Dear Shareholders,
As we reflect on DiaMedica's journey throughout 2023, we believe we are now strategically
positioned to execute on our commitment to advancing the treatment of acute ischemic stroke (AIS)
with our therapeutic candidate, DM199 (Rinvecalinase Alfa), the first pharmaceutically active
recombinant form of the human tissue kallikrein-1 (rKLK1) protein to be clinically studied. We
successfully navigated the challenges of resolving our clinical hold and resuming our ReMEDy2
stroke trial, exited the year with the strongest balance sheet in the Company’s history, and added core
talent throughout the organization. We are determined with a steadfast focus on execution and
prudent investment.
Progress in the ReMEDy2 Trial
A key development this year was the FDA’s full removal of the clinical hold on and the re-initiation
of our ReMEDy2 Phase 2/3 pivotal trial for AIS. This step forward was achieved through diligent
work and dedication to patient safety in addressing the IV dosing concerns that paused the trial. We
completed a significant amount of lab-based testing, including our in-use studies of the various
components used in the IV administration of DM199. Going above and beyond the data requested by
the FDA, we also conducted a Phase 1c human safety study to confirm that the IV dose level we are
using in the reinitiated ReMEDy2 trial is safe and well tolerated. While we believe that the results of
this study aided the FDA in its decision to fully lift the clinical hold, we also wanted to ensure that
existing and new physician investigators would be confident in the safety of the ReMEDy2 trial.
The resumption of the ReMEDy2 trial signifies not just our ability to adapt but also our ability to
address the continuous challenges of clinical development. The past year, we have learned from
previous challenges, leading to further enhancements in our ReMEDy2 clinical trial protocol, which
we believe will give us the highest probability of success. Our focus is on efficiently managing trial
activities, while keenly aware of the hurdles that lie ahead in bringing DM199 closer to patients.
Leadership Enhancements
We also made strategic additions to our leadership team. Lorianne Masuoka, M.D. joined us as Chief
Medical Officer. Dr. Masuoka is a board-certified neurologist with more than 25 years of experience
building and expanding high value pipelines in the biopharmaceutical industry. She has a history of
building and leading high-performing teams in clinical development through all stages and the
ultimate approval of new medicines. Her experience also includes playing a key role in developing
strategic partnerships and acquisitions of multiple biotechnology companies. Dr. Masuoka also
recruited a former colleague, Rebekah de Vitry Fries, to join DiaMedica’s team as Vice President of
Clinical Operations. Ms. de Vitry Fries has over 15 years of clinical operations experience including
Epygenix Therapeutics; Takeda and Marinus Pharmaceuticals. In addition, Ambarish Shah, Ph.D.
joined us as Chief Technology Officer. He has over 25 years of experience in advancing
biopharmaceuticals from early stage through commercialization. Dr. Shah has a distinguished record
of building and managing talented organizations focused on drug product and process development
and delivery, while balancing both technical and business priorities and challenges. He brings deep
insights and decision-making experience gained from successful global licensure and life cycle
management of several life altering medicines. These appointments expand and strengthen our team.
Financial Stability and Growth
We would also like to highlight our strong financial position to support the continued execution of
the ReMEDy2 trial. We completed the year with a cash reserve in excess of $50 million. This
improved financial standing provides us with a more solid foundation to pursue our clinical
objectives. While this financial buffer is reassuring, we are mindful of the need for careful
management and strategic investment to ensure long-term sustainability and success.
Forward Outlook
The path forward for DM199 is cautiously optimistic. While we have observed promising biological
activity and made strategic adjustments, we are acutely aware of the challenges that accompany
clinical development. Our enhanced team and financial resources better position us to tackle these
challenges.
Our progress and future plans are deeply supported by you, our shareholders. Your trust and support
are crucial to our endeavors, and we do not take this lightly. Thank you for your continued support,
and we are committed to keeping you informed of our progress and to working diligently towards our
shared goals.
Sincerely,
Rick Pauls
President and Chief Executive Officer
Richard Pilnik
Chairman of the Board
April 4, 2024
Dear Shareholders:
Together with our Board of Directors and the management team at DiaMedica Therapeutics Inc., we are
pleased to invite you to our 2024 Annual General Meeting of Shareholders, which will be held at our
corporate offices located at 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305, USA,
beginning at 9:00 a.m., CDT, on Wednesday, May 22, 2024.
At the meeting, shareholders will be asked to consider and vote upon the following voting proposals:
(1) to elect seven persons to serve as directors until our next annual general meeting of shareholders or
until their respective successors are elected and qualified; (2) to appoint Baker Tilly US, LLP as our
independent registered public accounting firm for the fiscal year ending December 31, 2024 and to
authorize the Board of Directors to fix our independent registered public accounting firm’s remuneration;
(3) to approve an amendment to the DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus
Incentive Plan to increase the number of shares available under the plan; (4) to approve, on an advisory
(non-binding) basis, our executive compensation; and (5) to approve, on an advisory (non-binding) basis,
the frequency of future advisory votes on executive compensation. The last two voting proposals, which
are commonly referred to as a say-on-pay vote and a frequency of a say-on-pay vote are new for
DiaMedica and are the result of the loss of our “emerging growth company” status under applicable U.S.
Securities and Exchange Commission rules.
The accompanying Notice of 2024 Annual General Meeting of Shareholders and proxy statement
describe these matters in more detail. We urge you to read this information carefully.
The Board of Directors recommends a vote: FOR each of the seven nominees for director named in the
proxy statement, for a frequency of every ONE YEAR on the frequency of a say-on-pay vote and FOR
the approval of the other proposals being submitted to a vote of our shareholders.
Voting your DiaMedica common shares is easily achieved without the need to attend the meeting in
person. Regardless of the number of shares you own, it is important that your shares be represented and
voted at the meeting. Therefore, we urge you to vote your shares via the Internet, by telephone, or by
promptly marking, dating, signing, and returning the proxy card. Voting over the Internet, by telephone,
or by written proxy will ensure that your shares are represented at the meeting.
On behalf of the Board of Directors, we thank you for your participation, investment and support.
Sincerely,
Richard Pilnik
Chairman of the Board
Rick Pauls
President and Chief Executive Officer
You can help us make a difference by eliminating paper proxy materials. With your consent, we will
provide all future proxy materials electronically. Instructions for consenting to electronic delivery can be
found on your proxy card or at www.proxyvote.com. Your consent to receive shareholder materials
electronically will remain in effect until canceled.
(This page left blank intentionally)
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
May 22, 2024
The Annual General Meeting of Shareholders of DiaMedica Therapeutics Inc., a corporation existing
under the laws of British Columbia, will be held at our corporate offices located at 301 Carlson Parkway,
Suite 210, Minneapolis, Minnesota 55305, USA, beginning at 9:00 a.m., CDT, on Wednesday, May 22,
2024, for the following purposes:
1.
2.
3.
4.
5.
6.
7.
To receive the audited consolidated financial statements of DiaMedica Therapeutics Inc. for the
financial year ended December 31, 2023 and accompanying report of the independent registered
public accounting firm (for discussion only).
To elect seven 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 US, LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2024 and to authorize the Board of
Directors to fix our independent registered public accounting firm’s remuneration (Voting
Proposal Two).
To consider a proposal to approve an amendment to the DiaMedica Therapeutics Inc. Amended
and Restated 2019 Omnibus Incentive Plan to increase the number of shares available under the
plan by 3,000,000 shares (Voting Proposal Three).
To approve, on an advisory (non-binding) basis, our executive compensation (Voting Proposal
Four).
To approve, on an advisory (non-binding) basis, the frequency of future advisory votes on
executive compensation (Voting Proposal Five).
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 March 25, 2024 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 4, 2024 during normal business hours for examination by any
shareholder registered on our common share ledger as of the record date, March 25, 2024, for any purpose
germane to the meeting.
By Order of the Board of Directors,
Scott Kellen
Corporate Secretary
April 4, 2024
Minneapolis, Minnesota
TABLE OF CONTENTS
________________
Page
PROXY STATEMENT SUMMARY ........................................................................................................... 1
GENERAL INFORMATION ABOUT THE MEETING AND VOTING ................................................... 5
Date, Time, Place and Purposes of Meeting ......................................................................................... 5
Who Can Vote ....................................................................................................................................... 5
How You Can Vote ............................................................................................................................... 5
How Does the Board of Directors Recommend that You Vote ............................................................ 7
How You May Change Your Vote or Revoke Your Proxy .................................................................. 7
Quorum Requirement ............................................................................................................................ 8
Vote Required ....................................................................................................................................... 8
Appointment of Proxyholders ............................................................................................................... 9
Other Business .................................................................................................................................... 10
Procedures at the Meeting ................................................................................................................... 10
Householding of Meeting Materials .................................................................................................... 10
Proxy Solicitation Costs ...................................................................................................................... 10
VOTING PROPOSAL ONE—ELECTION OF DIRECTORS .................................................................. 11
Board Size and Structure ..................................................................................................................... 11
Information about Current Directors and Board Nominees ................................................................ 11
Additional Information about Current Directors and Board Nominees .............................................. 11
Penalties or Sanctions ......................................................................................................................... 15
Corporate Cease Trade Orders or Bankruptcies .................................................................................. 15
Board Recommendation ...................................................................................................................... 15
VOTING PROPOSAL TWO—APPOINTMENT OF BAKER TILLY US, LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZATION TO FIX
REMUNERATION ..................................................................................................................................... 16
Appointment of Independent Registered Public Accounting Firm ..................................................... 16
Authorization to Board of Directors to Fix Remuneration.................................................................. 16
Audit, Audit-Related, Tax and Other Fees .......................................................................................... 16
Audit Committee Pre-Approval Policies and Procedures ................................................................... 17
Board Recommendation ...................................................................................................................... 17
VOTING PROPOSAL THREE— APPROVAL OF AMENDMENT TO DIAMEDICA
THERAPEUTICS INC. AMENDED AND RESTATED 2019 OMNIBUS INCENTIVE PLAN ............ 18
Background and Proposed Amendment .............................................................................................. 18
Reasons Why You Should Vote in Favor of the Plan Amendment .................................................... 18
Summary of Sound Governance Features of the Amended 2019 Plan ............................................... 19
Background for Shares Authorized for Issuance ................................................................................. 19
Summary of the Amended 2019 Plan Features ................................................................................... 21
U.S. Federal Income Tax Information ................................................................................................ 28
Awards Previously Granted Under the Plan ....................................................................................... 30
Board of Directors Recommendation .................................................................................................. 30
VOTING PROPOSAL FOUR— ADVISORY APPROVAL OF EXECUTIVE COMPENSATION ....... 31
Background and Proposed Advisory Approval of Our Executive Compensation .............................. 31
Why You Should Vote in Favor of our Say-on-Pay Vote ................................................................... 31
Proposed Resolution............................................................................................................................ 31
i
Next Say-On-Pay Vote ........................................................................................................................ 32
Board of Directors Recommendation .................................................................................................. 32
VOTING PROPOSAL FIVE— ADVISORY APPROVAL OF THE FREQUENCY OF FUTURE
ADVISORY VOTES ON EXECUTIVE COMPENSATION .................................................................... 33
Background and Proposed Advisory Approval of the Frequency of Future Say-on-Pay Votes ......... 33
Board of Directors Recommendation .................................................................................................. 33
STOCK OWNERSHIP ............................................................................................................................... 34
Security Ownership of Significant Beneficial Owners ....................................................................... 34
Security Ownership of Management ................................................................................................... 35
Delinquent Section 16(a) Reports ....................................................................................................... 36
CORPORATE GOVERNANCE ................................................................................................................ 37
Management by Board of Directors .................................................................................................... 37
Corporate Governance Guidelines ...................................................................................................... 37
Board Leadership Structure ................................................................................................................. 37
Director Independence ........................................................................................................................ 38
Board Committees ............................................................................................................................... 38
Audit Committee ................................................................................................................................. 39
Compensation Committee ................................................................................................................... 41
Nominating and Corporate Governance Committee ........................................................................... 42
Director Qualifications and the Nomination Process .......................................................................... 43
Board Diversity Matrix ....................................................................................................................... 44
Board Diversity ................................................................................................................................... 44
Role of Board in Risk Oversight Process ............................................................................................ 45
Code of Business Conduct and Ethics ................................................................................................ 46
Board and Committee Meetings .......................................................................................................... 46
Policy Regarding Director Attendance at Annual General Meetings of Shareholders ....................... 46
Complaint Procedures ......................................................................................................................... 46
Process Regarding Shareholder Communications with Board of Directors ....................................... 46
DIRECTOR COMPENSATION ................................................................................................................ 47
Non-Employee Director Compensation Program ............................................................................... 47
Director Compensation Table ............................................................................................................. 49
Indemnification ................................................................................................................................... 50
EXECUTIVE COMPENSATION .............................................................................................................. 51
Executive Compensation Overview .................................................................................................... 51
Summary Compensation Table ........................................................................................................... 58
Outstanding Equity Awards at Fiscal Year-End ................................................................................. 59
Pay Versus Performance Disclosure ................................................................................................... 60
Employee Benefit and Stock Plans ..................................................................................................... 64
Anti-Hedging and Pledging Policy ..................................................................................................... 65
RELATED PERSON RELATIONSHIPS AND TRANSACTIONS ......................................................... 66
Introduction ......................................................................................................................................... 66
Description of Related Party Transactions .......................................................................................... 66
Policies and Procedures for Related Party Transactions ..................................................................... 67
ii
SHAREHOLDER PROPOSALS FOR 2025 ANNUAL GENERAL MEETING OF
SHAREHOLDERS ..................................................................................................................................... 69
COPIES OF FISCAL 2023 ANNUAL REPORT AND ADDITIONAL INFORMATION....................... 70
________________
DiaMedica Therapeutics Inc. is sometimes referred to as “DiaMedica,” “we,” “our” or “us” in this proxy
statement.
The 2024 Annual General Meeting of Shareholders is sometimes referred to as the “Annual General
Meeting,” “Annual Meeting” or “meeting” in this proxy statement.
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 is sometimes referred to
as our “Annual Report to Shareholders” or “2023 Annual Report” 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.
iii
PROXY STATEMENT SUMMARY
________________
This summary provides an overview of the information included in this proxy statement. We recommend
that you review the entire proxy statement and our Annual Report to Shareholders before voting.
2024 ANNUAL GENERAL MEETING OF SHAREHOLDERS
DATE AND TIME
Wednesday, May 22, 2024
9:00 a.m. (CDT)
LOCATION
DiaMedica Therapeutics Inc.
301 Carlson Parkway, Suite 210,
Minneapolis, Minnesota 55305
RECORD DATE
Holders of record of our common
shares at the close of business on
March 25, 2024 are entitled to
notice of, to attend, and to vote at
the 2024 Annual Meeting.
Voting Item
Voting Proposal One:
Election of Directors
Voting Proposal Two:
Appointment of Independent
Registered Public Accounting Firm and
Authorization to Fix Remuneration
Voting Proposal Three:
Amendment to DiaMedica
Therapeutics Inc. Amended and
Restated 2019 Omnibus Incentive Plan
Voting Proposal Four:
Approval, on an Advisory (Non-
Binding) Basis, of Executive
Compensation
Voting Proposal Five:
Approval, on an Advisory (Non-
Binding) Basis, of Frequency of Future
Advisory Votes on Executive
Compensation
Board’s Vote
Recommendation
Page
FOR
FOR
FOR
FOR
11
16
18
31
ONE YEAR
33
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 4, 2024, we
expect to begin mailing a Notice of Internet Availability of Proxy Materials to shareholders of record as
of March 25, 2024 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 May 22, 2024:
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, 2023, are available at www.proxyvote.com.
1
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
✓ Clawback policy
✓ Regular executive sessions
✓ No conflicts of interest
✓ Access to independent advisors
✓ No guaranteed salary increases or bonuses
✓ No perquisites
✓ No poison pill
BOARD OF DIRECTORS NOMINEES
Below are the director nominees for election by shareholders at the 2024 Annual General Meeting, each
for a one-year term. All director nominees listed below served during the fiscal year ended December 31,
2023.
Director
Michael Giuffre, M.D.
Richard Kuntz, M.D., M.Sc.
Tanya Lewis
James Parsons
Rick Pauls
Richard Pilnik
Charles Semba, M.D.
Age
68
66
53
58
52
67
64
Serving Since
2010
2023
2023
2015
2005
2009
2021
Independent
Yes
Yes
Yes
Yes
No
Yes
Yes
The Board of Directors recommends a vote “FOR” each of these seven 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.
Director
Michael Giuffre, M.D.
Richard Kuntz, M.D., M.Sc.
Tanya Lewis
James Parsons
Rick Pauls
Richard Pilnik
Charles Semba, M.D.
Independent
Director
(Y/N)
Y
Y
Y
Y
N
Y
Y
Audit
Committee
Compensation
Committee
Chair
Nominating and
Corporate
Governance
Committee
●
Chair
Chair
●
●
●
●
●
2
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
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
significant portion of pay is at risk
• Maintain competitive pay packages
• Structure our executive compensation so a
significant portion is paid in equity
• Maintain a clawback policy
What We Don’t Do:
• No guaranteed salary increases or bonuses
• No repricing of stock options unless approved
by shareholders
• No liberal share counting under our equity plan
• No hedging or pledging of DiaMedica
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—Executive Compensation Overview—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 individual performance objectives.
• Long-term incentive – a variable, long-term element that is provided in stock options.
3
2023 EXECUTIVE COMPENSATION ACTIONS
Throughout this proxy statement, discussion of our executive compensation programs includes the
compensation of the following executive officers required to be named in the Summary Compensation
Table under “Executive Compensation” section and referred to as our named executive officers or NEOs:
(i) Rick Pauls, our Chief Executive Officer (CEO), (ii) Scott Kellen, our Chief Financial Officer (CFO)
and Julie Daves, our Senior Vice President, Clinical Development Operations (SVP, Clinical) who are our
two other most highly compensated executive officers serving at the end of 2023, and (iii) Kirsten Gruis,
M.D., our former Chief Medical Officer (CMO) who would have been among the most highly
compensated executive officers had she been serving at the end of 2023. The 2023 compensation actions
and incentive plan outcomes based on performance are summarized below:
Element
Base Salary
Short-Term Incentive
Long-Term Incentive
Key 2023 Actions
Our CEO received a base salary increase of 8% and our other NEOs
received base salary increases between 3% and 10%, in each case to move
their salaries closer toward our target positioning in our peer group.
The target incentive percentage under our short-term incentive plan for
2023 was 50% of base salary for our CEO, 40% of base salary for our CFO
and former CMO, and 35% of base salary for our SVP, Clinical, which
were all unchanged from the prior year.
Our NEOs received stock option awards, with 25% vesting on the one-year
anniversary of the grant date and the remaining 75% vesting in 12 equal
quarterly installments thereafter.
Other Compensation
No changes were made to other components of our executive
compensation program.
4
301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305
PROXY STATEMENT FOR
ANNUAL GENERAL MEETING OF SHAREHOLDERS
May 22, 2024
The Board of Directors of DiaMedica Therapeutics Inc. is soliciting your proxy for use at the 2024
Annual General Meeting of Shareholders to be held on Wednesday, May 22, 2024. The Board of
Directors expects to make available to our shareholders beginning on or about April 4, 2024 the Notice of
Annual General Meeting of Shareholders, this proxy statement and a form of proxy on the Internet or
have these materials sent to shareholders of DiaMedica upon their request.
GENERAL INFORMATION ABOUT THE MEETING AND VOTING
Date, Time, Place and Purposes of Meeting
The Annual General Meeting of Shareholders of DiaMedica Therapeutics Inc. will be held on
Wednesday, May 22, 2024, at 9:00 a.m., CDT, at our corporate offices located at 301 Carlson Parkway,
Suite 210, Minneapolis, Minnesota 55305, USA, for the purposes set forth in the Notice of Annual
General Meeting of Shareholders.
Who Can Vote
Shareholders of record at the close of business on March 25, 2024 will be entitled to notice of and to vote
at the meeting or any adjournment thereof. As of that date, there were 37,958,000 common shares
outstanding. Each common share is entitled to one vote on each matter to be voted on at the 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.
5
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., EDT (10:59 p.m., CDT), on
May 21, 2024, 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 seven nominees for director or
• WITHHOLD your vote from one or more of the seven nominees for director.
For Voting Proposal Two—Appointment of Baker Tilly US, LLP as our Independent Registered Public
Accounting Firm and Authorization to Fix Remuneration, you may:
• Vote FOR the proposal,
• WITHHOLD your vote from the proposal or
• ABSTAIN from voting on the proposal.
For Voting Proposal Three—Approval of Amendment to DiaMedica Therapeutics Inc. Amended and
Restated 2019 Omnibus Incentive Plan, you may:
• Vote FOR the proposal,
• Vote AGAINST the proposal or
• ABSTAIN from voting on the proposal.
6
For Voting Proposal Four—Approval, on an Advisory (Non-Binding) Basis, of our Executive
Compensation, you may:
• Vote FOR the proposal,
• Vote AGAINST the proposal or
• ABSTAIN from voting on the proposal.
For Voting Proposal Five—Approval, on an Advisory (Non-Binding) Basis, of the Frequency of Future
Advisory Votes on Executive Compensation, you may:
• Vote for a frequency of every ONE YEAR, TWO YEARS, or THREE YEARS 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 seven of the nominees for election to the
Board of Directors in Voting Proposal One—Election of Directors, FOR Voting Proposal Two—
Appointment of Baker Tilly US, LLP as our Independent Registered Public Accounting Firm and
Authorization to Fix Remuneration, FOR Voting Proposal Three—Approval of Amendment to
DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan, FOR Voting
Proposal Four—Approval, on an Advisory Basis, of our Executive Compensation, and ONE YEAR for
Voting Proposal Five—Approval, on an Advisory Basis, the Frequency of Future Advisory Votes on
Executive Compensation.
How Does the Board of Directors Recommend that You Vote
The Board of Directors unanimously recommends that you vote:
• FOR all seven of the nominees for election to the Board of Directors in Voting Proposal One—
Election of Directors;
• FOR Voting Proposal Two—Appointment of Baker Tilly US, LLP as our Independent
Registered Public Accounting Firm and Authorization to Fix Remuneration;
• FOR Voting Proposal Three—Approval of Amendment to DiaMedica Therapeutics Inc.
Amended and Restated 2019 Omnibus Incentive Plan;
• FOR Voting Proposal Four—Approval, on an Advisory Basis, of our Executive Compensation;
and
• ONE YEAR for Voting Proposal Five—Approval, on an Advisory Basis, of the Frequency of
Future Advisory Votes on Executive Compensation.
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 at the meeting 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
7
• 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 33 and 1/3% of our issued common shares entitled to be voted at the meeting or
12,652,667 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 US, 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 withhold your vote from the proposal in the
absence of your instruction.
Voting Proposal Three— Approval of Amendment to DiaMedica Therapeutics Inc. Amended and
Restated 2019 Omnibus Incentive Plan 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 Four— Approval, on an Advisory Basis, of our Executive Compensation, 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 Five— Approval, on an Advisory Basis, of the Frequency of Future Advisory Votes on
Executive Compensation, 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.
8
The table below indicates the vote required for each voting proposal and the effect of any votes withheld,
abstentions and broker non-votes.
Voting Proposal
Voting Proposal
One: Election of
Directors
Voting Proposal
Two: Appointment
of Independent
Registered Public
Accounting Firm
and Authorization to
Fix Remuneration
Voting Proposal
Three: Approval of
Amendment to
DiaMedica
Therapeutics
Amended and
Restated 2019
Omnibus Incentive
Plan
Voting Proposal
Four: Approval, on
an Advisory (Non-
Binding) Basis, of
our Executive
Compensation
Voting Proposal
Five: Approval, on
an Advisory Basis,
of the Frequency of
Future Advisory
Votes on Executive
Compensation
Effect of
Votes
Withheld/Against
Votes withheld
will have no
effect.
Effect of
Abstentions
Abstentions will have
no effect.
Votes withheld
will have no
effect.
Abstentions will have
no effect.
Votes Required
Affirmative vote
of a majority of
votes cast on the
voting proposal.
Affirmative vote
of a majority of
votes cast on the
voting proposal.
Affirmative vote
of a majority of
votes cast on the
voting proposal.
Votes against will
count against the
proposal.
Abstentions will have
no effect.
Affirmative vote
of a majority of
votes cast on the
voting proposal.
Votes against will
count against the
proposal.
Abstentions will have
no effect.
Abstentions will have
no effect.
Affirmative vote
of a majority of
votes cast on the
choice of
frequency.
Votes cast for
choice of
frequency other
than ONE YEAR
will count against
the choice of
frequency of ONE
YEAR.
Effect of
Broker Non-
Votes
Broker non-
votes will
have no
effect.
We do not
expect any
broker non-
votes on this
proposal.
Broker non-
votes will
have no
effect.
