorporated by reference to Exhibit 4.10 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 4.7Warrant dated December 11, 2018 issued by DiaMedica Therapeutics Inc. toCraig-Hallum Capital Group LLCIncorporated by reference to Exhibit 10.1 to DiaMedica’sCurrent Report on Form 8-K as filed with the Securities andExchange Commission on December 11, 2018(File No. 001-36291) 4.8Warrant dated October 1, 2019 issued by DiaMedica Therapeutics Inc. toCraig-Hallum Capital Group LLC  Filed herewith10.1#DiaMedica Therapeutics Inc. 2019 Omnibus Incentive PlanIncorporated by reference to Exhibit 10.1 to DiaMedica’sCurrent Report on Form 8-K as filed with the Securities andExchange Commission on May 23, 2019 (File No. 001-36291)  125  Item No.ItemMethod of Filing10.2#Form of Option Award Agreement under the DiaMedica Therapeutics Inc. 2019Omnibus Incentive PlanIncorporated by reference to Exhibit 10.2 to DiaMedica’sCurrent Report on Form 8-K as filed with the Securities andExchange Commission on June 21, 2019(File No. 001-36291) 10.3#Form of Restricted Stock Unit Award Agreement under the DiaMedicaTherapeutics Inc. 2019 Omnibus Incentive PlanIncorporated by reference to Exhibit 10.3 to DiaMedica’sCurrent Report on Form 8-K as filed with the Securities andExchange Commission on June 21, 2019(File No. 001-36291) 10.4#DiaMedica Therapeutics Inc. Stock Option Plan Amended and RestatedNovember 6, 2018Incorporated by reference to Exhibit 10.1 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.5#Form of Option Agreement under the DiaMedica Therapeutics Inc. StockOption Plan Amended and Restated November 6, 2018Incorporated by reference to Exhibit 10.3 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.6#Form of Option Agreement under the DiaMedica Therapeutics Inc. StockOption Plan Amended and Restated December 21, 2017Incorporated by reference to Exhibit 10.2 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.7#DiaMedica Therapeutics Inc. Amended and Restated Deferred Share Unit PlanIncorporated by reference to Exhibit 10.4 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.8#DiaMedica Therapeutics Inc. Short-Term Incentive PlanIncorporated by reference to Exhibit 10.1 to DiaMedica’sCurrent Report on Form 8-K as filed with the Securities andExchange Commission on June 21, 2019(File No. 001-36291)  126  Item No.ItemMethod of Filing10.9#Form of Indemnification Agreement between DiaMedica Therapeutics Inc. andEach Director and OfficerIncorporated by reference to Exhibit 10.1 to DiaMedica’sCurrent Report on Form 8-K as filed with the Securities andExchange Commission on June 4, 2019 (File No. 001-36291) 10.10#Employment Agreement effective as of September 12, 2018 between DiaMedicaTherapeutics Inc. and Rick PaulsIncorporated by reference to Exhibit 10.6 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.11#Employment Agreement effective as of September 12, 2018 between DiaMedicaTherapeutics Inc. and Scott KellenIncorporated by reference to Exhibit 10.7 to DiaMedica’sAnnual Report on Form 10-K for the year ended December 31,2018(File No. 001-36291) 10.12#Employment Agreement effective as of September 12, 2018 between DiaMedicaTherapeutics Inc. and Harry Alcorn, Ph.D.Incorporated by reference to Exhibit 10.9 to DiaMedica’sAnnual Report on Form 10-K for the year ended December 31,2018(File No. 001-36291) 10.13Two Carlson Parkway Office Lease dated September 18, 2015 between One TwoHoldings LLC and DiaMedica USA Inc.Incorporated by reference to Exhibit 10.8 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.14Supplemental to Lease Agreement dated December 16, 2015 between One TwoHoldings LLC and DiaMedica USA Inc.Incorporated by reference to Exhibit 10.9 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.15First Amendment to Lease dated May 3, 2017 between One Two Holdings LLCand DiaMedica USA Inc.Incorporated by reference to Exhibit 10.10 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313)  127  Item No.ItemMethod of Filing10.16Second Amendment to Lease dated September 5, 2017 between One TwoHoldings LLC and DiaMedica USA Inc.Incorporated by reference to Exhibit 10.11 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.17(1)GPEx® - Derived Cell Line Sale Agreement dated February 2, 2012 betweenDiaMedica Therapeutics Inc. and Catalent Pharma Solutions, LLCIncorporated by reference to Exhibit 10.12 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.18First Amendment to GPEx® Development and Manufacturing Agreement datedApril 10, 2017 between DiaMedica Therapeutics Inc. and Catalent PharmaSolutions, LLCIncorporated by reference to Exhibit 10.13 to DiaMedica’sRegistration Statement on Form S-1 as filed with the Securitiesand Exchange Commission on November 9, 2018 (File No. 333-228313) 