Broker non-
votes will
have no
effect.
Broker non-
votes will
have no
effect.
Appointment of Proxyholders
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.
9
Only a registered shareholder at the close of business on March 25, 2024 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.
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, unless contrary instructions have been received. 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., 301 Carlson Parkway, Suite 210,
Minneapolis, Minnesota 55305, telephone: (763) 496-5454. 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.
10
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 has fixed the number of directors at seven. The Board of Directors currently consists of seven
directors. Each director is elected annually by the shareholders and serves for a term that will end at the
next annual general meeting of shareholders.
Information about Current Directors and Board Nominees
The Board of Directors has nominated the following seven 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.
The following table sets forth as of March 25, 2024 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
Michael Giuffre, M.D.(1)(2)(3) ......
Richard Kuntz, M.D., M.Sc.(1) ...
Tanya Lewis(1)(2) ..........................
James Parsons(1)(2)(4) ....................
Rick Pauls ...................................
Richard Pilnik(1)(3)(4) ....................
Charles Semba, M.D.(1)(2)(4) .........
Age
68
66
53
58
52
67
64
Position
Director
Director
Director
Director
President and Chief Executive Officer, Director
Chairman of the Board
Director
Independent Director
(1)
(2) Member of the Compensation Committee
(3) Member of the Nominating and Corporate Governance Committee
(4) Member of the Audit 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
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.
11
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, a global developer and provider of proprietary rapid and accurate
food safety tests for the detection of foodborne and environmental pathogens and other microorganisms,
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 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.
Richard Kuntz, M.D., M.Sc. has served as a member of our board of directors since May 2023.
Dr. Kuntz recently retired from Medtronic plc (NYSE:MDT) where he was the Chief Medical Officer
& Scientific Officer and a member of the Executive Committee. Prior to that, he served as Senior
Vice President and President, Neuromodulation of Medtronic from October 2005 to August
2009. Before joining Medtronic, he was the founder and Chief Scientific Officer of the Harvard
Clinical Research Institute in Boston. He also served as an Associate Professor of Medicine at
Harvard Medical School, Chief of the Division of Clinical Biometrics, and as an Interventional
Cardiologist in the division of cardiovascular diseases at the Brigham and Women’s Hospital in
Boston. In addition, he served as a founding Governor of the Patient Centered Outcomes Research
Institute (PCORI), as part of the US Affordable Care Act. He also served as an advisor to multiple
national and regional committees, in the National Academy of Medicine and National Institutes of
Health (NIH). He is presently serving as a working group member of NIH’s Helping to End
Addiction Long-term® (HEAL) program. Dr. Kuntz serves as a member of the board of directors of
ZimVie Inc. and IDENTIV, INC., which are Nasdaq listed companies. Dr. Kuntz has directed numerous
multicenter clinical trials and has authored more than 250 original publications. His major interests
are traditional and alternative clinical trial design and biostatistics. Dr. Kuntz graduated from Miami
University and received his medical degree from Case Western Reserve University School of
Medicine. He completed his residency and chief residency in internal medicine at the University of
Texas Southwestern Medical School, Parkland Hospital, Dallas, and then completed fellowships in
cardiovascular diseases and interventional cardiology at the Beth Israel Hospital and Harvard
Medical School, Boston. Dr. Kuntz received his Master of Science in biostatistics from the Harvard
T.H. Chan School of Public Health.
12
We believe that Dr. Kuntz’ experience in the pharmaceutical industry, particularly his demonstrated
leadership skills relating to medical advancements in neurology and his deep expertise in stroke
treatments, enable him to make valuable contributions to the Board of Directors.
Tanya Lewis has served as a member of the Board of Directors since March 1, 2023. Ms. Lewis has
served as the Chief Development Operations Officer at Replimune Group, Inc., a Nasdaq listed clinical-
stage biotechnology company, since May 2021, and beginning in April 2024, will transition from
providing her functional expertise in a full-time position to an advisory capacity. Ms. Lewis served as
Executive Vice President, Chief Regulatory Officer and Quality Officer at Karyopharm Therapeutics Inc.,
a pharmaceutical company, from November 2019 to May 2021, and previously served as Senior Vice
President, Regulatory and Quality Affairs from November 2018 to November 2019. Ms. Lewis is also a
former director of Karyopharm Therapeutics Inc. Prior to joining Karyopharm Therapeutics Inc., Ms.
Lewis served as Vice President, Regulatory and Quality Affairs for Syros Pharmaceuticals, Inc., a
pharmaceutical company, from January 2017 to July 2018. Prior to joining Syros Pharmaceuticals, Ms.
Lewis served as Vice President, Regulatory Affairs and Quality Assurance for Idera Pharmaceuticals,
Inc., a pharmaceutical company, from October 2015 to December 2016. Before joining Idera
Pharmaceuticals, Ms. Lewis served as Vice President, Regulatory Affairs for Tesaro, Inc., a
pharmaceutical company, from October 2011 to June 2015 and prior to that served in various roles at
Millennium Pharmaceuticals. Inc. Ms. Lewis holds a Bachelor of Science degree in Biology from
Northeastern University and a Master of Science degree in Regulatory Affairs and Health Policy from
Massachusetts College of Pharmacy and Allied Health Science.
We believe that Ms. Lewis’s experience in the pharmaceutical industry, particularly in drug development
and commercial planning for specialty biopharmaceuticals, enable her 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. Mr. Parsons
served as Chief Financial Officer and Corporate Secretary of Trillium Therapeutics Inc., a Nasdaq-listed
immuno-oncology company, from August 2011 until its acquisition by Pfizer in November 2021, at
which time he became employed by Pfizer Canada ULC until March 2022. Mr. Parsons serves as a
member of the board of directors and serves as chair of both the nominating and corporate governance
committee and audit committee of Sernova Corp., which is listed on the TSX and is a member of the
board of Oncolytics Biotech Inc., a Nasdaq/TSX listed company. 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 MBA in
Finance from the University of North Dakota. Mr. Pauls is a resident of Minnesota, USA.
13
We believe that Mr. Pauls’s 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.
Richard Pilnik has served as a member of the Board of Directors since May 2009. Mr. Pilnik has served
as our Chairman of the Board since July 2014. 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 and served
as its President from May 2017 to October 2021. 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 Lumanity, a privately-held
pharma services company, WCG-Copernicus, a privately-held clinical services company, Vigor Medical
Systems, Inc., a privately-held medical device company, and BIAL Farma, a privately-held 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.
Charles Semba, M.D. has served as a member of the Board of Directors since July 2021. Dr. Semba has
over 20 years of drug-development experience in public and venture-funded biotechnology companies.
Since June 2020, Dr. Semba has served as the Chief Medical Officer of Eluminex Biosciences, an
ophthalmology-focused biotechnology company. From June 2016 to March 2020, Dr. Semba served as
the Chief Medical Officer of Graybug Vision, Inc., a clinical-stage biopharmaceutical company focused
on developing transformative medicines for the treatment of chronic diseases of the retina and optic
nerve, and from June 2014 to June 2016, Dr. Semba served as the Chief Medical Officer of ForSight
VISION5 (acquired by Allergan), a company focused on developing non-invasive products that replace
eye drops and provide sustained therapy for major eye diseases, including glaucoma, dry eye, and allergy.
Prior to his work at ForSight VISION5, Dr. Semba held senior positions at biopharmaceutical companies
including Genentech (a Roche company) and Shire (acquired by Takeda). Additionally, since 1992,
Dr. Semba has served as an adjunct professor of vascular and interventional radiology at the Stanford
University School of Medicine. Dr. Semba holds a Bachelor of Arts in Chemistry from Carleton College
and an M.D. from the University of Minnesota Medical School and is a recognized expert in endovascular
14
therapy, thrombolysis, mechanical thrombectomy, and endovascular surgery. Dr. Semba is currently a
resident of California, USA.
We believe that Dr. Semba’s experience in the biotechnology and biopharmaceutical industries,
particularly in drug development and clinical-stage companies, 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 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 seven nominees
named above.
The Board of Directors Recommends a Vote FOR Each Nominee for Director
15
VOTING PROPOSAL TWO—APPOINTMENT OF BAKER TILLY US, 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 US, LLP to serve as our independent
registered public accounting firm for the fiscal year ending December 31, 2024. Baker Tilly US, LLP
was first appointed as our auditor on April 27, 2018.
Representatives of Baker Tilly US, 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 US, 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 US, LLP for the fiscal years
ended December 31, 2023 and December 31, 2022.
Aggregate Amount Billed by
Baker Tilly US, LLP
Fiscal 2023
Fiscal 2022
Audit Fees(1) .......................................................... $
Audit-Related Fees(2) .............................................
Tax Fees ................................................................
All Other Fees .......................................................
Total ...................................................................... $
173,539
8,295
—
—
181,834
$
$
130,134
6,253
—
—
136,387
(1) These fees consisted of the audit of our annual consolidated financial statements for fiscal 2023 and 2022,
review of quarterly condensed consolidated financial statements and other services normally provided in
connection with statutory and regulatory filings or engagements.
(2) These fees consisted of consents in connection with registration statements and related services normally
provided in connection with statutory and regulatory filings or engagements.
16
Audit Committee Pre-Approval Policies and Procedures
All services rendered by Baker Tilly US, 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, and permits the Audit Committee to establish pre-approval
policies and procedures. While the Audit Committee has not adopted any formal pre-approval policies
and procedures, it has delegated to the Audit Committee Chair the authority to pre-approve certain
services up to $25,000.
Board Recommendation
The Board of Directors unanimously recommends that shareholders vote FOR the appointment of Baker
Tilly US, LLP, as our independent registered public accounting firm for the fiscal year ending December
31, 2024 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
17
VOTING PROPOSAL THREE— APPROVAL OF AMENDMENT TO DIAMEDICA
THERAPEUTICS INC. AMENDED AND RESTATED 2019 OMNIBUS INCENTIVE PLAN
________________
Background and Proposed Amendment
On March 13, 2024, the Board of Directors, upon recommendation of the Compensation Committee,
adopted, subject to approval by our shareholders, an amendment to the DiaMedica Therapeutics Inc.
Amended and Restated 2019 Omnibus Incentive Plan to increase the number of shares available for
issuance by an additional 3,000,000 shares. We refer to this amendment as the “Plan Amendment” and
the revised plan incorporating the Plan Amendment as the “Amended 2019 Plan” throughout this proxy
statement. Our continuing ability to offer equity incentive awards under the plan is critical to our ability
to attract, motivate and retain qualified personnel, particularly as we grow and in light of the highly
competitive markets for employee talent in which we operate.
If our shareholders approve the Plan Amendment, it will become effective as of the date of shareholder
approval. If our shareholders do not approve the Plan Amendment, then the current plan, as currently in
effect, will remain in effect until it terminates in accordance with its terms.
Reasons Why You Should Vote in Favor of the Plan Amendment
The Board recommends a vote “FOR” approval of the Plan Amendment because the Board believes the
proposed Plan Amendment is in the best interests of DiaMedica and our shareholders for the following
reasons:
• Attracts and retains talent. Talented, motivated and effective employees, non-employee directors
and consultants are essential to executing our business strategy. Stock-based compensation and
short-term incentive compensation payable in cash have been an important component of total
compensation for our executive officers and key employees for years because such compensation
enables us to effectively recruit and retain qualified individuals while encouraging them to think
and act like owners of DiaMedica. If our shareholders approve the Plan Amendment, we believe
we will maintain our ability to offer competitive compensation packages to both attract new talent
and retain our best performers in a manner that is broad-based and preserves cash resources.
• Consistent with our pay-for-performance compensation philosophy to increase shareholder
value. We believe that stock-based compensation, by its very nature, is performance-based
compensation. Over time, the most significant component of total compensation for our
executives is incentive compensation in the form of both stock-based and cash-based incentives
that are tied to the achievement of business results. We use incentive compensation both to
reinforce desired business results for our key employees and to motivate them to achieve those
results. By the nature of the vehicle, option recipients only receive value by creating future value
for shareholders from the point of receipt.
• Aligns director, employee and shareholder interests. We currently provide long-term incentives
in the form of stock options to eligible employees, our non-employee directors, and consultants.
Additionally, we provide our non-employee directors the opportunity to elect to receive deferred
stock units (DSUs) or restricted stock units (RSUs) in lieu of up to 100% of their annual cash
retainers. We believe our stock-based compensation programs and our short-term incentives
payable in cash help align the interests of our non-employee directors and employees with those
of our shareholders.
18
• Protects shareholder interests and embraces sound equity-based compensation practices. As
described in more detail below under the heading “—Summary of Sound Governance Features of
the Amended 2019 Plan,” the Amended 2019 Plan includes a number of features that are
consistent with protecting the interests of our shareholders and sound corporate governance
practices.
Summary of Sound Governance Features of the Amended 2019 Plan
The Board and Compensation Committee believe that the Amended 2019 Plan contains several features
that are consistent with protecting the interests of our shareholders and sound corporate governance
practices, including the following:
✓ No automatic share replenishment or
“evergreen” provision
✓ No re-pricing of “underwater” stock
options or SARs without shareholder
approval
✓ Will not be excessively dilutive to our
✓ No discounted stock options or SARs
shareholders
✓ Limit on non-employee director awards
✓ No tax gross-ups
✓ No reload stock options or SARs
✓ Clawback provisions
✓ No liberal share counting or “recycling” of
shares from exercised stock options, SARs,
or other stock-based awards
✓ No dividends on stock options, DSUs and
unvested RSUs
Background for Shares Authorized for Issuance
If the Plan Amendment is approved, the maximum number of common shares available for issuance
under the Amended 2019 Plan will be increased by 3,000,000 to a total of 7,000,000. In determining the
total number of shares available under the Amended 2019 Plan, the Board and Compensation Committee
considered a number of factors, which are discussed further below, including:
• Shares remaining available under the current plan, total outstanding equity-based awards and how
long the remaining available shares are expected to last;
• Historical and anticipated equity award granting practices, including our three-year average share
usage (commonly referred to as “burn rate”); and
• Potential dilution and overhang.
Shares Available and Outstanding Equity Awards
While the use of long-term incentives in the form of equity awards is an important part of our
compensation program, we are mindful of our responsibility to our shareholders to exercise judgment in
the granting of equity awards. In setting the number of shares available for issuance under the Amended
2019 Plan, the Board and Compensation Committee considered shares remaining available under the
current plan, total outstanding equity awards, and how long the remaining shares available under the
current plan are expected to last. To facilitate approval of the Plan Amendment, set forth below under
“—Potential Dilution” is information about our common shares that may be issued under our equity
compensation plans as of March 25, 2024.
19
Historical Equity Award Granting Practices
In setting the number of common shares authorized for issuance under the Amended 2019 Plan, the Board
and Compensation Committee also considered the historical number of equity awards granted under the
current plan and other equity compensation plans in the past three full fiscal years. The following table
sets forth information regarding awards granted and DSUs and RSUs earned in lieu of cash director fees
and the annual burn rate for each of the last three fiscal years.
Stock options granted
DSUs granted
RSUs granted
Weighted average common shares outstanding during year
Burn rate
2023
1,132,515
107,841
17,156
32,566,723
3.9%
2022
1,014,398
66,743
—
26,443,067
4.1%
2021
638,008
24,272
—
20,773,399
3.2%
The Board and Compensation Committee also considered our three-year average burn rate (2021 to 2023)
of approximately 3.7%, which is lower than the industry thresholds established by certain major proxy
advisory firms. Based on historical and anticipated granting practices and the recent trading price of our
common shares, we expect the additional shares available for issuance under the Plan Amendment to
cover awards for approximately three years. However, we cannot predict our future equity grant
practices, the future price of our shares, or future hiring activity with any degree of certainty at this time,
and the share increase provided by the Plan Amendment could last for a shorter or longer period of time.
Potential Dilution
In setting the number of common shares authorized for issuance under the Amended 2019 Plan, the Board
and Compensation Committee also considered potential dilution that would result by approval of the Plan
Amendment, including the policies of certain institutional investors and major proxy advisory firms.
Current dilution and potential dilution, or overhang, is as set forth in the table below, as of March 25,
2024, assuming the Plan Amendment is approved.
Options Outstanding
Weighted Average Exercise Price of Options Outstanding
Weighted Average Remaining Term of Options Outstanding
DSUs Outstanding
RSUs Outstanding
Total Equity Awards Outstanding
Common Shares Outstanding
Current Dilution(1)
Shares Available for Future Grant Under:
2019 Plan
Amended 2019 Plan, assuming Plan Amendment is approved
DiaMedica 2021 Employment Inducement Incentive Plan
Current Potential Dilution, or Overhang, as a Percentage of Shares Outstanding(2)
Potential Dilution, or Overhang, as a Percentage of Shares Outstanding(3)
_____________________
20
As of March 25,
2024 and
Assuming
Approval of
Plan Amendment
4,256,638
$ 3.53
7.1 years
284,886
23,660
4,565,184
37,958,000
12.0%
731,949
3,731,949
110,000
14.2%
22.1%
(1) Current dilution consists of the number of shares subject to equity awards outstanding as of March 25, 2024
divided by the number of common shares outstanding as of such date.
(2) Current potential dilution, or overhang, under our current equity plans, consists of the number of shares subject
to equity awards outstanding as March 25, 2024 and the number of shares available for future grant under our
current equity plans divided by the number of common shares outstanding as of such date.
(3) Potential dilution, or overhang, under the Amended 2019 Plan and Inducement Plan consists of the number of
shares subject to equity awards outstanding as March 25, 2024 and the number of shares available for future
grant under our equity plans, assuming the Amended 2019 Plan is approved, divided by the number of common
shares outstanding as of such date.
Summary of the Amended 2019 Plan Features
The major features of the Amended 2019 Plan are summarized below. Other than increasing the number
of common shares available for issuance, the Amended 2019 Plan is unchanged from the current plan.
The summary is qualified in its entirety by reference to the full text of the Amended 2019 Plan, a copy of
which may be obtained upon request to our Corporate Secretary at 301 Carlson Parkway, Suite 210,
Minneapolis, Minnesota 55305, or by telephone at (763) 496-5454. A copy of the Amended 2019 Plan
has also been filed electronically with the SEC as Appendix A to this proxy statement and is available
through the SEC’s website at www.sec.gov.
Purpose
Plan
Administration
Delegation
The purpose of the Amended 2019 Plan is to advance the interests of DiaMedica
and our shareholders by enabling DiaMedica and our subsidiaries to attract and
retain qualified individuals to perform services, provide incentive compensation
for such individuals in a form that is linked to the growth and profitability of
DiaMedica and increases in shareholder value. As such, the Amended 2019 Plan
provides opportunities for equity participation that align the interests of
recipients with those of our shareholders.
The Amended 2019 Plan will be administered by the Board of Directors or if the
Board of Directors so delegates, the Compensation Committee of the Board or a
subcommittee thereof, or any other committee delegated authority by the Board
of Directors to administer the Amended 2019 Plan. We expect both the Board of
Directors and the Compensation Committee of the Board to administer the
Amended 2019 Plan. The Board of Directors or the committee administering the
Amended 2019 Plan is referred to as the “Committee.” The Committee must be
comprised solely of directors designated by the Board of Directors who are
(a) “non-employee directors” within the meaning of Rule 16b-3 under the
Securities and Exchange Act of 1934, as amended, (the Exchange Act) and (b)
“independent directors” within the meaning of the rules of the Nasdaq Stock
Market (or other applicable exchange or market on which our common shares
may be traded or quoted).
To the extent permitted by applicable law, the Board of Directors may delegate
to one or more of its members or to one or more officers of DiaMedica such
administrative duties or powers, as it may deem advisable. The Board of
Directors may authorize one or more directors or officers of DiaMedica to
designate employees, other than officers, non-employee directors, or 10%
shareholders of DiaMedica, to receive awards under the plan and determine the
size of any such awards, subject to certain limitations established by the Board.
21
No Re-pricing
The Board of Directors may not, without prior approval of our shareholders,
effect any re-pricing of any previously granted “underwater” option or SAR,
including re-pricing effected by: (i) amending or modifying the terms of the
option or SAR to lower the exercise price or grant price; (ii) canceling the
underwater option or SAR in exchange for (A) cash; (B) replacement options or
SARs having a lower exercise price or grant price; or (C) other awards; or
(iii) repurchasing the underwater options or SARs and granting new awards
under the Amended 2019 Plan. An option or SAR will be deemed to be
“underwater” at any time when the fair market value of the common shares is
less than the exercise price of the option or the grant price of the SAR.
Shares Authorized
Subject to adjustment (as described below), the maximum number of our
common shares available for issuance under the Amended 2019 Plan would be
7,000,000 shares. No more than 2,000,000 common shares may be granted as
incentive stock options.
Shares that are issued under the Amended 2019 Plan or that are subject to
outstanding awards will be applied to reduce the maximum number of shares
remaining available for issuance under the Amended 2019 Plan only to the
extent they are used; provided, however, that the full number of shares subject to
a stock-settled SAR or other stock-based award will be counted against the
shares authorized for issuance under the Amended 2019 Plan, regardless of the
number of shares actually issued upon settlement of such SAR or other stock-
based award. Any shares withheld to satisfy tax withholding obligations on
awards issued under the Amended 2019 Plan, any shares withheld to pay the
exercise price or grant price of awards under the Amended 2019 Plan, and any
shares not issued or delivered as a result of the “net exercise” of an outstanding
option or settlement of a SAR in shares will be counted against the shares
authorized for issuance under the Amended 2019 Plan and will not be available
again for grant under the Amended 2019 Plan. Shares subject to awards settled
in cash will again be available for issuance pursuant to awards granted under the
Amended 2019 Plan. Any shares related to awards granted under the Amended
2019 Plan that terminate by expiration, forfeiture, cancellation or otherwise
without the issuance of the shares will be available again for grant under the
Amended 2019 Plan. Any shares repurchased by DiaMedica on the open market
using the proceeds from the exercise of an award will not increase the number of
shares available for future grant of awards. To the extent permitted by
applicable law, shares issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by
DiaMedica or a subsidiary or otherwise will not be counted against shares
available for issuance pursuant to the Amended 2019 Plan. The shares available
for issuance under the Amended 2019 Plan may be authorized and unissued
shares or treasury shares.
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 Amended 2019 Plan. In order to prevent
22
Adjustments
Eligible
Participants
Types of Awards
Stock Options
Stock Appreciation
Rights
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.
Awards may be granted to employees, non-employee directors and consultants
of DiaMedica or any of our subsidiaries. A “consultant” for purposes of the
Amended 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. As of March 25, 2024, 20 employees, six non-employee
directors and approximately five independent consultants are eligible to
participate in the current plan and in the Amended 2019 Plan if it is approved by
our shareholders.
The Amended 2019 Plan will permit us to grant non-statutory and incentive
stock options, stock appreciation rights, restricted stock awards, RSUs, DSUs,
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.
Stock options entitle the holder to purchase a specified number of our common
shares at a specified price, which is called the exercise price, subject to the terms
and conditions of the stock option grant. The Amended 2019 Plan permits the
grant of both non-statutory and incentive stock options. Incentive stock options
may be granted solely to eligible employees of DiaMedica or its subsidiaries.
Each stock option granted under the Amended 2019 Plan must be evidenced by
an award agreement that specifies the exercise price, the term, the number of
shares underlying the stock option, the vesting and any other conditions. The
exercise price of each stock option granted under the Amended 2019 Plan must
be at least 100% of the fair market value of a share of our common shares as of
the date the award is granted to a participant, unless the participant owns 10% or
more of our outstanding shares in which case the exercise price must be at least
110% of the fair market value. Fair market value under the Amended 2019 Plan
means the closing price of our common shares, as reported on the Nasdaq Stock
Market, as of the end of a regular trading session on such date, or, if no shares
were traded on such date, as of the next preceding date on which there was such
a trade. The closing price of our common shares, as reported on the Nasdaq
Stock Market, on March 25, 2024 was $2.68 per share. The Board of Directors
will fix the terms and conditions of each stock option, subject to certain
restrictions, such as a ten-year maximum term.
A stock appreciation right, or SAR, is a right granted to receive payment of cash,
common shares, or a combination of both, equal to the difference between the
fair market value of our common shares and the grant price of such shares. Each
SAR granted must be evidenced by an award agreement that specifies the grant
price, the term, and such other provisions as the Board of Directors may
determine. The grant price of a SAR must be at least 100% of the fair market
value of our common shares on the date of grant. The Board of Directors will
fix the term of each SAR, but SARs granted under the Amended 2019 Plan will
not be exercisable more than 10 years after the date the SAR is granted.
23
Restricted Stock
Awards, Restricted
Stock Units, and
Deferred Stock
Units
Performance
Awards
Limit on Non-
Employee Director
Compensation
Restricted stock awards, RSUs, and/or DSUs may be granted under the
Amended 2019 Plan. A restricted stock award is an award of common shares
that is subject to restrictions on transfer and risk of forfeiture upon certain
events, typically including termination of service. RSUs or DSUs are similar to
restricted stock awards except that no shares are actually awarded to the
participant on the grant date. DSUs permit the holder to receive shares of
common shares or the equivalent value in cash or other property at a future time
as determined by the Board of Directors. The Board of Directors will determine,
and set forth in an award agreement, the period of restriction, the number of
shares subject to a restricted stock award or the number of RSUs or DSUs
granted, the time of payment for DSUs, and other such conditions or restrictions.
Performance awards, in the form of cash, common shares, or other awards (or in
a combination thereof) may be granted under the Amended 2019 Plan in such
amounts and upon such terms as the Board of Directors may determine. The
Board of Directors shall determine, and set forth in an award agreement, the
amount of cash and/or number of shares or other awards, the performance goals,
the performance periods, and other terms and conditions. The extent to which
the participant achieves his or her performance goals during the applicable
performance period will determine the amount of cash and/or number of shares
or other awards earned by the participant.
The Amended 2019 Plan contains an upper total limit on annual non-employee
director compensation equal to the sum of any cash compensation, or other
compensation, and the value (determined as of the grant date in accordance with
Financial Accounting Standards Board Accounting Standards Codification Topic
718, or any successor thereto) of Awards granted to a non-employee director as
compensation for services as a non-employee director during any fiscal year of
DiaMedica may not exceed $400,000 (increased to $600,000 with respect to any
non-employee director serving as Chairman of the Board or Lead Independent
Director or in the fiscal year of a non-employee director’s initial service as a
non-employee director). Any compensation that is deferred counts towards this
limit for the year in which the compensation is first earned, and not a later year
of settlement.
Other Stock-Based
Awards
Consistent with the terms of the plan, other stock-based awards may be granted
to participants in such amounts and upon such terms as the Board of Directors
may determine.
Dividend
Equivalents
With the exception of stock options, SARs, and unvested performance awards,
awards under the Amended 2019 Plan may, in the discretion of the Board of
Directors, earn dividend equivalents with respect to the cash or stock dividends
or other distributions that would have been paid on the common shares covered
by such award had such shares been issued and outstanding on the dividend
payment date. However, no dividends may be paid on unvested awards. Such
dividend equivalents will be converted to cash or additional common shares by
such formula and at such time and subject to such limitations as determined by
the Board of Directors.
24
Termination of
Employment or
Other Service
The Amended 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 SARs 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 SARs would
otherwise expire;
• All outstanding stock options and SARs that are not exercisable and all
outstanding restricted stock will be terminated and forfeited; and
• All outstanding unvested RSUs, 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.
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 SARs 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 SARs would
otherwise expire;
• All outstanding restricted stock will be terminated and forfeited; and
All outstanding unvested RSUs, 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
25
Modification of
Rights upon
Termination
Forfeiture and
Recoupment
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.
Upon a participant’s termination of employment or other service with
DiaMedica or any subsidiary, the Board of Directors may, in its sole discretion
(which may be exercised at any time on or after the grant date, including
following such termination) cause stock options or SARs (or any part thereof)
held by such participant as of the effective date of such termination to terminate,
become or continue to become exercisable or remain exercisable following such
termination of employment or service, and restricted stock, RSUs, performance
awards, non-employee director awards, and other stock-based awards held by
such participant as of the effective date of such termination to terminate, vest, or
become free of restrictions and conditions to payment, as the case may be,
following such termination of employment or service, in each case in the manner
determined by the Board of Directors; provided, however, that no stock option or
SAR may remain exercisable beyond its expiration date any such action by the
Board of Directors adversely affecting any outstanding award will not be
effective without the consent of the affected participant, except to the extent the
Board of Directors is authorized by the Amended 2019 Plan to take such action.
If a participant is determined by the Board of Directors to have taken any action
while providing services to DiaMedica or within one year after termination of
such services, that would constitute “cause” or an “adverse action,” as such
terms are defined in the Amended 2019 Plan, all rights of the participant under
the Amended 2019 Plan and any agreements evidencing an award then held by
the participant will terminate and be forfeited. The Board of Directors has the
authority to rescind the exercise, vesting, issuance, or payment in respect of any
awards of the participant that were exercised, vested, issued, or paid and require
the participant to pay to DiaMedica, within 10 days of receipt of notice, any
amount received or the amount gained as a result of any such rescinded exercise,
vesting, issuance, or payment. DiaMedica may defer the exercise of any stock
option or SAR for up to six months after receipt of notice of exercise in order for
the Board of Directors to determine whether “cause” or “adverse action” exists.
DiaMedica is entitled to withhold and deduct future wages to collect any amount
due.
In addition, if DiaMedica is required to prepare an accounting restatement due to
material noncompliance, as a result of misconduct, with any financial reporting
requirement under the securities laws, then any participant who is one of the
individuals subject to automatic forfeiture under Section 304 of the Sarbanes-
Oxley Act of 2002 will reimburse DiaMedica for the amount of any award
received by such individual under the Amended 2019 Plan during the 12 month
period following the first public issuance or filing with the SEC, as the case may
be, of the financial document embodying such financial reporting requirement.
DiaMedica also may seek to recover any award made as required by the
provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act
or any other clawback, forfeiture, or recoupment provision required by
applicable law or under the requirements of any stock exchange or market upon
26
which our common shares is then listed or traded or any policy adopted by
DiaMedica.
Effect of Change in
Control
Generally, a change in control will mean:
• The acquisition, other than from DiaMedica, by any individual, entity, or
group of beneficial ownership of 50% or more of the then outstanding
shares of common shares of DiaMedica;
• The consummation of a reorganization, merger, or consolidation of
DiaMedica with respect to which all or substantially all of the
individuals or entities who were the beneficial owners of common shares
immediately prior to the transaction do not, following the transaction,
beneficially own more than 50% of the outstanding shares of common
shares of the corporation resulting from the transaction; or
• A complete liquidation or dissolution of DiaMedica or the sale or other
disposition of all or substantially all of the assets of DiaMedica.
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 RSUs 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 shares of 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.
Unless sooner terminated by the Board of Directors, the Amended 2019 Plan
will terminate at midnight on May 21, 2029. No award will be granted after
termination of the Amended 2019 Plan, but awards outstanding upon termination
of the Amended 2019 Plan will remain outstanding in accordance with their
applicable terms and conditions and the terms and conditions of the Amended
2019 Plan.
Subject to certain exceptions, the Board of Directors has the authority to
terminate and the Board of Directors has the authority to amend the Amended
2019 Plan or any outstanding award agreement at any time and from time to
time. No amendments to the Amended 2019 Plan will be effective without
approval of DiaMedica’s shareholders if: (a) shareholder approval of the
amendment is then required pursuant to Section 422 of the Code, the rules of the
primary stock exchange on which the common shares is then traded, applicable
U.S. state and federal laws or regulations, and the applicable laws of any foreign
country or jurisdiction where awards are, or will be, granted under the Amended
2019 Plan; or (b) such amendment would: (i) materially increase benefits
27
Term, Termination
and Amendment
accruing to participants; (ii) increase the aggregate number of shares of common
shares issued or issuable under the Amended 2019 Plan; (iii) increase any
limitation set forth in the Amended 2019 Plan on the number of shares of
common shares which may be issued or the aggregate value of awards which
may be made, in respect of any type of award to any single participant during
any specified period; or (iv) modify the eligibility requirements for participants
in the Amended 2019 Plan. No termination or amendment of the Amended 2019
Plan or an award agreement shall adversely affect in any material way any award
previously granted under the Amended 2019 Plan without the written consent of
the participant holding such award.
U.S. Federal Income Tax Information
The following is a general summary, as of the date of this proxy statement, of the U.S. federal income tax
consequences to participants and DiaMedica of transactions under the Amended 2019 Plan. This
summary is intended for the information of shareholders considering how to vote at the meeting and not
as tax guidance to participants in the Amended 2019 Plan, as the consequences may vary with the types of
grants made, the identity of the participant, and the method of payment or settlement. The summary does
not address the effects of other U.S. federal taxes or taxes imposed under state, local, or foreign tax laws.
Participants are encouraged to seek the advice of a qualified tax advisor regarding the tax consequences of
participation in the Amended 2019 Plan.
Incentive Stock Options. With respect to incentive stock options, generally, the stock option holder is not
taxed, and we are not entitled to a deduction, on either the grant or the exercise of an incentive stock
option so long as the requirements of Section 422 of the Code continue to be met. If the stock option
holder meets the employment requirements and does not dispose of the common shares acquired upon
exercise of an incentive stock option until at least one year after date of the exercise of the stock option
and at least two years after the date the stock option was granted, gain or loss realized on sale of the
shares will be treated as long-term capital gain or loss. If the common shares are disposed of before those
periods expire, which is called a disqualifying disposition, the stock option holder will be required to
recognize ordinary income in an amount equal to the lesser of (i) the excess, if any, of the fair market
value of our common shares on the date of exercise over the exercise price, or (ii) if the disposition is a
taxable sale or exchange, the amount of gain realized. Upon a disqualifying disposition, we will generally
be entitled, in the same tax year, to a deduction equal to the amount of ordinary income recognized by the
stock option holder, assuming that a deduction is allowed under Section 162(m) of the Code.
Non-Statutory Stock Options. The grant of a stock option that does not qualify for treatment as an
incentive stock option, which is generally referred to as a non-statutory stock option, is generally not a
taxable event for the stock option holder. Upon exercise of the stock option, the stock option holder will
generally be required to recognize ordinary income in an amount equal to the excess of the fair market
value of our common shares acquired upon exercise (determined as of the date of exercise) over the
exercise price of the stock option, and we will be entitled to a deduction in an equal amount in the same
tax year, assuming that a deduction is allowed under Section 162(m) of the Code. At the time of a
subsequent sale or disposition of shares obtained upon exercise of a non-statutory stock option, any gain
or loss will be either a long-term or short-term capital gain or loss, depending on how long the shares
have been held.
SARs. The grant of an SAR will not cause the participant to recognize ordinary income or entitle us to a
deduction for federal income tax purposes. Upon the exercise of an SAR, the participant will recognize
ordinary income in the amount of the cash or the value of common shares payable to the participant
(before reduction for any withholding taxes), and we will receive a corresponding deduction in an amount
28
equal to the ordinary income recognized by the participant, assuming that a deduction is allowed under
Section 162(m) of the Code.
Restricted Stock, RSUs, Deferred Stock Units and Other Stock-Based Awards. The federal income tax
consequences with respect to restricted stock, RSUs, DSUs, performance shares and performance stock
units, and other stock unit and stock-based awards depend on the facts and circumstances of each award,
including, in particular, the nature of any restrictions imposed with respect to the awards. In general, if an
award of stock granted to the participant is subject to a “substantial risk of forfeiture” (e.g., the award is
conditioned upon the future performance of substantial services by the participant) and is nontransferable,
a taxable event occurs when the risk of forfeiture ceases or the awards become transferable, whichever
first occurs. At such time, the participant will recognize ordinary income to the extent of the excess of the
fair market value of the stock on such date over the participant’s cost for such stock (if any), and the same
amount is deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code.
Under certain circumstances, the participant, by making an election under Section 83(b) of the Code, can
accelerate federal income tax recognition with respect to an award of stock that is subject to a substantial
risk of forfeiture and transferability restrictions, in which event the ordinary income amount and our
deduction, assuming that a deduction is allowed under Section 162(m) of the Code, will be measured and
timed as of the grant date of the award. If the stock award granted to the participant is not subject to a
substantial risk of forfeiture or transferability restrictions, the participant will recognize ordinary income
with respect to the award to the extent of the excess of the fair market value of the stock at the time of
grant over the participant’s cost, if any, and the same amount is deductible by us, assuming that a
deduction is allowed under Section 162(m) of the Code. If a stock unit award or other stock-based award
is granted but no stock is actually issued to the participant at the time the award is granted, the participant
will recognize ordinary income at the time the participant receives the stock free of any substantial risk of
forfeiture (or receives cash in lieu of such stock) and the amount of such income will be equal to the fair
market value of the stock at such time over the participant’s cost, if any, and the same amount is then
deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code.
Withholding Obligations. We are entitled to withhold and deduct from future wages of the participant, to
make other arrangements for the collection of, or to require the recipient to pay to us, an amount
necessary for us to satisfy the recipient’s federal, state or local tax withholding obligations with respect to
awards granted under the Amended 2019 Plan. Withholding for taxes may be calculated based on the
maximum applicable tax rate for the participant’s jurisdiction or such other rate that will not trigger a
negative accounting impact on DiaMedica. The Board of Directors may permit a participant to satisfy a
tax obligation by withholding shares of common shares underlying an award, tendering previously
acquired shares, delivery of a broker exercise notice, or a combination of these methods.
Code Section 409A. A grant may be subject to a 20% penalty tax, in addition to ordinary income tax, at
the time the grant becomes vested, plus an interest penalty tax, if the grant constitutes deferred
compensation under Section 409A of the Code and the requirements of Section 409A of the Code are not
satisfied.
Code Section 162(m). Pursuant to Section 162(m) of the Code, the annual compensation paid to an
individual who is a “covered employee” may not be deductible to the extent that it exceeds $1 million.
The Tax Cut and Jobs Act, signed into law on December 22, 2017, amended Code Section 162(m),
effective for tax years beginning after December 31, 2017, (i) to expand the definition of a “covered
employee” to include any person who was the Chief Executive Officer or the Chief Financial Officer at
any time during the year and the three most highly compensated officers (other than the Chief Executive
Officer or the Chief Financial Officer) who were employed at any time during the year whether or not the
compensation is reported in the Summary Compensation Table included in our proxy statement for our
Annual Meeting of Shareholders; (ii) to treat any individual who is considered a covered employee at any
time during a tax year beginning after December 31, 2017, as remaining a covered employee
29
permanently; and (iii) to eliminate the performance-based compensation exception to the $1 million
deduction limit (with a transition provision continuing the performance-based exception for certain
compensation covered by a written binding contract in existence on November 2, 2017).
Excise Tax on Parachute Payments. Unless otherwise provided in a separate agreement between a
participant and DiaMedica, if, with respect to a participant, the acceleration of the vesting of an award or
the payment of cash in exchange for all or part of an award, together with any other payments that such
participant has the right to receive from DiaMedica, would constitute a “parachute payment,” then the
payments to such participant will be reduced to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code. Such reduction, however,
will only be made if the aggregate amount of the payments after such reduction exceeds the difference
between the amount of such payments absent such reduction minus the aggregate amount of the excise tax
imposed under Section 4999 of the Code attributable to any such excess parachute payments. If such
provisions are applicable and if an employee will be subject to a 20% excise tax on any “excess parachute
payment” pursuant to Section 4999 of the Code, we will be denied a deduction with respect to such
excess parachute payment pursuant to Section 280G of the Code.
Awards Previously Granted Under the Plan
As of March 25, 2024, we had granted stock options, DSUs and RSUs under the current plan as follows:
Name and Position
Rick Pauls, President and Chief Executive
Officer ......................................................................
Scott Kellen, Chief Financial Officer .........................
Julie Daves, Senior Vice President, Clinical
Development Operations.............................................
Kirsten Gruis, M.D., Former Chief Medical
Officer .........................................................................
Executive Group (6 persons) .......................................
Non-Employee Director Group ...................................
All Other Employee Group .........................................
Total ............................................................................
Board of Directors Recommendation
Number of Shares
Underlying Stock
Options
Number of
Shares
Underlying
DSUs/RSUs
1,039,000
1,749
372,000
194,000
227,000
2,222,000
441,345
750,375
3,413,720
—
—
—
1,749
283,137
—
284,886
The Board of Directors unanimously recommends that our shareholders vote FOR approval of the
Amendment to DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan.
The Board of Directors Recommends a Vote FOR Voting Proposal Three
30
VOTING PROPOSAL FOUR— ADVISORY APPROVAL OF EXECUTIVE COMPENSATION
________________
Background and Proposed Advisory Approval of Our Executive Compensation
Our Board of Directors is providing our shareholders with an advisory vote on our executive
compensation pursuant to the Dodd-Frank Wall Street Consumer Protection Act, or Dodd-Frank Act, and
Section 14A of the Exchange Act. This advisory vote, commonly known as a say-on-pay vote, is a non-
binding vote on the compensation paid to our named executive officers as identified pursuant to Item 402
of Regulation S-K, as set forth in the “Executive Compensation” section of this proxy statement,
including in the accompanying compensation tables and the corresponding narrative discussion and
footnotes.
Because we no longer qualify as an “emerging growth company” as defined in the Jumpstart Our
Business Startups Act, or JOBS Act, this is our first year holding a say-on-pay vote in connection with
our annual general meeting of shareholders. In addition, at the annual general meeting, our shareholders
have the opportunity in Voting Proposal Five to indicate whether they prefer that we hold future advisory
votes on executive compensation every one, two, or three years, or they may abstain from that vote.
Why You Should Vote in Favor of our Say-on-Pay Vote
The “Executive Compensation” section of this proxy statement describes our executive compensation
program and the executive compensation decisions made by our Compensation Committee in 2023 in
more detail. Our executive compensation policies, plans and programs seek to enhance our financial
performance, and thus shareholder value, by aligning the financial interests of our executives with those
of our shareholders and by emphasizing pay-for-performance.
Our compensation practices include many best pay 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
significant portion of pay is at risk
• Maintain competitive pay packages
• Structure our executive compensation so a
significant portion is paid in equity
• Maintain a clawback policy
What We Don’t Do:
• No guaranteed salary increases or bonuses
• No repricing of stock options unless approved
by shareholders
• No liberal share counting under our equity plan
• No hedging or pledging of DiaMedica
securities
• No perquisites
Proposed Resolution
Our Board recommends that our shareholders vote in favor of our advisory vote on our executive
compensation as set forth in the following resolution:
RESOLVED, that our shareholders approve, on an advisory basis, the compensation paid
to the company's named executive officers, as disclosed pursuant to the compensation
disclosure rules of the SEC.
Shareholders are not ultimately voting to approve or disapprove the recommendation of our Board. As
this is an advisory vote, the outcome of the vote is not binding on us with respect to future executive
compensation decisions, including those relating to our named executive officers, or otherwise. Our
31
Compensation Committee and our Board expect to take into account the outcome of the vote when
considering future executive compensation decisions.
Next Say-On-Pay Vote
Our shareholders have an opportunity this year to vote on the frequency of future advisory votes on
executive compensation. Assuming our shareholders indicate a preference to hold a say-on-pay vote
every one year, in alignment with our Board’s recommendation, the next say-on-pay vote would occur in
2025 in connection with next year’s annual general meeting.
Board of Directors Recommendation
The Board of Directors unanimously recommends that our shareholders vote FOR approval, on an
advisory basis, of our executive compensation, or say-on-pay vote.
The Board of Directors Recommends a Vote FOR Voting Proposal Four
32
VOTING PROPOSAL FIVE— ADVISORY APPROVAL OF THE FREQUENCY OF FUTURE
ADVISORY VOTES ON EXECUTIVE COMPENSATION
________________
Background and Proposed Advisory Approval of the Frequency of Future Say-on-Pay Votes
Our Board of Directors is providing our shareholders with an advisory vote on the frequency of future
advisory votes on executive compensation, or say-on-pay votes, such as that provided for in Proposal
Four. This non-binding advisory vote is required to be conducted every six years under Section 14A of
the Exchange Act pursuant to the Dodd-Frank Act. Prior to this year, we were exempt from submitting a
say-on-pay proposal to the vote of our shareholders as a result of our “emerging growth company” status
under the JOBS Act. At the annual meeting, our shareholders may indicate whether they prefer that we
hold a say-on-pay vote every one, two, or three years, or they may abstain from this vote.
Our Board, upon recommendation of the Compensation Committee, recommends a say-on-pay vote
frequency of every year. We have determined that a say-on-pay vote every one year is the best approach
for our Company and shareholders for a number of reasons, including:
•
•
•
•
It is consistent with the preference of many of our shareholders
It allows our shareholders to provide timely, direct input on our executive compensation
philosophy, policies and practices as disclosed in our proxy statement each year.
It is consistent with our review of core elements of our executive compensation program
annually.
It is consistent with our efforts to engage in an ongoing dialogue with shareholders on executive
compensation and corporate governance matters.
Shareholders are not voting to approve or disapprove the recommendation of our Board. Instead,
shareholders may indicate their preference regarding the frequency of future say-on-pay votes by
selecting every one, two, or three years. Shareholders that do not have a preference regarding the
frequency of future say-on-pay votes may abstain from voting on the proposal.
The option of every one, two, or three years that receives the highest number of votes cast by shareholders
will reflect the frequency for future say-on-pay votes that has been selected by shareholders. As this is an
advisory vote, the outcome of the vote is not binding on us, and our Compensation Committee and Board
may decide that it is in the best interests of our company and shareholders to hold a say-on-pay vote more
or less frequently than the preference receiving the highest number of votes of our shareholders.
However, our Compensation Committee and Board value the opinions expressed by our shareholders in
their vote on this proposal, and expect to take into account the outcome of this vote when considering the
frequency of future advisory votes on our executive compensation.
Board of Directors Recommendation
Our Board unanimously recommends that shareholders vote, on an advisory basis, for a frequency of
every ONE YEAR, for future advisory votes on executive compensation.
The Board of Directors Recommends a Vote for ONE YEAR on Voting Proposal Four
33
STOCK OWNERSHIP
________________
Security Ownership of Significant Beneficial Owners
The table below sets forth information as to entities that have reported to the 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.
Title of Class
Common Shares
Common Shares
Common Shares
Name and Address of
Beneficial Owner
Richard Jacinto II
4775 Collins Avenue
Suite 3003
Miami Beach, FL 33140
TomEqt Private AB
c/o KinKon AB
Biblioteksgatan 25
11435
Stockholm, Sweden
Trill AB
Sveavägen 17, 18th Floor
SE-111 57
Stockholm, Sweden
Amount and Nature of
Beneficial Ownership
4,558,823(2)
Percent of Class(1)
12.0%
4,326,435(3)
11.4%
4,021,608(4)
10.6%
(1) Percent of class is based on 37,958,000 shares outstanding as of our record date, March 25, 2024.
(2) Based solely on information contained in a Schedule 13G/A of Mr. Richard Jacinto II filed with the SEC on
June 23, 2023, reflecting beneficial ownership as of June 23, 2023. Mr. Jacinto has the sole power to vote and
dispose of the common shares and is deemed to be the beneficial owner of all the shares.
(3) Based solely on information contained in a Schedule 13G/A of TomEnterprise AB filed with the SEC on June
27, 2023, reflecting beneficial ownership as of June 23, 2023. TomEqt Private AB is the record holder of
4,326,435 shares. Mr. Thomas Von Koch, as the board member of TomEqt Private AB, has the sole power to
vote and dispose of the common shares and is deemed to be the beneficial owner of all the shares. As of the date
of the Schedule 13G/A, TomEnterprise AB, the previous record holder of the common shares, is no longer the
record holder of any shares. TomEqt Private AB, TomEnterprise AB, and Mr. Von Koch filed their Schedule
13G/A jointly, but not as members of a group, and each disclaims membership in a group.
(4) Based solely on information contained in a Schedule 13G of Trill AB filed with the SEC on June 27, 2023,
reflecting beneficial ownership as of June 23, 2023. Trill AB is the record holder of 4,021,608 shares. Mr. Jan
Ståhlberg, as the board member of Trill AB, has the sole power to vote and dispose of the shares and is deemed
to be the beneficial owner of all the shares. Trill AB and Mr. Ståhlberg filed their Schedule 13G jointly, but not
as members of a group, and each disclaims membership in a group.
34
Security Ownership of Management
The table below sets forth information known to us regarding the beneficial ownership of our common
shares as of March 25, 2024, by:
•
•
each of our current directors;
each of the individuals named in the Summary Compensation Table under “Executive
Compensation” on page 58; 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., 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305.
Title of Class
Name of Beneficial Owner
Common Shares Michael Giuffre, M.D. ................................
Common Shares Richard Kuntz, M.D., M.Sc. ......................
Common Shares Tanya Lewis ................................................
Common Shares
James Parsons .............................................
Common Shares Richard Pilnik .............................................
Common Shares Charles Semba, M.D. ..................................
Common Shares Rick Pauls ...................................................
Common Shares Scott Kellen .................................................
Common Shares
Julie Daves ..................................................
Common Shares Kirsten Gruis, M.D. ....................................
Amount and
Nature of
Beneficial
Ownership(1)
485,894(3)
11,651
14,434
130,463
394,680
75,456
779,716
287,290
17,500
83,333
Percent of Class(2)
1.3%
*
*
*
1.0%
*
2.0%
*
*
*
Common Shares All current directors and executive officers
as a group (12 persons) ...............................
2,872,311
7.2%
*
Represents beneficial ownership of less than one percent.