10.19Second Amendment to GPEx® Development and Manufacturing Agreementdated as of October 22, 2018 between DiaMedica Therapeutics Inc. andCatalent Pharma Solutions, LLCFiled herewith   10.20Litigation Funding Agreement dated as of December 27, 2019 betweenLEGALIST FUND II, L.P. and DiaMedica Therapeutics Inc.Incorporated by reference to Exhibit 10.1 to DiaMedica’sCurrent Report on Form 8-K as filed with the Securities andExchange Commission on January 3, 2020(File No. 001-36291) 21.1Subsidiaries of DiaMedica Therapeutics Inc.Filed herewith 23.1Consent of Baker Tilly Virchow Krause, LLPFiled herewith 31.1Certification of President and Chief Executive Officer Pursuant to SEC Rule13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of2002  Filed herewith  31.2Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14(a), asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith  32.1Certification of President and Chief Executive Officer Pursuant to Rule 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002Furnished herewith    128  Item No.ItemMethod of Filing32.2Certification of Chief Financial Officer Pursuant to Rule 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Furnished herewith  101The following materials from DiaMedica Therapeutics Inc.’s Annual Report onForm 10-K for the year ended December 31, 2019, formatted in XBRL(Extensible Business Reporting Language): (i) the Consolidated BalanceSheets, (ii) the Consolidated Statements of Operations, (iii) the ConsolidatedStatements of Comprehensive Income (Loss), (iv) the Consolidated Statementsof Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes toConsolidated Financial StatementsFiled herewith        #Indicates a management contract or compensatory plan or arrangement.(1)Portions of this exhibit have been redacted and are subject to an order granting confidential treatment under Rule 406 of the United States Securities Act of1933, as amended (File No. 333-228313, CF #36833). The redacted material was filed separately with the Securities and Exchange Commission. Item 16.Form 10-K Summary None. 129  SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.  DIAMEDICA THERAPEUTICS INC.         Date: March 23, 2020By:/s/ Rick Pauls   Rick Pauls   President and Chief Executive Officer  Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated. Name Title Date          /s/ Rick Pauls President, Chief Executive Officer and Director March 23, 2020Rick Pauls (principal executive officer)       /s/ Scott Kellen Chief Financial Officer and Secretary March 23, 2020Scott Kellen (principal financial and accounting officer)       /s/ Richard Pilnik Chairman of the Board March 23, 2020Richard Pilnik         /s/ Michael Giuffre, M.D. Director March 23, 2020Michael Giuffre, M.D.         /s/ James Parsons Director March 23, 2020James Parsons         /s/ Zhenyu Xiao, Ph.D. Director March 23, 2020Zhenyu Xiao, Ph.D.     130[page intentionally left blank] [page intentionally left blank] BOARD OF DIRECTORS PROFESSIONAL SERVICE PROVIDERS SHARE INFORMATION Independent Auditors Baker Tilly Virchow Krause, LLP 225 South Sixth Street Suite 2300 Minneapolis, MN 55402 Our voting common shares are traded on The Nasdaq Capital Market under the symbol “DMAC.” ANNUAL GENERAL MEETING The Annual General Meeting of our shareholders will be held on Tuesday, June 2, 2020, beginning at 2:30 p.m., Central Daylight Savings Time, at the offices of: Fox Rothschild LLP Campbell Mithun Tower 222 South Ninth Street Suite 2000 Minneapolis, MN 5540 Legal Counsel Fox Rothschild LLP Campbell Mithun Tower Suite 2000 222 South Ninth Street Minneapolis, MN 55402 Pushor Mitchell LLP 301 – 1665 Ellis Street Kelowna, BC V1Y 2B3 Canada Patent Counsel Cooley LLP 1700 Seventh Avenue Suite 1900 Seattle, WA 98101 Transfer Agent and Registrar Computershare Investor Services 100 University Avenue, 8th Floor Toronto, ON M5J 2Y1 Canada 800.564.6253 +1 (514) 982 7555 service@computershare.com Richard Pilnik Chairman of the Board Michael Giuffre, M.D. Clinical Professor of Cardiac Sciences and Pediatrics at the University of Calgary James Parsons Chief Financial Officer and Corporate Secretary of Trillium Therapeutics Inc. Rick Pauls President and Chief Executive Officer DiaMedica Therapeutics Inc. Zhenyu Xiao, Ph.D. Chief Executive Officer of Hermed Equity Investment Management (Shanghai) Co., Ltd. EXECUTIVE OFFICERS Rick Pauls President and Chief Executive Officer Harry Alcorn Jr., PharmD Chief Medical Officer Scott Kellen Chief Financial Officer and Corporate Secretary Sydney Gilman, Ph.D. VP, Regulatory Affairs DiaMedica Therapeutics Inc. Two Carlson Parkway, Ste 260 Minneapolis, MN 55447 +1.763.479.1196 Phone www.diamedica.com bd@diamedica.com 

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