(1) Includes for the persons listed below the following shares subject to options, restricted stock units and deferred
stock units held by such persons that are currently exercisable or become exercisable within 60 days of March
25, 2024:
35
Name
Directors
Michael Giuffre, M.D. ....................
Richard Kuntz, M.D., M.Sc. . .........
Tanya Lewis ....................................
James Parsons .................................
Rick Pauls .......................................
Richard Pilnik .................................
Charles Semba, M.D. ......................
Executive Officers
Rick Pauls .......................................
Scott Kellen.....................................
Julie Daves ......................................
Kirsten Gruis, M.D. ........................
Other Executive Officers. ...............
All current directors and executive
officers as a group (12 persons) .........
Shares
Underlying
Stock Options
Shares
Underlying
Restricted Stock
Units
Shares
Underlying
Deferred Stock
Units
89,097
8,080
14,434
86,597
711,125
138,846
43,169
711,125
255,000
17,500
83,333
145,313
—
3,571
—
—
—
—
2,344
—
—
—
—
—
73,904
—
—
41,616
1,749
114,381
—
1,749
—
—
—
—
1,509,161
5,915
231,650
(2) Percent of class is based on 37,958,000 shares outstanding as of our record date, March 25, 2024.
(3) Includes: (i) 25,573 shares held by 424822 Albert Ltd, over which Dr. Giuffre has sole voting and dispositive
power, (ii) 164,890 shares Dr. Giuffre and his spouse hold jointly, (iii) 21,070 common shares held by
Dr. Giuffre’s spouse and (iv) 111,360 shares held directly by Dr. Giuffre.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who
beneficially own more than ten percent of our common shares to file with the SEC reports showing
ownership of and changes in ownership of our common shares and other equity securities. Based on a
review of reports filed by these reporting persons on the SEC’s electronic filing, or EDGAR, system and
written representations by our directors and executive officers, we believe that all of our directors,
executive officers and greater than 10% owners complied with all filing requirements applicable to them
during 2023 other than Tanya Lewis filed one late Form 4 with respect to a transaction on March 1, 2023.
36
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. The Board of Directors is comprised of 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 DiaMedica and our 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 describe our basic
approach to corporate governance. A copy of these Corporate Governance Guidelines can be found on
the “Investor Relations—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
• CEO evaluation
• Succession planning
• Limitations on other Board service
• Oversight and risk management
Board Leadership Structure
• 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
• Board compensation
• Stock ownership by directors
• Loans to directors and executive officers
• Board and committee evaluation
• Communications with directors
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 light of current 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
37
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 fewer 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 six times in executive session during the fiscal year ended December 31, 2023.
Director Independence
The Board of Directors has affirmatively determined that six of DiaMedica’s current seven directors are
“independent directors” under the Nasdaq Listing Rules: Michael Giuffre, M.D., Richard Kuntz, M.D.,
M.Sc., Tanya Lewis, James Parsons, Richard Pilnik and Charles Semba, M.D. In addition, Amy L.
Burroughs, a former director, who served during a portion of 2023 was also affirmatively determined by
the Board of Directors to be an “independent director” 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
38
written charter for each committee of the Board of Directors which can be found on the “Investor
Relations—Governance—Governance Documents” section of our corporate website www.diamedica.com
and which each committee reviews and assesses on an annual basis. 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
Michael Giuffre, M.D.
Richard Kuntz, M.D., M.Sc.
Tanya Lewis
James Parsons
Rick Pauls
Richard Pilnik
Charles Semba, M.D.
Audit Committee
Audit
Committee
Compensation
Committee
Chair
Nominating and Corporate
Governance Committee
●
Chair
●
●
●
●
●
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
• 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.
In addition to its primary responsibilities, the Audit Committee oversees the company’s systems to
monitor compliance with legal and regulatory requirements, the company’s Code of Business Conduct
and Ethics, and the company’s cybersecurity efforts.
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.
39
Composition. The current members of the Audit Committee are Mr. Parsons, Mr. Pilnik, and Dr. Semba.
Mr. Parsons is the Chair of the Audit Committee. In addition, Ms. Burroughs, a former director of
DiaMedica, also served as an Audit Committee member during a portion of 2023.
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, 2023.
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 US, 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, 2023 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 US, LLP the matters required to be discussed under Public
Company Accounting Oversight Board standards and Securities and Exchange Commission rules.
The Audit Committee has received the written disclosures and the letter from Baker Tilly US, LLP
required by applicable requirements of the Public Company Accounting Oversight Board regarding
Baker Tilly US, LLP’s communications with the Audit Committee concerning independence. The
Audit Committee has discussed with Baker Tilly US, 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 US, 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 December 31, 2023 be included in its Annual Report on Form 10-K for the year ended
December 31, 2023 for filing with the Securities and Exchange Commission.
Audit Committee
James Parsons, Chair
Richard Pilnik
Charles Semba, M.D.
40
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 US, 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, Ms. Lewis,
Mr. Parsons, and Dr. Semba. 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, short-term incentive compensation, long-term
incentive compensation, perquisites and any and all other compensation, and to administer our equity-
based 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 delegated to the Chief Executive Officer
and Chief Financial Officer, and each of them individually, under DiaMedica’s Amended and Restated
2019 Omnibus Incentive Plan the authority to approve initial stock option grants to newly hired non-
executive officer employees of DiaMedica and subject to DiaMedica’s Equity Grant Policy and additional
conditions and limitations specified by the Compensation Committee. The Compensation Committee has
not delegated any other of its duties and responsibilities to subcommittees, but rather has taken such
actions as a committee, as a whole.
41
The Compensation Committee has engaged the services of Alpine Rewards, LLC, 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 Alpine Rewards,
LLC and discussions with management, to establish a compensation strategy and set target compensation
levels for officers and non-employee directors. The Compensation Committee initially retained Alpine
Rewards, LLC in February 2023 to update its executive officer and non-employee director compensation
analyses. 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 consultants, the achievement by DiaMedica of pre-established performance objectives,
the general performance of DiaMedica and the individual officers, and other factors that may be relevant.
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 consultants, the number of Board and committee
meetings that our directors are expected to attend, the duties and responsibilities of individual Board
members, 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;
•
engaging in succession planning for the Board of Directors;
• 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;
•
recommending director diversity, retirement age, tenure and refreshment policies;
• developing and overseeing an orientation process for new directors; and
• developing and overseeing a periodic Board of Directors and Board committee evaluation
process.
42
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. The Nominating and Corporate Governance
Committee is responsible for developing and overseeing an orientation process for all new members of
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, outside legal counsel 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. Our directors are
encouraged 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 and Mr. Pilnik. Mr. Pilnik is the Chair of the Nominating and Corporate Governance
Committee. In addition, Ms. Burroughs, a former director of DiaMedica, also served as a Nominating
and Corporate Governance Committee member during a portion of 2023. 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.
Dr. Kuntz, M.D., M.Sc., who was appointed to the Board effective as of May 30, 2023, was identified and
recommended to us by one of our significant shareholders. 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, personal interview and
recommendations.
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
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
43
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 and provide
the specific information as required by our Articles and the British Columbia’s Business Corporations
Act. See additional information below in “Shareholder Proposals for 2025 Annual General Meeting of
Shareholders.”
Board Diversity Matrix
The table below provides certain highlights of the composition of our board members and nominees.
Each of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f).
Total Number of Directors
Board Diversity Matrix (As of March 25, 2024)
7
Male
Female
Part I: Gender Identity
Directors
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or More Races or Ethnicities
LGBTQ+
Did Not Disclose Demographic Background
1
1
—
—
—
—
—
—
6
—
—
1
—
—
5
—
—
—
Non-Binary
—
—
—
—
—
—
—
—
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;
44
• 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, whether an incumbent director or a director candidate,
based on their qualifications, judgment, attributes, background, experiences, perspectives and skills in the
context of the Board as a whole, with the objective of recommending a group that can best perpetuate the
success of the company’s business and represent shareholder interests through the exercise of sound
judgment, using its diversity of experience.
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. The Nominating and
Corporate Governance Committee 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, one (14%) woman
and two (29%) individuals who identify as racially or ethnically diverse serve on our Board of Directors.
Additionally, Mr. Pilnik was born and grew up in São Paulo, Brazil, and speaks Portuguese and Spanish
fluently. As of the date of this proxy statement the executive officers of DiaMedica include two (33%)
women, one (17%) individual with prior military experience, and one (17%) individual who identifies as
racially or ethnically diverse.
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,
cybersecurity, 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.
45
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 all reported violations and discipline 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 filed with the
SEC 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., 301 Carlson
Parkway, Suite 210, Minneapolis, Minnesota 55305.
Board and Committee Meetings
The Board of Directors met seven times during the fiscal year ended December 31, 2023. The Audit
Committee met four times, the Compensation Committee met five times, and the Nominating and
Corporate Governance Committee met four times during the fiscal year ended December 31, 2023. Each
of the directors attended at least 75% of the aggregate of the total number of meetings of the Board and
the total number of meetings held by all Board committees on which the director served.
Policy Regarding Director Attendance at Annual General Meetings of Shareholders
Directors are encouraged, but not required, to attend our annual general meetings of shareholders. Four
of our then current five directors attended the 2023 Annual General Meeting of Shareholders either in
person, by telephone or by video conference.
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.,
301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305 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.
46
DIRECTOR COMPENSATION
________________
Non-Employee Director Compensation Program
Overview. Our non-employee directors currently consist of Michael Giuffre, M.D., Richard Kuntz, M.D.,
M.Sc., Tanya Lewis, James Parsons, Richard Pilnik, and Charles Semba, M.D. We use a combination of
cash and long-term equity-based incentive compensation in the form of annual stock option grants and
either deferred stock units or restricted stock units in lieu of cash retainers 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.”
On May 18, 2023, the Board approved, upon recommendation of the Compensation Committee, the
following changes to the Non-Employee Director Compensation Program:
• A $500 increase in the annual cash retainer for members of the Nominating and Corporate
Governance Committee and a $250 increase in the annual cash retainer for the Chair of the
Nominating and Corporate Governance Committee;
• An increase in the annual equity award for non-employee directors from 0.05% to 0.06% of our
outstanding shares; and
• An increase in the initial equity award to non-employee directors from 0.10% to 0.12% of our
outstanding shares.
In recommending these changes, the Compensation Committee consulted with its independent
compensation consultant, Alpine Rewards, LLC, and reviewed a competitive analysis prepared by Alpine
Rewards that used the same peer group as used in reviewing our executive compensation program.
Cash Retainers. The following table sets forth the annual cash retainers paid to our non-employee
directors during fiscal 2023:
Description
Board Member .................................................................................. $
Chairman of the Board ......................................................................
Audit Committee Chair .....................................................................
Audit Committee Member (Excluding Chair) ..................................
Compensation Committee Chair .......................................................
Compensation Committee Member (Excluding Chair) ....................
Nominating and Corporate Governance Committee Chair ...............
Nominating and Corporate Governance Committee Member
(Excluding Chair) ..............................................................................
Annual Cash
Retainer
January 1, 2023
- May 17, 2023
Annual Cash
Retainer
Effective
May 18, 2023
40,000
30,000
15,000
7,500
10,000
5,000
8,000
40,000 $
30,000
15,000
7,500
10,000
5,000
7,500
3,750
4,000
Annual Stock Options. Under the amended Non-Employee Director Compensation Program, each non-
employee director is granted a stock option to purchase a number of common shares equal to 0.06% of
our outstanding shares and the Chairman of the Board is granted an additional stock option to purchase a
number of common shares equal to 0.02% of our outstanding shares, in each case rounding down to the
nearest whole share. These annual stock options are granted effective as of June 1st each year. All of
47
these stock options have a term of 10 years, a per share exercise price equal to 100% of the fair market
value of a common share on the date of grant and vest and become exercisable in four as nearly equal as
possible quarterly installments over one year, and in each case so long as the non-employee director is a
director of DiaMedica as of such date. Accordingly, on June 1, 2023, Messrs. Pilnik, Giuffre and
Parsons, and Dr. Semba each received an option to purchase 16,968 common shares at an exercise price
equal to $2.73 per share and Mr. Pilnik as Chairman of the Board received an additional 5,387 common
shares at an exercise price equal to $2.73 per share. These options expire on May 31, 2033 and vest in
four nearly equal quarterly installments over one year, subject to continued service.
Our Non-Employee Director Compensation Program also provides that each new non-employee director
will be granted a stock option to purchase a number of common shares equal to 0.12% of our outstanding
shares, rounding down to the nearest whole share, effective as of the new director’s first day as a director.
This initial equity award is in lieu of an annual equity award for the first year of service. This initial stock
option has a term of 10 years, a per share exercise price equal to 100% of the fair market value of a
common share on the date of grant and vests and becomes exercisable in 12 as nearly equal as possible
quarterly installments over three years, and in each case so long as the non-employee director is a director
of DiaMedica as of such date. On March 1, 2023, Ms. Lewis received an option to purchase 26,443
common shares at an exercise price equal to $1.77 per share. Ms. Lewis’s option grant was made prior to
the May 18, 2023 changes to our Non-Employee Director Compensation Program, and therefore,
reflected 0.10% of our outstanding common shares as of March 1, 2023. On June 1, 2023, Ms. Lewis
received an additional option to purchase 7,493 common shares at an exercise price equal to $2.73 per
share to bring her total option grant to reflect 0.12% of our outstanding common shares as of her start
date, March 1, 2023. On May 30, 2023, Dr. Kuntz received an option to purchase 32,320 common shares
at an exercise price equal to $2.81 per share. Dr. Kuntz’s option grant was after the May 18, 2023 changes
to our Non-Employee Director Compensation Program, and therefore, represented 0.12% of our
outstanding common shares as of May 30, 2023.
Deferred Stock Units or Restricted Stock Units in Lieu of Annual Cash Retainers. We provide our non-
employee directors the opportunity to elect to receive DSUs or RSUs in lieu of up to 100% of their annual
cash retainers payable for services to be rendered as a non-employee director, chairman and chair or
member of any board committee. Effective as of the first trading day of each year, each of our non-
employee directors who elected to receive DSUs or RSUs in lieu of all or a portion of such director’s
annual cash retainers, will be granted DSU or RSU awards under the 2019 Plan or any other shareholder-
approved plan covering that number of shares as determined based on the following formula (rounding
down to the nearest whole share):
•
•
the aggregate dollar amount of the elected portion of the annual cash retainers that otherwise
would have been payable to the non-employee director for services to be rendered as a non-
employee director, Chairman of the Board and Chair or member of any Board committee during
the year (or transition or other period, if applicable) based on such director’s Board committee
memberships and Chair positions as of the date of grant, divided by
the 10-trading day average closing sale price of our common shares, as reported by The Nasdaq
Capital Market, and as determined on the third (3rd) trading day prior to the anticipated grant date
of the award.
Such DSU and RSU awards vest in four as nearly equal as possible quarterly installments, on March 31,
June 30, September 30 and December 31, (or prorated from the first date as a director in the case of new
directors) in each case so long as the non-employee director is a director of DiaMedica as of such date.
DSU awards are settled following a separation from service by such director and RSU awards are settled
immediately upon vesting or, if earlier, the death of the director.
48
If a non-employee director who elected to receive a DSU or RSU award in lieu of all or a portion of such
director’s annual cash retainers is no longer a director of DiaMedica before such director’s interest in all
of the shares underlying the DSU or RSU award have vested, the director will forfeit his or her rights to
receive all of such unvested shares on the day his or her status as a director of DiaMedica terminates.
However, shares underlying the DSU or RSU award corresponding to the elected cash retainers for such
quarter in which the director’s status changed will vest ratably for such quarter based on the number of
days of service as a director of DiaMedica during such quarter.
If a non-employee director of DiaMedica who elected to receive a DSU or RSU award in lieu of his or her
annual cash retainers becomes entitled to receive an increased or additional annual cash retainer during
the year, the director will receive such increased or additional annual cash retainer in cash until the
director makes his or her election for the following year. Conversely, if a non-employee director of
DiaMedica who elected to receive a DSU or RSU award in lieu of such director’s annual cash retainers
experiences a change in committee membership or Chair positions during the year, such that the
aggregate amount of annual cash retainers for the year to which the director is entitled is less than the
aggregate amount used to calculate the director’s most recent DSU or RSU award, the director will forfeit
effective as of such change his or her rights to receive the corresponding portion of the shares underlying
such DSU or RSU award; provided, however, that in the event the director elected to receive only a
portion of his or her cash retainers in the form of a DSU or RSU award, the amount of cash retainers to
be received will be reduced first. In addition, in the event shares underlying the DSU or RSU award are
forfeited, the vesting of the DSU or RSU award will be revised accordingly as of the date of such change.
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, 2023, other than Rick
Pauls, our President and Chief Executive Officer, who was not compensated separately for serving on the
Board of Directors during fiscal 2023. His compensation during fiscal 2023 for serving as an executive
officer of our company is set forth under “Executive Compensation—Summary Compensation Table.”
Name
Amy Burroughs(7)
Michael Giuffre, M.D.
Richard Kuntz, M.D.(8)
Tanya Lewis(9)
James Parsons
Richard Pilnik
Charles Semba, M.D.
Fees Earned
or Paid in
Cash(1)
$
Option
Awards(2)(3)
13,697 $ 24,194
37,175
53,750
72,684
23,333
54,350
37,500
37,175
60,000
48,978
85,000
37,175
52,500
Stock
Awards(4)(5)
$ —
—
—
—
—
—
—
All Other
Compensation(6)
$ —
—
—
—
—
—
—
Total
$ 37,891
90,925
96,017
91,850
97,175
133,978
89,675
(1) The following directors elected to receive DSUs or RSUs in exchange for all or part of their cash retainers:
Ms. Burroughs ($9,530 was paid in the form of 6,439 DSUs); Dr. Giuffre ($53,750 was paid in the form of
35,130 DSUs); Mr. Pilnik ($85,000 was paid in the form of 55,555 DSUs); and Dr. Semba ($26,250 was paid in
the form of 17,156 RSUs).
(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, other than in the case of Ms. Burroughs who did not receive an annual option award. The amount
for Ms. Burroughs reflects the incremental fair value expense associated with the modification of her
outstanding stock options to accelerate the vesting of her unvested options and extend the post-termination
exercise period of her options in connection with her resignation as a director.
49
(3) The following current and former directors held the following option awards as of December 31, 2023:
Ms. Burroughs (32,008 options); Dr. Giuffre (90,839 options); Dr. Kuntz (32,320 options); Ms. Lewis (33,936
options); Mr. Parsons (90,839 options); Mr. Pilnik (144,435 options); and Dr. Semba (48,976 options).
(4) Represents the difference between the grant date fair value of the DSUs or RSUs received by the director and
the amount of cash retainers forfeited in lieu of such DSUs or RSUs, if such amount is positive. For 2023, the
amount is negative since in the case of each director, the grant date fair value of the DSUs or RSUs received
was less than amount of cash retainers forfeited since the grant date fair value per share of the DSUs and RSUs
was $1.48, compared to the 10-trading day average stock price of $1.53 used to convert the dollar amount of
retainers forfeited into a number of DSUs or RSUs.
(5) The following current and former directors held the following stock awards (all in the form of DSUs) as of
December 31, 2023: Ms. Burroughs (0); Dr. Giuffre (69,105); Dr. Kuntz (0); Ms. Lewis (0); Mr. Parsons
(36,259); Mr. Pilnik (106,792); and Dr. Semba (0).
(6) We do not provide perquisite and other personal benefits to our non-employee directors.
(7) Ms. Burroughs resigned from the Board of Directors effective March 1, 2023, but her DSU award was vested
through May 17, 2023, the date of the 2023 Annual General and Special Meeting of Shareholders.
(8) Dr. Kuntz joined the Board of Directors effective May 30, 2023.
(9) Ms. Lewis joined the Board of Directors effective March 1, 2023.
Indemnification
Our Articles provide that, subject to British Columbia’s Business Corporations Act, 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. DiaMedica 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 DiaMedica: (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.
50
EXECUTIVE COMPENSATION
________________
Executive Compensation Overview
This section describes the compensation of the executive officers named in the Summary Compensation
Table on page 58, which individuals consist of our President and Chief Executive Officer and the two
most highly compensated executive officers for the year ended December 31, 2023, as well as any
individual who would have been considered a named executive officer except that such individual was
not serving as an executive officer at the end of the last completed fiscal year:
• Rick Pauls, our President and Chief Executive Officer (CEO);
• Scott Kellen, our Chief Financial Officer and Corporate Secretary (CFO);
•
Julie Daves, our Senior Vice President, Clinical Development Operations (SVP, Clinical); and
• Kirsten Gruis, M.D., our former Chief Medical Officer (CMO).
These executive officers are collectively referred to as our named executive officers. Kirsten Gruis, M.D.
resigned from her position as Chief Medical Officer effective as of August 31, 2023, but agreed to serve
as an independent consultant with us for nine months as described later this in this proxy statement.
When reading this Executive Compensation Overview, please note we are a small reporting company 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 2023
compensation was prepared by Alpine Rewards, LLC, our independent compensation consultant. For
2023, Alpine Rewards, LLC recommended increasing our peer company group from 15 to 20 and
consisted of the following 20 other companies in the same industry and with similar characteristics from a
market capitalization, revenue, number of employees and clinical development perspective.
Abeona Therapeutics Inc.
Applied Therapeutics, Inc.
Brainstorm Cell Therapeutics Inc.
GlycoMimetics, Inc.
Lipocine Inc.
Satsuma Pharmaceuticals, Inc.
Tracon Pharmaceuticals, Inc.
Aceragen, Inc.
Athira Pharma, Inc.
Clene Inc.
Hepion Pharmaceuticals, Inc.
Matinas BioPharma Holdings, Inc.
Soleno Therapeutics, Inc.
Zynerba Pharmaceuticals, Inc.
Annovis Bio, Inc.
BioCardia, Inc.
Galectin Therapeutics Inc.
Immunic, Inc.
MediciNova, Inc.
Spruce BioSciences, Inc.
51
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. The Compensation
Committee retained Alpine Rewards, LLC in February 2023 and updated its executive officer and non-
employee director compensation analyses shortly thereafter. Alpine Rewards, LLC did not provide any
services to our company other than those for which it was retained by the Compensation Committee.
Elements of Our Executive Compensation Program
During 2023, 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 and
key 2023 changes.
Element
Base Salary
(Fixed, Cash)
Key Characteristics
A fixed amount, paid in cash
periodically throughout the
year and reviewed annually
and, if appropriate, adjusted.
Purpose
Provides a source of
fixed income that is
market competitive and
reflects
scope and responsibility
of the position held.
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
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 our long-term
performance; promotes
retention; and encourages
significant share
ownership.
Provides an opportunity
for employees to save
and prepare financially
for retirement.
52
Key 2023 Changes
Our CEO received a base salary
increase of 8%, our CFO
received a base salary increase of
5%, our SVP, Clinical received a
base salary increase of 3%, and
our former CMO received a base
salary increase of 10%, in each
case to move their salaries closer
toward our target positioning in
our peer group.
The target incentive percentage
under our short-term incentive
plan for 2023 was 50% of base
salary for our CEO, 40% of base
salary for our CFO, 35% of base
salary for our SVP, Clinical and
40% of base salary for our
former CMO, which were all
unchanged from last year.
Our named executive officers
received stock option awards,
with 25% vesting on the one-year
anniversary of the grant date and
the remaining 75% vesting in 12
quarterly installments thereafter.
No changes.
We describe each key element of our executive compensation program in more detail in the following
pages, along with the compensation decisions made in 2023. 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.”
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 target short-term incentives and actual long-
term incentives) compared to fixed pay (i.e., base salary) reported for 2023 in the Summary
Compensation Table for our CEO and the average for our 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.
53
The base salary for each of our named executive officers for fiscal 2023 compared to fiscal 2022 is as
follows:
Name
Rick Pauls ......................................... $
Scott Kellen .......................................
Julie Daves ........................................
Kirsten Gruis, M.D. .........................
Fiscal 2023
Fiscal 2022
573,000 $
357,000
309,000
418,000
529,000
340,000
300,000
380,000
% Change from
Fiscal 2022
8%
5%
3%
10%
In March 2023, the Compensation Committee approved base salary increases of approximately 8% for
our CEO, 5% for our CFO, 3% for our SVP, Clinical, and 10% for our former CMO. The base salary
increases were intended to bring their base salaries closer to our target positioning in our peer group and
provide for cost-of-living adjustments.
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 2023 STI program, each named executive officer had a target incentive percentage that was a
percentage of their base salary.
Name
Rick Pauls
Scott Kellen
Julie Daves
Kirsten Gruis, M.D.
Percentage of Base Salary
50%
40%
35%
40%
2023 STI payouts were based primarily on corporate objectives, which had a 75% weighting, and to a
lesser extent, individual objectives, which had a 25% weighting. The corporate objectives related to our
ReMEDy2 trial, the Phase 1C study and raising additional capital and were determined by the
Compensation Committee to have been achieved at 70% of target. The individual objectives varied by
executive and related to our ReMEDy2 trial, manufacturing, developing people and organization,
accounting and financial reporting, commercial and partnering activities. The individual objectives were
determined by the Compensation Committee to have been achieved at 80% of target for our CEO, 70% of
target for our CFO and 84% of target for SVP, Clinical. Our former CMO did not receive any 2023 STI
payout.
The following sets forth each executive’s target bonus opportunity and actual STI payout for 2023:
Officer Name and Position
Rick Pauls
Scott Kellen
Julie Daves
Kirsten Gruis, M.D.
$
2023 Base
Salary
573,000
357,000
309,000
418,000
Target Incentive
Percentage of
Base Salary
50%
40%
35%
40%
Target Bonus
Opportunity
2023 Actual
Payout
$
286,500 $
142,000
108,150
167,200
239,958
116,025
91,657
—
54
Long-Term Equity-Based Incentive Compensation
The long-term equity-based incentive compensation component consists of stock options granted under
the DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive 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.
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 2023,
which options vest with respect to 25% of the underlying common shares on the one-year anniversary of
the grant date, and with respect to the remaining 75% of the underlying common shares in 12 as nearly
equal as possible quarterly installments commencing after the one-year anniversary of the grant date:
Name
Rick Pauls ...........................
Scott Kellen .........................
Julie Daves ..........................
Kirsten Gruis, M.D. ............
Grant Date
06/01/23
06/01/23
06/01/23
06/01/23
Grant Date
Fair Value
$ 396,553
146,790
118,309
146,790
Number of Shares
Underlying Options Exercise Price
$ 2.73
2.73
2.73
2.73
181,000
67,000
54,000
67,000
The number of stock options granted to our executives was determined based on a percent of company
analysis as opposed to a value analysis.
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
We typically enter into employment agreements with our executive officers, which provide 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 contain standard severance and change in control
provisions which are described under “—Post-Termination Severance and Change in Control
Arrangements.”
55
Consulting Agreement with Kirsten Gruis, M.D.
In September 2023, we entered into a consulting agreement with Dr. Kirsten Gruis in order to implement
an orderly transition of her responsibilities and projects following her resignation. Under this agreement,
Dr. Gruis agreed to provide consulting services for nine months in exchange for a monthly consulting fee
of $33,500. We also entered into a separation agreement with Dr. Gruis pursuant to which she agreed to
provide a general release of claims against us and our subsidiaries. The separation agreement also
includes customary non-disparagement and confidentiality obligations.
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 the executive’s target
annual bonus for the year of termination, and (iv) immediate acceleration of the executive’s 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 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, if we terminate the executive’s employment without
“cause” or the executive terminates their employment with “good reason” in connection with or within
56
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
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
57
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.
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 2023 and 2022 fiscal years. Mr. Pauls is also a director
of DiaMedica but did not receive any compensation related to his role as a director.
Salary
Bonus(1)
$ 562,000 $
522,796
Option
Awards(2)
— $ 396,553
343,819
—
Year
2023
2022
Non-
Equity
Incentive
Plan
Compen-
sation(3)
$ 239,958
198,342
All Other
Compen-
sation(4)
$ 16,650
15,650
Total
$ 1,215,161
1,080,607
2023
2022
352,750
329,392
—
—
146,790
116,549
116,025
101,983
16,650
15,650
632,215
563,574
2023
306,754
—
118,309
91,657
16,650
533,370
2023
2022
298,643
364,167
—
—
146,790
487,789
—
137,085
150,650
15,650
596,083
1,004,691
Name and Principal
Position
Rick Pauls .....................
President and Chief
Executive Officer
Scott Kellen ..................
Chief Financial Officer
and Secretary
Julie Daves(5) ................
SVP, Clinical
Development
Operations
Kirsten Gruis, M.D. (6) ..
Former Chief Medical
Officer
(1) We generally do not pay discretionary bonuses.
(2) 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
06/01/2022
01/03/2022
07/28/2021
Grant Date Fair
Value Per Share
$
$
$
1.94
1.94
3.05
Risk Free
Interest Rate
2.93%
2.93%
1.41%
Expected
Life
5.6 years
5.6 years
5.5 years
Expected
Volatility
102.86%
102.86%
103.67%
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.
(3) 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.”
58
(4) The amounts shown in the “All Other Compensation” column for fiscal 2023 include the following with respect
to each named executive officer:
Name
Rick Pauls .................. $
Scott Kellen ................
Julie Daves .................
Kirsten Gruis, M.D. . ..
401(k)
Match
Health Savings
Account
Contribution
13,200
13,200
13,200
13,200
$ 3,450
3,450
3,450
3,450
Consulting
Services
$ —
—
—
134,000
$
Total
16,650
16,650
16,650
150,650
(5) Ms. Daves was not a named executive officer for 2022.
(6) Dr. Gruis resigned effective as of August 31, 2023. The base salary for Dr. Gruis includes a payment of
$29,475 for accrued paid-time off.
Outstanding Equity Awards at Fiscal Year-End
The following table presents for each named executive officer information regarding outstanding equity
awards held as of December 31, 2023.
Name
Rick Pauls
Stock Options ..........
DSUs .....................
Scott Kellen
Stock Options .......
Julie Daves
Stock Options ..........
Kirsten Gruis, M.D.
Stock Options .......
Option Awards(1)
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option
Exercise
Price
Option
Expiration
Date(2)
Stock Awards
Number
of Shares
or Units
of Stock
That
Have Not
Vested(3)
(#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested(4)
($)
1,749
(US$) 4,967
67,500
42,500
42,500
33,500
264,000
56,000
98,438
66,375
—
50,250
99,750
35,000
33,750
22,500
—
61,250
—
76,667
—
—
—
—
—
—
—
76,563
110,652
181,000
(CAD$) 3.00
(CAD$) 5.20
(CAD$) 6.40
(CAD$) 11.20
(US$) 4.60
(US$) 4.64
(US$) 5.00
(US$) 2.45
(US$) 2.73
12/01/2025
11/28/2026
06/19/2027
04/17/2028
06/23/2029
05/31/2030
07/27/2031
05/31/2032
05/31/2033
—
—
—
26,250
37,500
67,000
(CAD$) 11.20
(US$) 4.60
(US$) 4.64
(US$) 5.00
(US$) 2.45
(US$) 2.73
04/17/2028
06/23/2029
05/31/2030
07/27/2031
05/31/2032
05/31/2033
78,750
54,000
(US$) 1.47
(US$) 2.73
09/12/2032
05/31/2033
83,333
67,000
(US$) 3.88
(US$) 2.73
01/02/2032
05/31/2033
59
(1)
(2)
(3)
(4)
The stock options that remained unvested as of December 31, 2023 generally vest monthly or quarterly and
may be accelerated under certain circumstances, including if the recipient’s employment or service
relationship with our company is involuntarily terminated.
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, 2023 is based on the closing
sale price of our common shares as reported by The Nasdaq Capital Market on December 29, 2023, the last
trading day of 2023 ($2.84).
Pay Versus Performance Disclosure
As required by Section 953(a) of the Dodd-Frank Act and Item 402(v) of SEC Regulation S-K, we are
providing the following information about the relationship between “compensation actually paid” to our
named executive officers, within the meaning of such rules, and certain financial performance measures
of our company. The table below provides information regarding compensation actually paid to our CEO
who is our principal executive officer (PEO), and compensation actually paid to our other non-PEO
named executive officers, during each of the past two fiscal years, as well as total shareholder return and
net income (loss) for each of the past two fiscal years.
Summary
Compensation
Table Total
for PEO(1)
Compensation
Actually Paid
to PEO(2)(3)
Average
Summary
Compensation
Table Total
for Non-PEO
NEOs(4)
Average
Compensation
actually Paid
to Non-PEO
NEOs(5)(6)
Value of
Initial Fixed
$100
Investment
Based on
Total
Shareholder
Return(7)
Net Income
(Loss)(8)
$
1,215,161 $
1,080,607
1,424,344 $
534,244
587,222 $
784,132
707,892 $
507,196
74 $
41
(19,423)
(13,676)
Year
2023
2022
(1) Amounts reported represent the Summary Compensation Table total for our CEO for each of the years
presented. See “Executive Compensation – Summary Compensation Table.”
(2) Amounts reported represent compensation actually paid to our CEO for each of the years presented. The dollar
amounts in this column do not reflect the actual amount of compensation earned by or paid to our CEO during
the applicable year.
(3) Compensation actually paid to our PEO consists of the following amounts deducted from or added to the
Summary Compensation Table total for our CEO for each of the years presented:
Summary Compensation Table Total for 2023
Deduct: Stock awards(a)
Deduct: Option awards(b)
Add: Year-end value of equity awards granted during the year that are outstanding and
unvested(c)
Add: Change in fair value of equity awards granted in prior years that are outstanding and
unvested(d)
Add: Change in fair value of equity awards granted in prior years that vested during the year(e)
Add: Value of dividend equivalents accrued on equity awards during the year
Compensation Actually Paid for 2023
Rick Pauls
$ 1,215,161
—
(396,553 )
387,114
139,587
79,035
—
1,424,344
60
Summary Compensation Table Total for 2022
Deduct: Stock awards(a)
Deduct: Option awards(b)
Add: Year-end value of equity awards granted during the year that are outstanding and
unvested(c)
Add: Change in fair value of equity awards granted in prior years that are outstanding and
unvested(d)
Add: Change in fair value of equity awards granted in prior years that vested during the year(e)
Add: Value of dividend equivalents accrued on equity awards during the year
Compensation Actually Paid for 2022
$ 1,080,607
—
(343,819 )
147,914
(266,518 )
(83,940 )
—
534,244
(a) Represents the total of the amounts reported in the “Stock Awards” column in the Summary Compensation
Table for the applicable year.
(b) Represents the total of the amounts reported in the “Option Awards” column in the Summary
Compensation Table for the applicable year.
(c) Represents the year-end value of equity awards granted during the applicable year that are outstanding and
unvested as of the end of such applicable year.
(d) Represents the amount of change as of the end of the applicable year (from the end of the prior fiscal year)
in fair value of any equity awards granted in prior years that are outstanding and unvested as of the end of
such applicable year.
(e) Represents the amount of change as of the vesting date (from the end of the prior fiscal year) in fair value
of any equity awards granted in prior years that vested during the applicable year.
Since we do not have a pension plan, all of the foregoing adjustments are equity award adjustments for each
applicable year and include the addition (or subtraction, as applicable) of the following: (i) the year-end fair
value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of such
applicable year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal
year) in fair value of any equity awards granted in prior years that are outstanding and unvested as of the end of
such applicable year; (iii) for equity awards that are granted and vest in the same applicable year, the fair value
as of the vesting date; (iv) for equity awards granted in prior years that vest in the applicable year, the amount
equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for equity
awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the
applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the
dollar value of any dividends or other earnings paid on equity awards in the applicable year prior to the vesting
date that are not otherwise reflected in the fair value of such award or included in any other component of total
compensation for such applicable year.
Adjustments as provided in clauses (iii) and (vi) are inapplicable for all of the years presented in the table.
The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time
of grant. The value of option awards is based on the fair value as of the end of the covered year or change in
fair value during the covered year, in each case based on our Black-Scholes option pricing model, the
assumptions of which are described in Note 12 to our consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2023.
(4) Average Summary Compensation Table total for non-PEO named executive officers reflects the average
Summary Compensation Table total for Mr. Kellen, Ms. Daves and Dr. Gruis for 2023 and for Mr. Kellen and
Dr. Gruis for 2022.
61
(5) The amounts in this column represent the average compensation actually paid to the non-PEO named executive
officers for each of the years presented. The dollar amounts in this column do not reflect the actual amount of
compensation earned by or paid to our non-PEO named executive officers during the applicable year.
(6) Average compensation actually paid to our non-PEO named executive officers consists of the following
amounts deducted from or added to the Summary Compensation Table total for each of the years presented:
Summary Compensation Table Total for 2023
Deduct: Stock awards(a)
Deduct: Option awards(b)
Add: Year-end value of equity awards granted during the year that are outstanding and
Average for Non-PEO Named Executive Officers
$ 587,222
—
(137,296 )
unvested(c)
Add: Change in fair value of equity awards granted in prior years that are outstanding and
unvested(d)
Add: Change in fair value of equity awards granted in prior years that vested during the year(e)
Add: Value of dividend equivalents accrued on equity awards during the year
Compensation Actually Paid for 2023
Summary Compensation Table Total for 2022
Deduct: Stock awards(a)
Deduct: Option awards(b)
Add: Year-end value of equity awards granted during the year that are outstanding and
unvested(c)
Add: Change in fair value of equity awards granted in prior years that are outstanding and
unvested(d)
Add: Change in fair value of equity awards granted in prior years that vested during the year(e)
Add: Value of dividend equivalents accrued on equity awards during the year
Compensation Actually Paid for 2022
134,028
81,901
42,037
—
707,892
$ 784,132
—
(302,169 )
75,730
(36,824 )
(13,673 )
—
507,196
(a) Represents the total of the amounts reported in the “Stock Awards” column in the Summary Compensation
Table for the applicable year.
(b) Represents the total of the amounts reported in the “Option Awards” column in the Summary
Compensation Table for the applicable year.
(c) Represents the year-end value of equity awards granted during the applicable year that are outstanding and
unvested as of the end of such applicable year.
(d) Represents the amount of change as of the end of the applicable year (from the end of the prior fiscal year)
in fair value of any equity awards granted in prior years that are outstanding and unvested as of the end of
such applicable year.
(e) Represents the amount of change as of the vesting date (from the end of the prior fiscal year) in fair value
of any equity awards granted in prior years that vested during the applicable year.
Since we do not have a pension plan, all of the foregoing adjustments are equity award adjustments for each
applicable year and include the addition (or subtraction, as applicable) of the following: (i) the year-end fair
value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of such
applicable year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal
year) in fair value of any equity awards granted in prior years that are outstanding and unvested as of the end of
such applicable year; (iii) for equity awards that are granted and vest in the same applicable year, the fair value
as of the vesting date; (iv) for equity awards granted in prior years that vest in the applicable year, the amount
equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for equity
62
awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the
applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the
dollar value of any dividends or other earnings paid on equity awards in the applicable year prior to the vesting
date that are not otherwise reflected in the fair value of such award or included in any other component of total
compensation for such applicable year.
Adjustments as provided in clauses (iii) and (vi) are inapplicable for all of the years presented in the table.
The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time
of grant. The value of option awards is based on the fair value as of the end of the covered year or change in
fair value during the covered year, in each case based on our Black-Scholes option pricing model, the
assumptions of which are described in Note 12 to our consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2023.
(7) The total shareholder return is calculated by the difference between our common share price at the end of the
measurement period by our common share price at the beginning of the measurement period.
(8) Amounts reported represent the amount of net loss reflected in our audited consolidated financial statements for
the applicable year and is presented in thousands.
Pay Versus Performance Relationship
In accordance with Item 402(v) of SEC Regulation S-K, we are providing the following descriptions of
the relationships between information presented in the Pay versus Performance table above. The graphs
below illustrate a high correlation between compensation actually paid to our NEOs and our cumulative
total shareholder return (TSR) and a low correlation between compensation actually paid to our NEOs
during 2022 and 2023 and our net loss during those years.
As demonstrated by the following graph, the amount of compensation actually paid to our NEOs is
aligned with our cumulative TSR over the two years presented in the table. The alignment of
compensation actually paid with our cumulative TSR over the period presented is because a significant
portion of the compensation actually paid to our NEOs is comprised of equity awards, the value of which
is driven by our share price.
Compensation Actually Paid vs. DiaMedica TSR
d
i
a
P
y
l
l
a
u
t
c
A
n
o
i
t
a
s
n
e
p
m
o
C
$2,000,000
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
$41
$74
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
R
S
T
e
v
i
t
a
l
u
m
u
C
)
t
n
e
m
t
s
e
v
n
i
0
0
1
$
l
a
i
t
i
n
i
f
o
e
u
l
a
v
(
2022
2023
PEOs
Average for Non-PEO NEOs
DiaMedica TSR
63
The amount of compensation actually paid to our NEOs increased despite an increase in our net loss. This
is a result of an increase in our stock price year over year, which increased the compensation actually paid
to our NEOs, despite an increase in our net loss.
Employee Benefit and Stock Plans
Amended and Restated 2019 Omnibus Incentive Plan
The DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan was adopted by
the Board of Directors on March 10, 2022 and approved by our shareholders on May 18, 2022. For more
information on the 2019 Plan, see Voting Proposal Three—Approval of Amendment to DiaMedica
Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan, beginning on page 18.
Employment Inducement Plan
The DiaMedica Therapeutics Inc. 2021 Employment Inducement Plan was adopted by the Board of
Directors on December 3, 2021 to facilitate the granting of equity awards as an inducement material to
new employees joining DiaMedica. The Employment Inducement Plan was adopted without shareholder
approval pursuant to Nasdaq Listing Rule 5635(c)(4) and is administered by the Compensation
Committee.
The Board of Directors reserved 1,000,000 common shares for issuance under the Employment
Inducement Plan, which permits the grant of options, stock appreciation rights, restricted stock awards,
restricted stock units, performance awards and other stock-based awards, to eligible recipients. The only
persons eligible to receive awards under the Inducement Plan are individuals who are new employees and
satisfy the standards for inducement grants under Nasdaq Listing Rule 5635(c)(4) or 5635(c)(3), as
applicable.
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
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
64
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 DiaMedica’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
DiaMedica’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.
• Purchases of DiaMedica’s Securities on Margin; Pledging DiaMedica’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 DiaMedica’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.”
65
RELATED PERSON RELATIONSHIPS AND TRANSACTIONS
________________
Introduction
Below under “—Description of Related Party Transactions” is a description of transactions that have
occurred during the past two fiscal years, 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.
Description of Related Party Transactions
Insider Stock Purchases
On April 10, 2023, in conjunction with his appointment as Chief Business Officer, David Wambeke
purchased 468,750 common shares of DiaMedica at an aggregate purchase price of $750,000 or $1.60 per
share.
On June 21, 2023, we issued and sold an aggregate 11,011,406 common shares pursuant to a securities
purchase agreement at a purchase price of $3.40 per share, or $3.91 per share in the case of our
participating directors and officers, in a private placement. As a result of the offering, we received gross
proceeds of $37.5 million, which resulted in net proceeds to us of approximately $36.1 million, after
deducting the offering expenses. The following directors and officers participated in the private
placement:
Director/Officer
Richard Pilnik
Rick Pauls
Michael Giuffre
Charles Semba, M.D.
Scott Kellen
David Wambeke
Total Purchase Price
$ 150,000
50,000
254,150
50,000
39,100
150,000
Number of Common
Shares Purchased
38,363
12,787
65,000
12,787
10,000
38,364
In connection with the June 2023 private placement, we entered into a registration rights agreement
(Registration Rights Agreement) with the investors pursuant to which we agreed to file with the SEC a
registration statement registering the resale of the shares sold in the June 2023 private placement (Resale
Registration Statement). The Resale Registration Statement was filed with the SEC on June 30, 2023 and
declared effective by the SEC on July 7, 2023. Under the terms of the Registration Rights Agreement, we
agreed to keep the Resale Registration Statement effective at all times until the shares are no longer
considered “Registrable Securities” under the Registration Rights Agreement and if we fail to keep the
Resale Registration Statement effective, subject to certain permitted exceptions, we will be required to
pay liquidated damages to the investors in an amount of up to 10% of the invested capital, excluding
interest. We also agreed, among other things, to indemnify the selling holders under the Resale
Registration Statement from certain liabilities and to pay all fees and expenses incident to our
performance of or compliance with the Registration Rights Agreement.
66
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.
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:
•
•
the purpose of the transaction;
the benefits of the transaction to us;
67
•
•
•
•
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.
68
SHAREHOLDER PROPOSALS FOR 2025 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 2025 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 5, 2024, unless the date of the 2025 Annual General Meeting of
Shareholders 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 to be presented at the 2025 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, such date being February 22, 2025. 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.
A shareholder wishing to nominate a candidate for election to the Board of Directors at the 2025 Annual
General Meeting of Shareholders will be required to give notice of such shareholder’s intention to make
such a nomination to our Chief Executive Officer at our principal executive offices at 301 Carlson
Parkway, Suite 210, Minneapolis, Minnesota 55305, or our registered office not later than 5:00 p.m.
(CDT) on the 90th day nor earlier than 5:00 p.m. (CDT) on the 120th day prior to the first anniversary of
the preceding year’s annual general meeting of shareholders so no earlier than January 22, 2025 and no
later than February 22, 2025. A shareholder’s notice of nomination and solicitation are required to
contain specific information as required by our Amended Articles and universal proxy rules including
providing certain information required by Rule 14a-19 under the Exchange Act (including a statement
that such shareholder intends to solicit the holders of shares representing at least 67% of the voting power
of DiaMedica’s shares entitled to vote on the election of directors in support of director nominees other
than DiaMedica’s nominees). A nomination that does not comply with these requirements may not be
considered.
We encourage shareholders who wish to submit a proposal or nomination to seek independent counsel.
DiaMedica will not consider any proposal or nomination that is not timely or otherwise does not meet the
requirements set forth in our Articles, as may be amended, and SEC requirements. We reserve the right
to reject, rule out of order, or take other appropriate action with respect to any proposal that does not
comply with these and other applicable requirements.
69
COPIES OF FISCAL 2023 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, 2023. Our 2023
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, 2023. Our 2023 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., 301 Carlson Parkway, Suite 210, Minneapolis,
Minnesota 55305, Attention: Shareholder Information.
_________________________
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 4, 2024
Minneapolis, Minnesota
70
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For 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)
301 Carlson Parkway, Suite 210
Minneapolis, Minnesota
(Address of principal executive offices)
Not Applicable
(I.R.S. Employer Identification No.)
55305
(Zip Code)
Title of each class
Voting Common Shares, no par value per share
Registrant’s telephone number, including area code: (763) 496-5454
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
DMAC
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange on which registered
Nasdaq Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 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 the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Emerging growth company ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 voting common shares were last sold as of June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal
quarter), as reported by The Nasdaq Capital Market on that date, was $103.4 million.
As of March 15, 2024, there were 37,958,000 voting common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part 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 Proxy Statement for its 2023 Annual General Meeting of Shareholders to be held May 22, 2024.
[This page intentionally left blank]
DIAMEDICA THERAPEUTICS INC.
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 2023
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ........................................................
INDUSTRY AND MARKET DATA ..............................................................................................................................
PART I .............................................................................................................................................................................
Item 1. Business ...........................................................................................................................................................
Item 1A. Risk Factors .....................................................................................................................................................
Item 1B. Unresolved Staff Comments ............................................................................................................................
Item 1C. Cybersecurity ...................................................................................................................................................
Item 2. Properties .........................................................................................................................................................
Item 3. Legal Proceedings ............................................................................................................................................
Item 4. Mine Safety Disclosures ..................................................................................................................................
Page
1
2
3
3
24
51
51
52
52
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PART II ............................................................................................................................................................................
53
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ......................................................................................................................................................
Item 6.
[Reserved] ........................................................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ...........................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .........................................................................
Item 8. Financial Statements and Supplementary Data ................................................................................................
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure .........................
Item 9A. Controls and Procedures ..................................................................................................................................
Item 9B. Other Information ............................................................................................................................................
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections .............................................................
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69
70
89
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PART III ..........................................................................................................................................................................
90
Item 10. Directors, Executive Officers and Corporate Governance ...............................................................................
Item 11. Executive Compensation..................................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ........
Item 13. Certain Relationships and Related Transactions, and Director Independenc ...................................................
Item 14. Principal Accountant Fees and Services ..........................................................................................................
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PART IV ..........................................................................................................................................................................
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Item 15. Exhibits and Financial Statement Schedules ....................................................................................................
Item 16. Form 10-K Summary .......................................................................................................................................
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SIGNATURES .................................................................................................................................................................
97
i
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. For more 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” mean our voting common 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 are referred 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 not assert, 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 a relationship with, or endorsement or sponsorship of us by, any other companies.
ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements 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 Private Securities Litigation Reform Act of 1995 that are based on management’s
current expectations and are subject to risks and uncertainties that could negatively affect our business, operating results,
financial condition, prospects 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 terms or other comparable terminology, and the use
of future dates.
The forward-looking statements in this report are subject to risks and uncertainties and include, among other things:
● our plans to develop, obtain regulatory approval for and commercialize our DM199 product candidate for the
treatment of acute ischemic stroke (AIS) and cardio-renal disease (CRD);
● our ability to conduct successful clinical testing of our DM199 product candidate for AIS or CRD and meet certain
anticipated or target dates with respect to our clinical studies, including in particular our Phase 2/3 ReMEDy2
clinical trial of DM199 for the treatment of AIS, or ReMEDy2 trial, and anticipated site activations, enrollment
and interim analysis timing, especially in the light of the effects of COVID-19, particularly on hospital and
medical facility staffing shortages, concerns managing logistics and protocol compliance for participants
discharged from the hospital to an intermediate care facility, and competition for research staff and trial subjects
due to other pending stroke and stroke related trials;
● uncertainties relating to regulatory applications and related filing and approval timelines and the possibility of
●
additional future adverse events associated with or unfavorable results from our ReMEDy2 trial;
the adaptive design of our ReMEDy2 trial, which is intended to enroll approximately 350 participants at up to 100
sites globally, and the possibility that these numbers and other aspects of the study could increase depending upon
certain factors, including additional input from the United States Food and Drug Administration (FDA) and results
of the interim analysis as determined by the independent data safety monitoring board;
● our expectations regarding the perceived benefits of our DM199 product candidate over existing treatment options
●
for AIS and CRD;
the potential size of the markets for our DM199 product candidate for AIS and CRD and our ability to serve those
markets and the rate and degree of market acceptance of, and our ability to obtain coverage and adequate
reimbursement for, our DM199 product candidate for AIS and CRD both in the United States and internationally;
● our ability to partner with and generate revenue from biopharmaceutical or pharmaceutical partners to develop,
●
obtain regulatory approval for and commercialize our DM199 product candidate for AIS and CRD;
the success, cost and timing of our ReMEDy2 trial, as well as our reliance on third parties in connection with our
ReMEDy2 trial and any other clinical trials we conduct;
● our commercialization, marketing and manufacturing capabilities and strategy;
●
expectations regarding federal, state and foreign regulatory requirements and developments, such as potential FDA
regulation of our DM199 product candidate for AIS and CRD;
● our estimates regarding expenses, market opportunity for our product candidates, future revenue, capital
requirements, how long our current cash resources will last and need for additional financing;
● our expectations regarding our ability to obtain and maintain intellectual property protection for our DM199
●
product candidate;
expectations regarding competition and our ability to obtain data exclusivity for our DM199 product candidate for
AIS and CRD; and
● our anticipated use of the net proceeds from our private placements and our ability to obtain additional funding for
our operations, including funding necessary to complete planned clinical trials and obtain regulatory approvals for
our DM199 product candidate for AIS and CRD.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those
described under “Part I. Item 1A. Risk Factors” in this 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 to predict 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 differ materially from those contained in any forward-looking statements we may make. In light of
these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not
occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking
statements. 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
1
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.
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 other statistical information included in this report are based in part upon information
obtained from third-party industry publications, research, surveys and studies, none of which we commissioned. Third-
party industry publications, research, surveys and studies generally indicate that their information has been obtained from
sources believed 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 are prepared by reputable sources, we have not independently verified market
and industry data from third-party sources. In addition, while we believe our internal company research and estimates are
reliable, such research and estimates have not been verified by independent sources. Assumptions and estimates of our and
our industry’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 Regarding Forward-Looking Statements.”
2
Item 1.
Business
Overview
PART I
We are a clinical stage biopharmaceutical company committed to improving the lives of people suffering from serious
diseases. DiaMedica’s lead candidate DM199 (rinvecalinase alfa) is the first pharmaceutically active recombinant
(synthetic) form of the human tissue kallikrein-1 (KLK1) protein to be clinically studied in patients. KLK1 is an established
therapeutic modality in Asia, with human urinary KLK1, for the treatment of acute ischemic stroke and cardio renal
disease, including hypertension. We have also produced a potential novel treatment for severe inflammatory diseases,
DM300, which is currently in the early preclinical stage of development. Our long-term goal is to use our patented and in-
licensed technologies to establish our Company as a leader in the development and commercialization of therapeutic
treatments from novel recombinant proteins. Our current focus is on the treatment of acute ischemic stroke (AIS) and
currently, to a lesser extent, cardio renal disease (CRD). We plan to advance DM199, our lead drug candidate, through
required clinical trials to create shareholder value by establishing its clinical and commercial potential as a therapy for AIS
and CRD. In September 2021, the FDA granted Fast Track designation to DM199 for the treatment of AIS where tPA
and/or mechanical thrombectomy are not indicated or medically appropriate.
AIS and CRD patients suffer from impaired blood flow in the brain, kidneys, and throughout the body. Many of these
patients also exhibit lower than normal levels of endogenous (produced by the body) KLK1 protein, which is produced
primarily in the kidneys, pancreas and salivary glands. We believe treatment with DM199 could augment endogenous
KLK1 to enhance the function of the kallikrein-kinin system (KKS) to preferentially relax smooth muscle cells in ischemic
arteries, thereby vasodilating these arteries and increasing blood flow and oxygen.
We are currently conducting our ReMEDy2 clinical trial of DM199 for the treatment of AIS. Our ReMEDy2 clinical trial is
a Phase 2/3, adaptive design, randomized, double-blind, placebo-controlled trial intended to enroll approximately 350
patients at up to 100 sites globally. Patients enrolled in the trial will be treated with either DM199 or placebo within 24
hours of the onset of AIS symptoms. The trial excludes patients treated with tissue plasminogen activator (tPA), a
thrombolytic agent intended to dissolve blood clots, and those with large vessel occlusions. The study population is
representative of the approximately 80% of AIS patients who do not have treatment options today, primarily due to the
limitations on treatment with tPA and/or mechanical thrombectomy. The primary endpoint of the ReMEDy2 trial is
physical recovery from stroke as measured by the well-established modified Rankin Scale (mRS) at day 90, specifically
recovering to an mRS score of 0-1 (mRS range of 0-6). We believe that our ReMEDy2 trial has the potential to serve as a
pivotal registration study of DM199 in this patient population.
We voluntarily paused participant enrollment in the ReMEDy2 trial in May 2022 to investigate three unexpected instances
of clinically significant hypotension (low blood pressure) occurring shortly after initiation of the intravenous (IV) dose of
DM199. The acutely low blood pressure levels in the three participants recovered back to their baseline blood pressure
within minutes after the IV infusion was stopped, and the participants suffered no injuries. On July 6, 2022, we announced
that the FDA placed a clinical hold on the investigational new drug application (IND) for our ReMEDy2 trial, and the
clinical hold was subsequently lifted in June 2023. In our request for lifting of the clinical hold, we submitted to the FDA
in-vitro data supporting that the cause of the hypotensive events was likely related to switching to a new type of IV bag for
use in the ReMEDy2 trial, as well as results of an additional in-use, in vitro stability study of all of the materials and
equipment used in the IV administration of DM199, which included testing the combination of the IV bag, IV tubing and
mechanical infusion pump, to further rule out any other cause of the hypotension events. We also modified the protocol to
mitigate the risk of future hypotensive events, including a reduction in the DM199 dose level for the initial IV dose to
effectively match the well tolerated IV dose administered in the ReMEDy1 trial.
Concurrently with performing the requested in-use study, we also conducted a Phase 1C open label, single ascending dose
(SAD) study of DM199 administered with polyvinyl chloride (PVC) IV bags used in the ReMEDy2 trial. The purpose of
the Phase 1C open label SAD study was to confirm, with human data, the DM199 blood concentration levels achieved with
the IV dose and further evaluate safety and tolerability. We also included a cohort of hypertensive patients being treated
with angiotensin-converting-enzyme inhibitors (ACEi) prior to enrolling. All ACEi patients received the full IV dose at the
0.5 µg/kg level with no instances of hypotension. We believe that these results provide further assurance to potential
investigators that ACEi patients may be safely included in the ReMEDy2 trial.
3
Following in-depth discussions of the ReMEDy2 Phase 2/3 protocol design with global stroke experts, the scientific
advisory board and current investigators, we made several important amendments to the protocol subsequent to the June
2023 lifting of the clinical hold. These changes were submitted to the FDA in early October 2023 and we are proceeding
with use of the amended protocol as the FDA did not issue any comments during the 30-day review period which ended on
November 3, 2023.
We believe DM199 has the potential to treat a variety of diseases where restoring healthy function requires sufficient
activity of KLK1 and its system, KKS. Today, forms of KLK1 derived from human urine and the pancreas of pigs are
approved and sold in Japan, China and South Korea to treat AIS, hypertension and other related vascular diseases. We
believe millions of patients have been treated with these KLK1 therapies, including over 600,000 AIS patients now being
treated annually with human urinary-derived KLK1 in China. Over 200 clinical studies in China have found urinary-
derived KLK1 effective for increasing blood flow, decreasing ischemia in the penumbra and reducing infarct size.
Importantly, human urinary-derived KLK1 has not been shown to increase the risk of severe intracranial hemorrhage.
However, there are numerous regulatory, commercial and clinical drawbacks associated with KLK1 derived from these
sources which can be overcome by developing a recombinant version of KLK1 such as DM199. We believe higher
regulatory standards and potential antibody reactions are the primary reasons why KLK1 derived from these sources are not
currently available and used in the United States or Europe. We are not aware of any recombinant version of KLK1 with
regulatory approval for human use in any country, nor are we aware of any recombinant version in development other than
our drug candidate, DM199.
DM199 Background
Kallikrein-Kinin System
KLK1 is a serine protease, or protein, produced primarily in the kidneys, pancreas and salivary glands. KLK1 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 well as an important role in reducing inflammation and oxidative stress (an imbalance between
potentially damaging reactive oxygen species, or free radicals, and antioxidants in the body).
KLK1 is involved in multiple biochemical processes. The most well-characterized activity of KLK1 is the enzymatic
cleavage of low molecular weight kininogen (LMWK) to produce Lys-bradykinin (BK)-like peptides, collectively known
as kinins, which activate BK receptors (primarily BK2R since the BK1R is typically only activated in pathological
situations). As illustrated below, activation of BK receptors by kinins sets in motion metabolic pathways which locally
produce nitric oxide, prostaglandins (primarily prostacyclin in endothelial cells),which work through the cyclic guanosine
monophosphate (cGMP) and cyclic nucleotides cyclic adenosine monophosphate (cAMP) pathways, to preferentially relax
smooth muscle cells and improve blood flow (through vasodilation), potentially protecting tissues and end-organs from
ischemic damage. Scientific literature, including publications in Circulation Research, Immunopharmacology and Kidney
International, suggests that lower endogenous KLK1 levels in patients are associated with diseases related to vascular
disorders, such as stroke, renal diseases and hypertension. DM199, as a protein augmentation therapy, may increase KLK1
levels to properly activate the KKS driving the local production of nitric oxide, prostaglandins and other anti-inflammatory
mediators, to promote endothelial health and protect the brain and kidney from damage. By providing additional supply of
the KLK1 protein, DM199 treatment could potentially improve blood flow to and reduce inflammation in damaged end-
organs, such as the brain and the kidneys, supporting their structural integrity and normal functioning.
4
We have conducted numerous internal and third-party analyses to demonstrate that DM199 is structurally and functionally
equivalent to KLK1 derived from human urine. Specifically, the amino acid structure of DM199 is nearly identical to the
human urine form, and the enzymatic and pharmacokinetic profiles are substantially similar to both human urine and
porcine derived KLK1. The physiological effects of DM199 on blood pressure, from our completed studies, is similar to
that of human urine and porcine-derived forms 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 human urinary and porcine forms of
KLK1 marketed in Asia.
We believe DM199 may provide a new treatment with significant benefits over the current standards of care by offering a
therapeutic treatment option to a greater number of patients with the potential for fewer side effects.
Summary of Clinical Results
To date, clinical trials have been and/or are being conducted in the United States, Europe and Australia. We believe the
clinical data generated to date by DM199 supports the continued development of DM199 as a treatment for AIS and CRD.
● Our Phase 2 ReMEDy1 trial of DM199 in the treatment of AIS (n=91) met our primary safety and tolerability end
points and demonstrated a statistically significant reduction in the number of participants with recurrent ischemic
stroke (reported as stroke in evolution or stroke progression by the investigators) in the active treatment group: 0
(0%) participants treated with DM199 vs. 6 (13%) on placebo (p=0.012), with 4 of the 6 resulting in participant
death. In a subgroup analysis of participants not receiving mechanical thrombectomy prior to enrollment (n=46),
patients treated with DM199 demonstrated a 22% absolute improvement in excellent outcomes (recovering to a
National Institutes of Health Stroke Scale (NIHSS) score of 0-1). In participants treated with DM199 (n=25) vs.
supportive care and/or tPA (n=21), the results showed that 36% of participants receiving DM199 progressed to a
full or nearly full recovery at 90 days (NIHSS: 0-1), compared to 14% of participants in the placebo group. This
represents a 22% absolute increase in the proportion of participants achieving a full or nearly full recovery.
Additionally, subject deaths decreased from 24% in the placebo group to 12% in the DM199 treatment group, a
50% relative reduction. This subgroup represents the participants most closely aligned with the target treatment
population for DM199 in our ReMEDy2 trial.
● We conducted our Phase 2 REDUX trial of DM199 in participants with chronic kidney disease (n=84). Most
notably, the hypertensive African American cohort demonstrated an over 50% mean reduction in albuminuria in
participants with moderate to severe baseline albuminuria and a statistically significant reductions in systolic and
diastolic blood pressure levels at the 2µg/kg dose level after three months of treatment.
In all completed studies, DM199 was shown to be generally safe and well tolerated. The primary adverse events noted in
our studies with healthy volunteers included headache, erythema (redness), dizziness, injection site reaction and flushing.
The most common adverse events in people with diabetes with or without chronic kidney disease included orthostatic
hypotension, local injection site irritation/redness, and diarrhea. The most common adverse events in people with acute
ischemic stroke include constipation, oral candidiasis (yeast/fungal infection of mouth) and nausea.
Supporting Data for Use of DM199 (KLK1)
KLK1 derived from human urine was approved in China in 2005. KLK1 derived from the pancreas of pigs has been
approved in Japan for several decades. There is one company selling human urine derived KLK1 in China, and we believe
human urine derived KLK1 is currently being used to treat over 600,000 AIS patients per year. We believe that
approximately 20 companies are marketing porcine KLK1 in Japan, China and South Korea for hypertension, certain
chronic kidney and other vascular diseases. We have identified several hundred papers supporting the clinical use of urinary
and porcine derived KLK1 from China, Japan and South Korea.
5
Studies have shown that lower KLK1 levels are also a predictor of stroke recurrence. The red line in the graph below
represents patients in the lowest KLK1 quartile who were at the highest risk for recurrence of stroke. (2,478 stroke patients
and event free survival over 5 years).
Low KLK1 Levels Are Associated With Stroke Recurrence
Source: Annals of Neurology (2011) 70:265-73
Our Strategy
Our mission is to improve the lives of people suffering from serious diseases. Our near-term goal is to principally focus on
executing our ReMEDy2 Phase 2/3 trial of DM199 in AIS and to finalize plans for the next steps for our CRD program.
Key elements of our strategy include:
● DM199 for AIS – activate additional clinical sites for and enroll participants in our ReMEDy2 Phase 2/3 trial and
expand the trial globally to potentially increase enrollment rates;
● DM199 for CRD – announce next steps for our CRD program during 2024;
● Continue manufacturing process development to support anticipated applications for commercial approval of
DM199; and
Identify a strategic partner(s) to assist with future clinical development and commercialization of DM199.
●
AIS Background and Disease Pathology
Acute Ischemic Stroke Background
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 tissues of the brain become inactive and may eventually die. Strokes can be classified into two major
categories: AIS and hemorrhagic stroke. AIS is characterized by interruption of the blood supply by a blood clot (ischemia),
while a hemorrhagic stroke results from rupture, or bleeding, of a blood vessel in the brain. Risk factors for stroke include,
among other things, advanced age, hypertension (high blood pressure), previous stroke or transient ischemic attack (TIA),
diabetes, high cholesterol, cigarette smoking, atrial fibrillation, physical inactivity and obesity.
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 with nearly complete loss of blood flow (blood flow reduction of 75% to 90%, or
more), and the surrounding ischemic penumbra, a rim of mild to moderately ischemic tissue surrounding the core ischemic
zone. Within minutes, the significant lack of blood flow in the core ischemic zone deprives these cells of glucose and
oxygen which rapidly depletes energy stores and triggers the loss of ion gradients, ultimately leading to neuronal cell death,
or apoptosis. The ischemic penumbra zone, however, may remain viable for several hours via collateral arteries that branch
from the main occluded artery in the core ischemic zone. Unfortunately, the penumbra is at great risk of delayed tissue
6
damage due to inflammation which may also lead to neuronal cell death. As time goes on, a lack of blood flow in the core
ischemic zone (infarct) may lead to fluid buildup (edema) and swelling which creates intracranial pressure. This pressure on
the brain leads to tissue compression resulting in additional ischemia. Additional events in AIS include vascular damage to
the blood vessel lining or endothelium, loss of structural integrity of brain tissue and blood vessels and inflammation. A
stroke can lead to permanent damage with memory loss, 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 the extended 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 a stroke.
Unmet Medical Need in AIS
According to the World Health Organization, each year 12.2 million people worldwide suffer a stroke, of which 7.6 million
are acute ischemic strokes. According to the U.S. Centers for Disease Control and Prevention (CDC) approximately
800,000 people in the U.S. suffer a stroke each year, of which 87% are acute ischemic strokes. We believe that stroke
represents an area of significant unmet medical need and a KLK1 therapy (such as DM199) could provide a significant
patient benefit, in particular given its proposed treatment window of up to 24 hours after the first sign of symptoms.
Currently, the only FDA-approved pharmacological intervention for AIS is tPA, which is approved to be given within 3
hours of symptom onset; however, we understand that based upon supplemental clinical research and common practice, it is
typically administered up to 4.5 hours from symptom onset. Treating patients with tPA during this time window can be
challenging because it is difficult to determine precisely when symptoms began and a patient must undergo brain imaging
before treatment to rule out a hemorrhagic stroke, a ruptured blood vessel causing bleeding within the brain. Mechanical
thrombectomy, a procedure which attempts to remove the clot using catheter-based tools, is also available to certain
patients. Despite the availability of these treatments, we believe they are relevant to approximately 20% of ischemic stroke
patients due to the location of the clot, the elapsed time after the stroke occurred or other safety considerations. Thus, we
believe DM199 may offer significant advantages over the current treatment options in that it fills a serious, unmet need for
patients who cannot receive tPA or mechanical thrombectomy. Additionally, we believe DM199 may also offer a
complementary follow-on treatment for patients who initially receive tPA or mechanical thrombectomy by enabling
sustained blood flow improvements to the brain during the critical weeks and months after a stroke, reducing the risk of
stroke recurrence.
Acute Ischemic Stroke Treatment Options
According to the CDC, stroke incidence in the United States and its related effects include:
● Every year in the United States, approximately 800,000 people experience a stroke (ischemic or hemorrhagic).
Approximately 600,000 of these are first events and approximately 25%, or 200,000, are recurrent stroke events.
● Approximately one of every 20 deaths in the United States is caused by stroke and is the fifth leading cause of
death. On average, someone in the United States has a stroke every 40 seconds and someone dies from a stroke
every 3.5 minutes.
● Stroke is the leading cause of serious long-term disability and reduces mobility in more than half of stroke
survivors aged 65 and over.
● Risk of having a first stroke is nearly twice as high for African Americans as for Caucasians, and African
Americans have the highest rate of death due to stroke.
7
● Stroke-related costs in the United States came to nearly $53 billion between 2017 and 2018, including the cost of
health care services, medications and missed days of work.
DM199 – Our Novel Solution for the Treatment of AIS
In response to an ischemic stroke, bradykinin 2 receptors (BK2) are significantly upregulated (increased) in the arteries
affected by the stroke, the ischemic penumbra. This phenomenon has been observed in animal stroke models, showing a
36-fold increase on the ipsilateral side and a 10-fold increase on the contralateral side (PLOS ONE (2018), 13(6),
e0198553.https://doi.org/10.1371/journal.pone.0198553). In these oxygen depleted arteries, the increased BK2 receptors
signal the need for BK to bind and restore blood flow to these at-risk arteries in the ischemic penumbra. The treatment with
DM199 is intended to increase the body’s production of BK to bind with the BK2 receptors to improve collateral
circulation. In binding with the BK2 receptors expressed on endothelial cells (exposed to internal lumen of the artery),
DM199, via production of bradykinin, activates the body’s natural physiologic processes and does not need to pass through
the blood brain barrier, which is a specialized structure that is difficult for many therapeutic agents to cross.
As depicted in the graphic below, we believe the mechanism of action for DM199 (KLK1) has the potential to preserve “at
risk” penumbral brain tissue by acutely increasing cerebral blood flow by selectively vasodilating arteries in the ischemic
penumbra and increasing collateral blood flow, to improve blood flow and restore oxygen levels rescuing these cerebral
tissues.
DM199 Acute Ischemic Stroke: Proposed Mechanism
8
In January 2019, we published a paper titled “Human Tissue Kallikrein in the Treatment of Acute Ischemic Stroke” in a
peer reviewed journal (Therapeutic Advances in Neurological Disorders (2019), 12:1-15,
.https://doi.org/10.1177/1756286418821918). The paper reviews the scientific literature covering the biochemical role of
KLK1 and presents the mechanistic rationale for using KLK1 as an additional pharmacological treatment for AIS. In
addition to the biochemical mechanism of KLK1, the review highlights supporting results 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 is isolated from human urine. This form has been approved for post-stroke treatment of AIS in China and data
has been published from clinical trials involving over 4,000 patients. The paper offers a series of testable therapeutic
hypotheses for demonstrating the long-term beneficial effect of KLK1 treatment in AIS patients and the reasons for this
action.
We are developing DM199 to treat AIS patients with a therapeutic window of up to 24 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 those patients
who cannot receive tPA under the currently available treatment window of tPA. This important attribute could potentially
make therapy available to the millions of patients worldwide who currently have limited treatment options.
Supporting Data from the Use of Urine-derived KLK1 for the Treatment of AIS in China
In China, Kailikang® is approved and marketed by Techpool Bio-Pharma Inc., a company controlled by Shanghai
Pharmaceuticals Holding Co. Ltd. Kailikang has been approved for the treatment of AIS in China. We believe the initial
treatment window is up to 48 hours after stroke symptom onset. Based on data from IQVIA real world and health data,
other publications and our own internal analysis, we estimate that over 600,000 stroke patients in China were treated in
2022 with Kailikang. More than 50 published clinical studies, covering over 4,000 stroke patients, have demonstrated a
beneficial effect of Kailikang treatment in AIS including improvements in standard stroke scores, increased blood flow,
reduced infarct size/ischemia in the brain. In a double-blinded, placebo-controlled trial of 446 participants treated with
either Kailikang or a placebo with initial treatment administered up to 48 hours after symptom onset showed significantly
better scores on the European Stroke Scale and Activities of Daily Living at three weeks post-treatment and after three
months using the Barthel Index, (China Journal of Neurology (2007), 40:306–310).
Additionally, a comprehensive meta-analysis covering 24 clinical studies involving 2,433 concluded that human urinary
KLK1 appears to ameliorate neurological deficits for patients with AIS and improves long-term outcomes, though a few
treated patients suffered from transient hypotension (Journal of Evidence-Based Medicine (2012) 5:31-39,
https://doi.org/10.1111/j.1756-5391.2012.01167.x)
Furthermore, in a retrospective study covering 300 consecutive AIS patients, subjects treated with human urinary KLK1
experienced a 6.5% absolute reduction (p=0.009) in recurrent strokes (39% relative) within one year (Brain and Behavior
(2018), https://onlinelibrary.wiley.com/doi/pdf/10.1002/brb3.1033).
CRD Background and Disease Pathology
Cardio Renal Disease Background
Cardio-renal syndrome refers to the complex interplay between cardiac and renal dysfunction, where acute or chronic
dysfunction in one organ may induce acute or chronic dysfunction of the other. A key component of this syndrome is
hypertension, which serves as both a cause and consequence of cardio-renal interactions. Hypertension contributes to the
development and progression of heart and kidney diseases by imposing increased workload on the heart and by causing
damage to the kidneys' nephrons, leading to a vicious cycle of worsening heart and kidney function. This relationship
underscores the critical need for integrated management strategies that address both cardiac and renal health to effectively
treat and prevent the progression of cardio-renal diseases. This integrated approach includes controlling blood pressure,
managing fluid and electrolyte balance, and employing therapies that target the underlying mechanisms linking heart and
kidney disease, such as the renin-angiotensin-aldosterone system (RAAS) inhibitors.
9
DM199 – Our Novel Solution for the Treatment of CRD, Including Hypertension
We believe DM199 has the potential to offer meaningful therapeutic benefits for CRD patients. We believe that the KLK1
protein plays a vital role in maintaining normal kidney function, promoting the production of nitric oxide, prostaglandin
and other anti-inflammatory mediators which are important for kidney health and integrity. Patients with moderate to severe
CRD often excrete abnormally low levels of KLK1 in their urine, leading to the hypothesis that a KLK1 deficit contributes
to disease progression.
Additionally, KLK1 is the main source of bradykinin (BK) in resting conditions. BK opposes the prohypertensive renin,
angiotensin, aldosterone system (RAAS) by restoring regulation of the epithelial sodium channel (EnaC) and increasing
sodium and fluid excretion. DM199 augments low KLK1 levels and promotes natriuresis (excretion of sodium in urine).
This regulation of EnaC with DM199 may contribute to lowering blood pressure in hypertensive patients and in particular
in patient’s considered to be salt-sensitive.
By providing additional KLK1, we believe DM199 has the potential to:
DM199 treatment is intended to directly replenish KLK1 levels to maintain, or possibly restore, kidney function. Current
treatment options, especially ACEi drugs, primarily slow the rate of decline in kidney function but are associated with side
effects. Importantly, it is becoming increasingly clear that part of the beneficial effect of ACEi drugs involves preventing
the normal breakdown of BK leading to substantial increases in BK levels throughout the body. However, these effects can
be unregulated and ACEi drugs therefore can generate excessive BK where it is not needed, potentially leading to side
effects such as persistent cough, angioedema (swelling of skin and tissue) and hyperkalemia (abnormally high potassium
levels that can lead to cardiac arrest and sudden death). Most importantly, even with the use of ACEi or ARB medications
in CRD patients, there remains a high unmet need as a majority of CRD patients still experience a progressive loss of renal
function over time. We believe DM199 treatment, either alone or in combination with an ARB, could potentially restore
normal KLK1 levels allowing the KKS to perform its normal physiological processes and release BK when and where it is
needed, avoiding these side effects.
We intend to clinically evaluate the use of DM199 as a novel therapy for CRD. Protein replacement therapy with DM199,
through the activation of the KKS, may complement and balance RAAS, primarily targeted by ACEis and ARBs, and may
potentially improve the function of the diseased renal system by improving blood flow and vasodilation, as well as reducing
blood pressure.
Our Competition and Current Treatments for Acute Ischemic Stroke and Cardio Renal Disease
The biopharmaceutical industry is highly competitive and characterized by rapidly advancing technologies that focus on
rapid development of proprietary drugs. We believe that our DM199 product candidate, development capabilities,
experience and scientific knowledge provide us with certain competitive advantages. However, we face significant potential
competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology
companies, academic institutions, governmental agencies and other research institutions. Any product candidates that we
successfully develop and commercialize will compete with existing therapies and new therapies that may become available
in the future.
10
Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and
human resources than we do, and experience in obtaining FDA and other regulatory approvals of treatments and
commercializing those treatments. Accordingly, our competitors may be more successful than us in obtaining approval for
competitive products and achieving widespread market acceptance. Our competitors’ treatments may be more effectively
marketed and sold than any products we may commercialize, thus limiting our market share and resulting in a longer period
before we can recover the expenses of developing and commercializing our DM199 product candidate.
Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being
concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies. 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 management personnel, our ability to work with specific advisors, or our ability to work with
clinical contract organizations due to conflicts of interest or capacity constraints, and may 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 reimbursement from government or other third-party payers. Our commercial
opportunity could be reduced or eliminated if our competitors develop and commercialize products that are viewed as safer,
more effective or less expensive than any products that we may develop.
Acute Ischemic Stroke
Currently, there is one approved pharmaceutical treatment for AIS. That treatment is tPA (marketed under the brand name
Activase®), and its therapeutic 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 develop pharmaceutical products for the treatment of AIS
including, among others:
tPA extended treatment window (Genentech / Boehringer Ingelheim)
● Stem cells (Athersys, Inc.)
●
● Tenecteplase (Genentech / Boehringer Ingelheim)
● 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)
●
● Neuroprotector (Mitsubishi)
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. Currently,
the most advanced treatment for AIS uses a medical device for the mechanical removal of blood clots in the large arteries
supplying blood to the brain through sophisticated catheter-based approaches, referred to as mechanical thrombectomy.
According to published research, use of mechanical thrombectomy is growing and the window of time after a stroke where
the procedure can be used is widening. New therapeutic options in development include tissue protection focused therapies
(deliverable from hours to days after the stroke) that are intended to preserve and protect brain cells beyond the tPA
therapeutic window. The goal is to provide treatment options for the vast majority of AIS patients who do not receive
hospital care early 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 is able to obtain regulatory approval.
DM199 Clinical Trials
AIS Phase 2/3 ReMEDy2 Trial
We are currently conducting our ReMEDy2 clinical trial of DM199 for the treatment of AIS. Our ReMEDy2 clinical trial is
a Phase 2/3, adaptive design, randomized, double-blind, placebo-controlled trial intended to enroll approximately 350
patients at up to 100 sites globally. Patients enrolled in the trial will be treated with either DM199 or placebo within 24
hours of the onset of AIS symptoms. The trial excludes patients treated with tPA, a thrombolytic agent intended to dissolve
blood clots, and those with large vessel occlusions. The study population is representative of the approximately 80% of AIS
11
patients who do not have treatment options today, primarily due to the limitations on treatment with tPA and/or mechanical
thrombectomy. We believe that the proposed trial has the potential to serve as a pivotal registration study of DM199 in this
patient population.
The primary endpoint of the ReMEDy2 trial is physical recovery from stroke as measured by the well-established modified
Rankin Scale (mRS) at day 90. The mRS is a commonly used scale for measuring the degree of disability or dependence in
the daily activities of people who have suffered a stroke. Secondary endpoints for the trial will evaluate, among other
things, mRS shift (which shows the treatment effect on participants across the full spectrum of stroke severity), participant
deaths, the National Institute of Health Stroke Score (NIHSS) and Barthel Index (BI) stroke scales and stroke recurrence.
Recurrent strokes represent 25% of all ischemic strokes, often occurring in the first few weeks after an initial stroke and are
typically more disabling, costly and fatal than initial strokes.
We voluntarily paused participant enrollment in the ReMEDy2 trial to investigate three unexpected instances of clinically
significant hypotension (low blood pressure) occurring shortly after initiation of the intravenous (IV) dose of DM199. The
acutely low blood pressure levels in the three participants recovered back to their baseline blood pressure within minutes
after the IV infusion was stopped, and the participants suffered no injuries. On July 6, 2022, we announced that the FDA
placed a clinical hold on the investigational new drug application (IND) for our ReMEDy2 trial. In September 2022, we
submitted to the FDA supporting in-vitro data that the cause of the hypotensive events was likely related to switching to a
new type of IV bag for use in the ReMEDy2 trial rather than continue with the type of IV bag used in the prior ReMEDy1
trial, where DM199 was generally safe and well tolerated and no hypotensive episodes were reported. While there were no
differences in the compatibility of DM199 with either type of IV bag, we observed significant differences in DM199
binding between the two types of IV bags we believe altered, and unintentionally elevated, the total amount of DM199
being administered to participants in the ReMEDy2 trial and thereby triggering the hypotensive events. We also included in
this FDA submission, proposed protocol modifications to further address the mitigation of these events, including a
reduction in the DM199 dose level for the initial IV dose to effectively match in the PVC IV bags, the well tolerated IV
dose administered in the ReMEDy1 trial. Following review of this analysis, the FDA informed us that they were continuing
the clinical hold and requesting, among other items, an additional in-use, in vitro stability study of all of the materials and
equipment used in the IV administration of DM199, which included testing the combination of the IV bag, IV tubing and
mechanical infusion pump, to further rule out any other cause of the hypotension events. The requested in-use study was
completed at an independent laboratory and the results were substantially consistent with our initial stand-alone testing of
the IV bags. In May 2023, this additional supporting data was submitted to the FDA in our clinical hold response. In June
2023, the FDA completed review of our clinical hold response and informed us that the clinical hold was fully removed
allowing us to begin preparations to resume our ReMEDy2 trial.
Following in-depth discussions of the ReMEDy2 Phase 2/3 protocol design with global stroke experts, the scientific
advisory board and current investigators, the Company has made several important amendments to the protocol subsequent
to the lifting of the clinical hold. These changes were submitted to the FDA in early October and the Company is
proceeding with use of the amended protocol as the FDA did not issue any comments during the 30-day review period
which ended on November 3, 2023.
Prior to the clinical hold of our ReMEDy2 trial, we had experienced slower than expected site activations and enrollment in
our ReMEDy2 trial and may continue to experience these conditions as we activate additional clinical sites and enrollment
participants. We believe this was due primarily to clinical staff shortages resulting from layoffs and employee burnout, the
reallocation of clinical nurses to COVID-19 care, particularly during surges in COVID-19 cases, a loss of study
coordinators resulting from budget constraints and COVID-19 vaccination requirements and concerns managing logistics
and protocol compliance for participants discharged from the hospital to an intermediate care facility. In an effort to
mitigate the impact of these factors, we have worked with our contract research organization to develop alternative
procedures to support study sites and potential participants as needed. We intend to continue to monitor the results of these
efforts or implement additional actions to mitigate the impact of these factors on our ReMEDy2 trial, however no
assurances can be provided as to if and when these issues will resolve.
In September 2021, the FDA granted Fast Track designation to DM199 for the treatment of AIS where tPA and/or
mechanical thrombectomy are not indicated or medically appropriate. The FDA may grant Fast Track designation to a drug
that is intended to treat a serious condition and nonclinical or clinical data demonstrate the potential to address unmet
medical need. The FDA provides opportunities for frequent interactions with the review team for a Fast Track product,
including end-of-phase 2 meetings with the FDA to discuss study design, extent of safety data required to support approval,
dose-response concerns, and use of biomarkers. A Fast Track product may also be eligible for rolling review, where the
FDA reviews portions of a marketing application before the sponsor submits the complete application.
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Phase 1C Open Label Safety Trial
Concurrently with performing the requested in-use study, we also conducted a Phase 1C open label, single ascending dose
(SAD) study of DM199 administered with the PVC IV bags used in the ReMEDy2 trial. The purpose of the study was to
confirm, with human data, the DM199 blood concentration levels achieved with the IV dose and further evaluate safety and
tolerability. This study was conducted in Australia. The third cohort, which received the 0.50 µg/kg dose level proposed for
the ReMEDy2 trial, was dosed in April 2023 with no significant adverse events related to DM199. The pharmacokinetic
data, including the DM199 blood concentration levels, for all cohorts was included as supplemental information in our
clinical hold response. In investigating the cause of the unexpected instances of hypotension, we noted that all three
participants were receiving angiotensin-converting enzyme inhibitor (ACEi) therapy at the time of their enrollment. Given
this, we also completed an additional, fourth cohort of hypertensive patients (Part B) being treated with ACEi prior to
enrolling. All ACEi patients received the full IV dose at the 0.5 µg/kg level with no instances of hypotension. We believe
that these results provide further assurance to potential investigators that ACEi patients may be safely included in the
ReMEDy2 trial.
AIS Phase 2 ReMEDy1 Trial
In May 2020, we announced top-line data from our Phase 2 ReMEDy1 trial assessing the safety, tolerability and markers of
therapeutic efficacy of DM199 in patients suffering from AIS. We initiated treatment in this trial in February 2018 and
completed enrollment in October 2019 with 92 participants. The study drug (DM199 or placebo) was administered as an
intravenous (IV) infusion within 24 hours of stroke symptom onset, followed by subcutaneous injections later that day and
once every 3 days for 21 days. The trial 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 Rankin Scale, National
Institutes of Health Stroke Scale, the Barthel Index. The trial met primary safety and tolerability endpoints and was
generally safe and well tolerated. In addition, there was a demonstrated therapeutic effect on the rate of severe stroke
recurrence inclusive of all participants and there was also a demonstrated therapeutic effect on the physical recoveries of
participants that received tPA prior to enrollment but not in participants receiving mechanical thrombectomy prior to
enrollment.
Prior to enrollment, 44 of the 91 evaluable participants (48%) received mechanical thrombectomy intervention, a catheter-
based treatment intended to physically remove clots and potentially available for patients who have a large vessel occlusion
and can be treated within 6 to 24 hours of the onset of stroke symptoms. While approximately 20% of AIS patients are
believed to be eligible for a mechanical thrombectomy, currently only about 5% to 10% receive the treatment due to
elapsed time post-stroke or unavailability of the therapy at the hospital where the patient presents. DM199 is intended to
treat the approximately 80% of AIS patients who are not eligible for either mechanical thrombectomy or tPA. Treatment for
these patients is limited to supportive care. Due to the large volume of participants receiving mechanical thrombectomy
prior to enrollment in the ReMEDy1 trial, and a disproportionate distribution of these participants between the active
treatment and placebo groups, DM199 did not produce a therapeutic effect on physical recoveries in the overall trial
analysis.
When participants treated with mechanical thrombectomy are excluded from the trial data set, which represents the group
of participants most closely aligned with the target treatment population for DM199 in the ReMEDy2 trial, a positive
therapeutic effect on participant physical recoveries was demonstrated. As shown in the table below, when evaluating the
participants treated with DM199 (n=25) vs. supportive care and/or tPA (n=21), the results showed that 36% of participants
receiving DM199 progressed to a full or nearly full recovery at 90 days (NIHSS: 0-1), compared to 14% of participants in
the placebo group. This represents a 22% absolute increase in the proportion of participants achieving a full or nearly full
recovery. Additionally, subject deaths decreased from 24% in the placebo group to 12% in the active therapy group, a 50%
relative reduction. Note that the number of subjects in these subsets were insufficient for statistical significance.
DM199 vs. Supportive Care and/or tPA
Placebo (n=21)
DM199 (n=25)
0-1
14%
36%
NIHSS Outcomes at 90 Days
2-8
57%
36%
≥ 9
5%
16%
Death
24%
12%
13
In addition, in the evaluable participants (n=91), a significant reduction in the number of participants with recurrent
ischemic stroke was noted in the active treatment group: 0 (0%) participants treated with DM199 vs. 6 (13%) on placebo
(p=0.012), with 4 of the 6 resulting in participant death.
We believe these findings from our Phase 2 ReMEDy1 trial, which are consistent with the use of Kailikang in China,
provide a signal that recombinant human KLK1 appears safe and may have promise as a new treatment for physicians who
have limited options for the treatment of patients following an AIS.
CRD Phase 2 REDUX Trial
Our REDUX trial was a multi-center, open-label investigation of participants with mild or moderate chronic kidney disease
(CKD) (Stage II or III) and albuminuria. The trial was conducted in the United States and included: Cohort 1 enrolled non-
diabetic, hypertensive African Americans (AA) with Stage II or III CKD. African Americans are at greater risk for CKD
than Caucasians, and those African Americans who have the APOL1 gene mutation are at an even higher risk. Cohort 2
enrolled participants with IgA Nephropathy (IgAN). Cohort 3 enrolled participants with Type 2 diabetes mellitus with
CKD, hypertension and albuminuria (DKD). The trial evaluated two dose levels of DM199 within each cohort. Study
participants received DM199 by subcutaneous injection twice weekly for 95 days. The primary study endpoints, evaluated
after three months of treatment, included safety, tolerability, blood pressure, albuminuria and kidney function, which are
evaluated by changes from baseline in estimated glomerular filtration rate, albuminuria, as measured by the urinary albumin
to creatinine ratio, and blood pressure in hypertensive participants.
Interim results, issued in November 2021, indicated that after three months of treatment, DM199 was demonstrating
clinically meaningful improvements in kidney function in Cohorts 1 and 2, as measured by simultaneously stabilizing
estimated glomerular filtration rate (eGFR) and decreasing the urinary albumin-to-creatinine ratio (UACR). Additionally, in
participants who were hypertensive (Cohorts 1 and 3), DM199 reduced blood pressure by clinically significant levels and
importantly, there was no effect on participants who were not hypertensive (Cohort 2).
DM199 was generally safe and well tolerated across all cohorts. Adverse events (AEs) were generally mild to moderate in
severity, with the most common being local injection site irritation, and all resolved without medical intervention.
We completed enrollment in REDUX with a total 84 subjects enrolled, including 24 African American subjects into Cohort
1, 25 subjects with IgAN into Cohort 2 and 35 subjects with Type 2 diabetes in Cohort 3. As of March 31, 2022, all
participants had completed their treatment periods.
We plan to disclose additional data related to blood pressure control as part of supporting our plans for our cardio renal
program to be disclosed in 2024.
DM199 Safety Summary
Intravenously/subcutaneously administered DM199, in doses ranging from 0.025 μg/kg to 50.0 μg/kg, has been
administered to over 250 subjects across 5 completed clinical studies and has been shown to be generally safe and well
tolerated. The most frequently reported treatment-emergent adverse events in our Phase 2 ReMEDy1 AIS trial were
constipation, oral candidiasis and nausea. These events were predominately mild to moderate in severity. Orthostatic
hypotension was determined to be the dose limiting tolerability. There have been 3 reported drug-related serious adverse
events (SAEs) in subjects receiving DM199 of transient hypotension; these events were rapidly reversible upon stopping
infusion with no long term sequelae (further adverse events).
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 KLK1 treatments. Today, forms of KLK1 derived from human urine and the
pancreas of pigs are approved and sold in Japan, China and South Korea to treat AIS, CRD, retinopathy, hypertension and
related diseases. We are not aware of any recombinant version of KLK1 with regulatory approval for human use in any
country, nor any recombinant version in development other than our drug candidate DM199. We believe at least five
companies have attempted, unsuccessfully, to create a recombinant version of KLK1.
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The growing understanding of the role of KLK1 in human health and its use in Asia as an approved therapeutic
highlight two important potential commercial advantages for DM199:
KLK1 treatment is sold in Japan, China and South Korea. Research has shown that patients with low levels of
KLK1 are associated with a variety of diseases related to vascular dysfunction, such as AIS, CRD, retinopathy and
hypertension. In randomized, controlled clinical trials, human urine and porcine derived KLK1 has demonstrated
statistically significant clinical benefits in treating a variety of patients with KLK1 compared to placebo. These
efficacy results are further substantiated by established markets in Japan, China and South Korea for
pharmaceutical sales of KLK1 derived from human urine and the pancreas of pigs. We estimate that millions of
patients have been treated with these forms of KLK1 in Asia. Altogether, we believe this supports a strong market
opportunity for a recombinant version of KLK1 such as DM199.
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 side effect observed to limit participant tolerability in our clinical trials was orthostatic
hypotension, or a sudden drop in blood pressure, which has been primarily seen at doses 10 to 20 times higher
than our anticipated therapeutic dose levels. Most recently, clinically significant, transient hypotension (low blood
pressure) occurring shortly after initiation of the intravenous (IV) dose of DM199 was experienced by three
participants in our ReMEDy2 trial which were the cause of the Company pausing participant enrollment and the
FDA placing a clinical hold on the IND for our ReMEDy2 trial. The blood pressure levels of the three participants
recovered back to their baseline blood pressure within minutes after the IV infusion was stopped and the
participants suffered no injuries. We believe that these events were caused by our switching away from the type of
IV bag used in the prior ReMEDy1 trial, where no hypotensive episodes were reported, which resulted in an
unintended, elevated dose of DM199 being delivered in the ReMEDy2 trial. We believe that by reducing the dose
rate for the IV infusion to a level that matches the effective dose rate in the ReMEDy1 trial, we can manage and/or
eliminate the clinically significant hypotensive events.
Moreover, we understand that routine clinical use of KLK1 treatment in Asia has been well-tolerated by patients
for several decades. In 2017, we completed a clinical trial comparing the pharmacokinetic profile of DM199 to the
human urinary form of KLK1 (Kailikang), which showed DM199, when administered in intravenous form, had a
similar pharmacokinetic profile. Further, when DM199 was administered subcutaneously, DM199 demonstrated a
longer acting pharmacokinetic profile, superior to the intravenously administered Kailikang and DM199.
In addition, we believe that there are also significant formulation, manufacturing, regulatory and other advantages for
recombinant human KLK1 drug candidate DM199:
Potency and Impurity Considerations. KLK1 produced from human urine or the pancreas of pigs presents risks
related to preventing impurities, endotoxins and chemical byproducts due to the inherent variability of the
isolation and purification process. We believe that this creates the risk of inconsistencies in potency and impurities
from one production 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 or pig pancreas must be obtained to derive a small amount
of KLK1. This creates potential procurement, cost and logistical challenges to source the necessary raw material,
particularly for human urine sourced KLK1. Once sourced, the raw material is processed using chemicals and
costly capital equipment and produces a significant amount of byproduct waste. Our novel recombinant
manufacturing process utilizes widely available raw materials and can be readily scaled for commercial
production. Accordingly, we believe our manufacturing process will have 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 United States. We believe that this is related to challenges presented by using
inconsistent and potentially hazardous biomaterials, such as human urine and the pancreas of pigs, and their
resulting ability to produce a consistent drug product. Our novel recombinant manufacturing process utilizes
widely available raw materials which we believe provides a significant regulatory advantage, particularly in
regions such as the United States, Europe and Canada, where safety standards are high. In addition, 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 (BPCIA), which was enacted as part of the Patient Protection and
Affordable Care Act (ACA) as amended by the Health Care and Education Reconciliation Act of 2010.
15
From a strategic perspective, we continue to believe that strategic alternatives with respect to our DM199 product
candidate, including licenses and business collaborations, 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 engage in discussions with third parties regarding these matters.
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 long and costly process that is controlled by each territory’s national
regulatory agency. The national regulatory agency in the United States is the FDA, in Europe it is the European Medicines
Agency (EMA), and in Canada it is Health Canada. Other national regulatory agencies have similar regulatory approval
requirements, but each national regulatory agency has its own approval processes. Approval in the United States, Europe or
Canada does not assure approval by other national regulatory 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 principal development activities. These laws require controlled research and testing of
products, governmental review, and approval of a submission containing preclinical and clinical data establishing the safety
and efficacy of the product for each use sought, as well as approval of manufacturing facilities, including adherence to good
manufacturing practices (GMP) during production and storage, and control of marketing activities, including labeling and
advertising.
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 to market any of our product candidates.
The clinical testing, manufacturing, labeling, storage, distribution, record keeping, advertising, promotion, import, export
and marketing, among other things, of our current or future product candidates, are subject to extensive regulation by
governmental authorities in the United States and other countries. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of
substantial time and financial resources. Failure to comply with the applicable requirements at any time during the product
development process, approval process, or after approval may subject us to a variety of administrative or judicial sanctions,
including refusal by the applicable regulatory authority to approve pending applications, withdrawal of an approval,
imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or
partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution,
disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA 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. The FDA’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 CFR 314 are approved.
The U.S. food and drug regulations require licensing of manufacturing facilities, carefully controlled research and testing of
products, governmental review and approval of 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 is called 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 drug works. Information from these
experiments is submitted to the FDA as part of an IND. The FDA reviews the information in the IND and decides if the
drug is safe to study in humans.
16
Stage 2: Clinical Research. The experimental drug is studied in humans. The studies are known as clinical trials. Clinical
trials are carefully designed and controlled experiments in which the experimental drug is administered to patients to test its
safety and to determine the effectiveness of an experimental drug. The four general phases of clinical research are described
below.
● Phase 1 Clinical Studies. Phase 1 clinical studies are generally conducted with healthy volunteers who are not
taking other medicines; patients with the illness that the drug is intended to treat are not tested at this stage.
Ultimately, Phase 1 studies demonstrate how an experimental drug affects the body of a healthy individual. Phase
1 consists of a series of small studies consisting of tens of volunteers. Tests are done on each volunteer throughout
the study to see how the 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 the determination of the safe dosage range in volunteers by the
end of Phase 1. This information will determine whether the drug proceeds to Phase 2.
● Phase 2 Clinical Studies. Phase 2 clinical studies are conducted in order to determine how an experimental drug
affects people who have the disease to be treated. Phase 2 usually consists of a limited number of studies that help
determine the drug’s short-term safety, side effects, and general effectiveness. The studies in Phase 2 often are
controlled investigations involving comparison between the experimental drug and a placebo, or between the
experimental drug and an existing drug. Information gathered in Phase 2 studies will determine whether the drug
proceeds to Phase 3.
● Phase 3 Clinical Studies. Phase 3 clinical studies are expanded controlled and uncontrolled trials that are used to
more fully investigate the safety and effectiveness of the drug. These trials differ from Phase 2 trials because a
larger number of patients are studied (sometimes in the thousands) and because the studies are usually double
blinded, placebo controlled and of longer duration. As well, Phase 3 studies can include patients who have more
than one illness and are taking medications in addition to the experimental drug used in the study. Therefore, the
patients in Phase 3 studies more closely reflect the general population. The information from Phase 3 forms the
basis for most of the drug’s initial labeling, which will guide physicians on how to use the drug.
● Phase 4 Clinical Studies. Phase 4 clinical studies are conducted after a drug is approved. Phase 4 studies may be
required by the FDA or conducted by companies to more fully understand how their drug compares to other drugs.
FDA-required Phase 4 studies often investigate the drug in specific types of patients that may not have been
included in the Phase 3 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 3 clinical studies, the pharmaceutical company
prepares an electronic common technical document reporting all clinical nonclinical and chemistry, manufacturing and
control studies conducted on the drug that is transmitted to the FDA as a Biologics License Application (BLA). The FDA
reviews the information in the BLA to determine if the drug is safe and effective for its intended use. An advisory panel
meeting is scheduled 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 company also 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 FDA approval process before it can be
marketed for that purpose.
Any FDA approved pharmaceutical products are subject to continuing regulation by the FDA, including, among other
things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated
safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records
and signature requirements and complying with FDA guidance documents, and promotion and advertising requirements,
which include, among others, standards for direct-to-consumer advertising, promoting pharmaceutical products for uses or
in patient populations that are not described in the pharmaceutical product’s approved labeling (known as “off-label use”),
industry-sponsored scientific and educational activities and promotional activities involving the internet or social media.
Failure to comply with FDA requirements is likely to have negative consequences, including adverse publicity, warning or
enforcement letters from the FDA or the Federal Trade Commission (FTC), mandated corrective advertising or
communications with doctors, product seizures or recalls and state or federal civil or criminal prosecution, injunctions and
penalties.
The FDA also may require post-marketing testing, known as Phase 4 testing, risk evaluation and mitigation strategies and
surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the
distribution or use of the product.
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DM199 may qualify for 12 years of data exclusivity under the BPCIA, which was enacted as part of the ACA, as amended
by the Health Care and Education Reconciliation Act of 2010. 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, after the original brand
product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway for the
approval of biosimilar and interchangeable 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 only beginning to be
interpreted and implemented by the FDA.
European Approval Process
The EMA is roughly parallel to the FDA in terms of the drug approval process and the strict requirements for approval. The
EMA was set up in 1995 in an attempt to harmonize, but not replace, the work of existing national medicine regulatory
bodies in individual European countries. As with the FDA, the EMA drug review and approval process follows similar
stages from preclinical testing through clinical testing in Phase 1, 2, and 3. There are some differences between the FDA
and EMA review process, specifically the review process in individual European countries. Such differences may allow
certain drug products to be tested in patients at an earlier stage 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 for Medicare and Medicaid Services and other divisions of the U.S. government,
including, the Department of Health and Human Services, the Department of Justice and 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, a company, including its sales, marketing and
scientific/educational grant programs, must comply with the federal Food, Drug & Cosmetic Act (FDCA) as it relates to
advertising and promotion of drugs, the federal False Claims Act, as amended, the federal Anti-Kickback Statute, as
amended, the Physician Payments Sunshine Act, the federal Health Insurance Portability and Accountability Act of 1996
(HIPAA), 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 the Medicare Prescription Drug Improvement and Modernization Act of 2003. Among other things, OBRA
requires drug manufacturers to pay rebates on prescription drugs to state Medicaid programs and empowers states to
negotiate rebates on pharmaceutical prices, which may result in prices for our future products being lower than the prices
we might otherwise obtain. Additionally, the ACA substantially changes the way healthcare is financed by both
governmental and private insurers. There may continue 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 of drug products. If drug
products are made available to authorized users of the Federal Supply Schedule of the General Services Administration,
additional laws and requirements may apply.
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 the availability of coverage and adequate reimbursement from third-party payers,
including government health administrative authorities, managed care providers, private health insurers and other
organizations. In the United States, private health insurers and other third-party payers often provide reimbursement for
products and services based on the level at which the government (through the Medicare and/or Medicaid programs)
provides reimbursement for such treatments. Third-party payers are increasingly 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 Union and other potentially significant markets for our product candidates, government
authorities and third-party payers are increasingly attempting to limit or regulate the price of medical products and services,
particularly for new and innovative products and therapies, which has resulted in lower average selling prices. Further, the
increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement
controls in the European Union will put additional pressure on product pricing, reimbursement and usage, which may
adversely affect our future product sales and results of operations. These pressures can arise 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 to enable us to realize an appropriate return on our investment in
research and product development.
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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 lists of medications for which third-party payers provide coverage and
reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on
pharmaceutical companies. Also, third-party payers may refuse to include a particular branded drug in their formularies or
may otherwise restrict patient access to a branded drug when a less costly generic equivalent or another alternative is
available. In addition, because each third-party payer individually approves coverage and reimbursement levels, obtaining
coverage and adequate reimbursement is a time-consuming and costly process. We would be required to provide 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, and we may need to conduct expensive pharmacoeconomic studies to demonstrate the cost-
effectiveness of our product candidates. This process could delay the market acceptance 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. We
cannot be certain that our product candidates will be considered cost-effective. If we are unable to obtain coverage and
adequate payment levels for our product candidates from third-party payers, physicians may limit how much or under what
circumstances they will prescribe or administer them and patients may decline to purchase them. This in turn could affect
our ability to successfully commercialize our products and impact our profitability, results of operations, financial
condition, and future success.
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. Our primary focus over the past approximately 12 years has been our lead product
candidate, DM199, which is currently in clinical development for the treatment of AIS.
We expect our R&D expenses will continue to increase in the future as we continue the development and clinical study of
our initial product candidate, DM199, in AIS and seek to pursue other indications or expand our product candidate
portfolio. The process of conducting the necessary development and clinical research to obtain regulatory approval is costly
and time-consuming and we 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 product candidate, clinical indication and preclinical program
may be affected by a variety of factors including, among other things, the safety and efficacy data for each product
candidate, amounts invested in their respective programs, competition and competitive developments, manufacturing
capability and commercial viability.
R&D expenses include:
●
●
●
●
●
●
expenses incurred with third party service providers such as contract research organizations and other study
support services;
expenses incurred under agreements with clinical trial sites that conduct research activities on our behalf;
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;
employee and consultant-related expenses, which include salaries, benefits, consulting fees, travel and share-based
compensation; and
facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities,
insurance, and other supply costs.
R&D costs are expensed as incurred. Costs for certain development activities such as clinical trials are recognized based on
an evaluation of the progress 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 at least three to four 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 DM199 nor do we have plans to develop our own
manufacturing operations in the foreseeable future. We rely on Catalent Pharma Solutions, LLC (Catalent), a contract
development and manufacturing organization (CDMO) with proven GMP experience in the manufacturing of recombinant
proteins for clinical trials, for procuring all of our required raw materials and producing active pharmaceutical ingredient
for our clinical trials. We have licensed certain gene expression technology and we contract with Catalent for the
manufacture of DM199 drug substance. We currently employ internal resources and third-party consultants to manage our
manufacturing relationship with Catalent.
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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. We currently expect to partner with a large pharmaceutical company for sales execution.
However, our future commercial strategy 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 for regions and territories outside the United
States.
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 translating our innovations into intellectual property protecting our proprietary technology
from infringement by competitors. To that end, patents are reviewed frequently and continue 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 file patent applications to protect our product candidates, as well as methods of manufacturing, administering and using a
product candidate. Prior art searches of both patent and scientific databases are performed to evaluate novelty,
inventiveness and freedom-to-operate. We require all employees, consultants and parties to a collaborative 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 also maintain agreements with our scientific staff and all
parties contracted in a scientific capacity affirming that all inventions resulting from work performed for us, using our
property 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 four granted U.S. patents, a granted European patent, a granted Canadian patent, and
pending applications in Australia, Canada, China, Europe, India, Japan, South Korea, Hong Kong and the United States.
Granted or pending claims offer various forms of protection for DM199 including claims to compositions of matter,
pharmaceutical compositions, specific formulations and dosing levels and methods for treating a variety of diseases,
including stroke, chronic kidney disease 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 of glycosylation (process by which sugars are chemically attached to proteins). Issued
claims in this patent family cover the most pharmacologically active variants of DM199 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 (KLK1) polypeptides and is predicted to 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 of diseases
including, e.g. pulmonary arterial hypertension, cardiac ischemia, chronic kidney disease, diabetes, stroke and vascular
dementia which, if granted, are predicted to expire in 2038.
As previously discussed, we do not own or operate manufacturing facilities for the production of clinical or commercial
quantities of DM199. We are contracting with Catalent for the manufacture of DM199. We have licensed certain gene
expression technology and we contract with Catalent for the manufacture of DM199. Under the terms of this license,
certain milestone and royalty payments may become due and are dependent upon, among other factors, performing clinical
trials, obtaining regulatory approvals and ultimately the successful commercialization 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 90 days’
prior written notice. The license may not be terminated by Catalent unless we fail to make required milestone and royalty
payments.
Methods and reagents required for commercial scale manufacture of DM199 are subject to a series of patents issued to
Catalent. We license these patents from Catalent, and such license is exclusive as it relates to 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 from third-party competitors. We also believe that DM199 cannot be easily
reverse engineered for the production of a copycat version.
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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 with their projected expiration dates exclusive of any patent term extension:
Title
DM199 Patent Family
Geography
Predicted
Expiration
Patent/Application
Number
Issued patents
US 9,364,521
US 9,839,678
CA 2880085
EP 2 854 841
US 9,616,015
Human Tissue Kallikrein 1 Glycosylation Isoforms
Human Tissue Kallikrein 1 Glycosylation Isoforms
Human Tissue Kallikrein 1 Glycosylation Isoforms
Human Tissue Kallikrein 1 Glycosylation Isoforms
Formulations for Human Tissue Kallikrein-1 for Parenteral
Delivery and Related Methods
Dosage Forms of Tissue Kallikrein 1 Application
US 11,857,608
Pending applications
Dosage Forms of Tissue Kallikrein 1
AU 2018230478
CA 3054962
Dosage Forms of Tissue Kallikrein 1
CN 201880016380.4 Dosage Forms of Tissue Kallikrein 1
Dosage Forms of Tissue Kallikrein 1
EP 18763243.5
Dosage Forms of Tissue Kallikrein 1
IN 201917037712
JP 2019-548655
Dosage Forms of Tissue Kallikrein 1
KR 10-2019-7026369 Dosage Forms of Tissue Kallikrein 1
Dosage Forms of Tissue Kallikrein 1
HK 62020009783.5
Dosage Forms of Tissue Kallikrein 1
HK 62020007146.7
Dosage Forms of Tissue Kallikrein 1
US 18/501,804
Tissue Kallikrein 1 for Treating Chronic Kidney Disease
US 18/295,991
Tissue Kallikrein 1 for Treating Chronic Kidney Disease
PCT/US23/65385
DM300 Patent Family
US
US
CA
Europe
US
US
Australia
Canada
China
Europe
India
Japan
South Korea
Hong Kong
Hong Kong
US
US
PCT
2033
2033
2033
2033
2033
2038
2038
2038
2038
2038
2038
2038
2038
2038
2038
2038
Issued patents
11,725,043
Pending applications
Ulinastatin Polypeptides
US
2041
PCT/US2021/021148 Ulinastatin Polypeptides
PCT/US2022/014095 Ulinastatin Polypeptides for Treating Diseases
BR,CA,CN,EP,HK,IN,JP, TW,US 2041
2042
CA,CN,EP,JP,US
The base term of a U.S. patent is 20 years from the filing date of the earliest-filed non-provisional patent application from
which the patent claims priority. The term of a U.S. patent can be lengthened by patent term adjustment, which
compensates the owner of the patent for administrative delays at the U.S. Patent and Trademark Office. In some cases, the
term of a U.S. patent is shortened by terminal disclaimer that reduces its term to that of an earlier-expiring patent.
The term of a U.S. patent may also be eligible for patent term extension under the Drug Price Competition and Patent Term
Restoration Act of 1984, referred to as the Hatch-Waxman Act, to account for at least some of the time the drug is under
development and regulatory review after the patent is granted. With regard to a drug for which FDA approval is the first
permitted marketing of the active ingredient, the Hatch-Waxman Act allows for extension of the term of one U.S. patent
that includes at least one claim covering the composition of matter of an FDA-approved drug, an FDA-approved method of
treatment using the drug, and/or a method of manufacturing the FDA-approved drug. The extended patent term cannot
exceed the shorter of five years beyond the non-extended expiration of the patent or 14 years from the date of the FDA
approval of the drug. Some foreign jurisdictions, including Europe and Japan, also have patent term extension provisions,
which allow for extension of the term of a patent that covers a drug approved by the applicable foreign regulatory agency.
In the future, if and when our pharmaceutical products receive FDA approval, we expect to apply for patent term extension
on patents covering those products, their methods of use, and/or methods of manufacture.
21
In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. Companies
typically rely on trade secrets to protect aspects of their business that are not amenable to, or that they do not consider
appropriate for, patent protection. We protect trade secrets, if any, and know-how by establishing confidentiality
agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and
partners. These agreements provide that all confidential information developed or made known during the course of an
individual or entity’s relationship with us must be kept confidential during and after the relationship. These agreements also
generally provide that all relevant inventions resulting from work performed for us or relating to our business and
conceived or completed during the period of employment or assignment, as applicable, shall be our exclusive property. In
addition, we take other appropriate precautions, such as physical and technological security measures, to guard against
misappropriation of our proprietary information by third parties.
Employees
As of December 31, 2023, we had 19 employees, 18 of whom were full-time and one part-time. We have never had a work
stoppage and none of our employees are covered by collective bargaining agreements. We believe our employee relations
are good.
Information About Our Executive Officers
The following table sets forth information as of March 15, 2024 regarding each of our current executive officers:
Name
Rick Pauls ................................................................... 52 President and Chief Executive Officer, Director
Lorianne Masuoka, M.D. ........................................... 62 Chief Medical Officer
Scott Kellen ................................................................ 58 Chief Financial Officer and Secretary
Dominic Cundari ........................................................ 73 Chief Commercial Officer
David Wambeke ......................................................... 40 Chief Business Officer
Julie VanOrsdel Daves, MSHS, CCRP ...................... 50 Senior Vice President, Clinical Development Operations
Age Positions
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 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.
Lorianne Masuoka, M.D. joined DiaMedica as our Chief Medical Officer in January 2024. Prior to joining DiaMedica, Dr.
Masuoka served as the Chief Medical Officer of Epygenix Therapeutics, a clinical-stage pharmaceutical company focused
on the development of new drugs for the treatment of intractable, rare genetic epilepsies from May 2022 through December
2023. Prior to Epygenix, Dr. Masuoka served as an independent clinical development consultant for several
biopharmaceutical companies and as the Chief Medical officer of Marinus Pharmaceuticals From April 2017 through
November 2019. Dr. Masuoka served as the Chief Medical Officer or acting Chief Medical Officer at Invivo Therapeutics,
from March 2015 through July 2017, Cubist Pharmaceuticals (now Merck) from July 2013 through January 2015 and
Nektar Therapeutics from June 2009 through August 2011. Previously, she held various roles of increasing responsibility at
FivePrime Therapeutics (now Amgen) and Chiron (now Novartis). In addition to her executive roles, Dr. Masuoka most
recently served as a Board member at Pfenex Inc. (now Ligand) and served as a Board member at Opiant Pharmaceuticals
(now Indivior). Dr. Masuoka received her medical degree from the University of California, Davis, where she also
completed her residency in neurology. She completed her epilepsy fellowship at Yale University and is board certified by
the American Boards of Psychiatry and Neurology.
22
Scott Kellen joined DiaMedica as our Vice President of Finance in January 2018 and was appointed our Chief Financial
Officer and Secretary in April 2018. Prior to joining DiaMedica, Mr. Kellen served as Vice President and Chief Financial
Officer of Panbela Therapeutics, Inc., formerly known as 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 of Kips 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. Kellen served 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 a Bachelor of Science degree in Business Administration from the University
of South Dakota and is a Certified Public Accountant (inactive).
Dominic Cundari joined DiaMedica as our Chief Commercial Officer in February 2022. Mr. Cundari has over 30 years of
pharmaceutical experience in various commercial roles in high growth markets. Prior to joining DiaMedica, Mr. Cundari
served as an independent commercial strategy and development consultant for Genentech, a global biotechnology company,
since February 2009. From January 1988 to January 2009, Mr. Cundari held a variety of sales and marketing management
positions across multiple medical specialties at Genentech. As Senior Director for the Vascular Franchise, Mr. Cundari was
responsible for shaping commercial strategies, leading product launches in cardiology, pulmonary and neurology specialties
and establishing strategic partnerships with telemedicine companies. Mr. Cundari holds both a Master of Science and
Bachelor of Arts in Psychology from Villanova University.
David Wambeke joined DiaMedica as our Chief Business Officer in April 2023. Prior to joining DiaMedica, Mr. Wambeke
served as Partner and Managing Director of Investment Banking at Craig-Hallum Capital Group, LLC, a growth focused
investment bank. Mr. Wambeke joined Craig-Hallum in May 2007 and was involved in more than one hundred financing
and M&A transactions with a focus on the life sciences and biotech industries. Prior to joining Craig-Hallum, Mr.
Wambeke was enlisted in the U.S. Army and served as an artilleryman and military police officer. During a deployment in
Baghdad, Iraq, in support of Operation Iraqi Freedom, Mr. Wambeke was wounded in combat and awarded the Purple
Heart. Mr. Wambeke received a B.S. from the University of Minnesota.
Julie VanOrsdel Daves, MSHS, CCRP joined DiaMedica as our Senior Vice President, Clinical Development Operations in
September 2022. Prior to joining DiaMedica, Ms. Daves served as the Vice President and Global Head of Clinical
Operations of Sanifit Therapeutics, S.A., a clinical-stage biopharmaceutical company focused on treatments for progressive
vascular calcification disorders, from September 2021 through August 2022. Ms. Daves also served as President and
Principal Consultant at JVD Pharma Consulting, LLC, a consulting services company specializing in clinical operations
and outsourcing, from February 2018 to August 2022. Ms. Daves served as Vice President of Outsourcing and Vendor
Management for Edgewise Therapeutics, Inc., a Nasdaq-listed clinical-stage biopharmaceutical company, from May 2021
to August 2021 and served as Edgewise’s Executive Director and Head of Clinical Operations from April 2020 to May
2021. Prior to Edgewise, from February 2018 to April 2020, Ms. Daves served as Senior Director, Clinical Operations &
Head of Outsourcing for miRagen Therapeutics, Inc., a development-stage biotechnology company. From February 2016 to
February 2018, Ms. Daves served as Global Head and Senior Director of Clinical Vendor Management of Chiltern
International Inc., a contract research organization, and from November 2015 to February 2016, she worked as the Director
of Clinical Operations. Prior to her time at Chiltern, Ms. Daves worked for Array Biopharma, Inc. as the Director of
Clinical Operations & Development Outsourcing from October 2014 to November 2015, as Associate Director of Clinical
Outsourcing and Operations from October 2011 to October 2014, and as Clinical Principal Research Manager from January
2011 to October 2011. Ms. Daves worked as a Senior Manager of Clinical Development for BioCryst Pharmaceuticals, Inc.
from April 2007 to January 2011, a Study Manager and Senior Clinical Research Associate for Cellgate Pharmaceuticals,
Inc., from July 2006 to April 2007, and as a Clinical Project Manager for Inveresk/Charles River Clinical/Kendle from
December 2002 to February 2005. Ms. Daves is a certified clinical research professional and received her MSHS in Clinical
Research Administration from The George Washington University School of Medicine and Health Sciences and BS in
Zoology from North Carolina State University.
Available Information
We are a corporation governed under British Columbia’s Business Corporations Act (BCBCA). Our company was initially
incorporated pursuant to The Corporations Act (Manitoba) by articles of incorporation dated January 21, 2000. Our articles
were subsequently amended several times, including on April 11, 2016 to continue the Company from The Corporations
Act (Manitoba) to the Canada Business Corporations Act (CBCA) and on May 31, 2019, to continue our existence from a
corporation incorporated under the CBCA into British Columbia under the BCBCA.
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Our registered office is located at 301-1665 Ellis Street, Kelowna, British Columbia, Canada V1Y 2B3 and our principal
executive office is located at our wholly owned subsidiary, DiaMedica USA Inc., located at 301 Carlson Parkway, Suite
210, Minneapolis, Minnesota, USA 55305. Our telephone number is 763-496-5454. Our internet website address 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, and any 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 reasonably practicable 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 at www.sec.gov.
Item 1A. Risk Factors
Below are the material factors known to us that could materially adversely affect our business, operating results, financial
condition, prospects or share price. The summary of risk factors is not complete and should be read in conjunction with the
more complete and detailed descriptions of risk factors that follow. Risks and uncertainties not currently known to us or
that we currently deem to be immaterial also may materially adversely affect our business, operating results, financial
condition, prospects or share price.
Risk Factors Summary
Risks Related to Our ReMEDy2 Trial, Future Clinical Trials and DM199 Product Candidate
● We have had and may continue to have difficulty engaging clinical trial sites for, or enrolling patients in, the trial
or we may experience other clinical testing delays or setbacks, which would delay our ability to obtain regulatory
approval for DM199 to treat AIS and commercialize it, or partner with a third party to obtain regulatory approval
for or commercialization of DM199 to treat AIS, which would substantially harm our business and prospects.
● The COVID-19 pandemic adversely impacted hospital and medical facilities, causing, among other things, staffing
shortages, which have previously delayed site activations and patient enrollments in our ReMEDy2 trial and could
continue to adversely affect the trial.
● The adaptive design of our ReMEDy2 trial could result in the trial being required to enroll more patients than
anticipated, increasing the time and costs to complete the trial, which may require additional funding that may not
be available to us on acceptable terms or at all.
● If our ReMEDy2 trial fails to adequately demonstrate the safety and efficacy of DM199 to treat AIS, we will not
be able to obtain the regulatory approvals required to market and commercialize DM199 to treat AIS, which would
substantially harm our business and prospects.
● We may be required to suspend, repeat or terminate our ReMEDy2 trial or future clinical trials if they are deemed
not conducted in accordance with regulatory requirements, the results are negative or inconclusive, or the trial is
not well designed.
Risks Related to Our Financial Position and Need for Additional Capital
● Since we have no revenue from product sales and do not expect any revenue from product sales for at least three or
four years, we will likely need additional funding to continue our clinical development activities and other
operations, which may not be available to us on acceptable terms, or at all.
● We have incurred substantial losses since our inception and expect to continue to incur substantial losses for at
least three or four years and may never become profitable, or if achieved, be able to sustain profitability.
● Adverse developments with respect to the stability of financial institutions we do business with, or unstable
banking, credit and/or capital market conditions generally, or the perception thereof, could adversely affect our
ability to access our cash on deposit with financial institutions, obtain additional financing, or meet our liquidity
requirements.
Risks Related to Governmental and Regulatory Compliance and Approvals
● The regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future
partner or collaborator from obtaining approvals for the commercialization of DM199 or any future product
candidate.
● Any product candidate for which we or any future partner or collaborator obtains marketing approval could be
subject to post-marketing restrictions or recall or withdrawal from the market, and we may be subject to penalties
if we fail to comply with regulatory requirements or if we experience unanticipated problems with the product
candidate.
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Risks Related to Our Reliance on Third Parties
● We rely on third parties to support the planning, execution and/or monitoring of our preclinical and clinical trials,
and their failure to perform as required could cause delays in completing our product development and
substantially harm to our business.
● We rely on contract manufacturers over whom we have limited control.
● Future development collaborations are expected to be important to us.
Risks Related to Intellectual Property
● We could lose important intellectual property rights that we currently license from a third party if we fail to
comply with our obligations under the license agreements under which we license intellectual property rights from
this third party or otherwise experience disruptions to our business relationships with our licensor.
● We may be unable to adequately protect our technology and enforce our intellectual property rights.
● We or a future partner may require additional third-party licenses to effectively develop, manufacture and
commercialize DM199, or any future product candidate, and such licenses might not be available on commercially
acceptable terms, or at all.
● Changes in patent law and its interpretation could diminish the value of our patents.
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Intellectual property litigation may be expensive, time consuming and may cause delays in the development,
manufacturing and commercialization of DM199 or any future product candidate.
Risks Related to Human Capital Management
● We rely heavily on the capabilities and experience of our key executives, clinical personnel and advisors and the
loss of any of them could affect our ability to develop DM199 or any future product candidate.
● We will likely need to expand our operations and increase the size of our Company and we may experience
difficulties in managing our growth.
Risks Related to the Future Commercialization of DM199 or Any Future Product Candidate
● The successful commercialization of DM199 or any future product candidate, if approved, will depend on
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achieving market acceptance and we may not be able to gain sufficient acceptance to generate significant revenue.
If we fail to obtain coverage and adequate reimbursement for DM199 or any future product candidate, its revenue-
generating ability will be diminished and there is no assurance that the anticipated market for the product will
develop or be sustained.
● We or any future partner will likely face competition from other biotechnology and pharmaceutical companies,
many of which have substantially greater resources than us.
● Our DM199 product candidate may face competition sooner than expected.
Risks Related to Our Common Shares
● Our common share price has been volatile and may continue to be volatile.
● We do not have a history of a very active trading market for our common shares.
● We may issue additional common shares resulting in share ownership dilution.
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If there are substantial sales of our common shares or the perception that such sales may occur, the market price of
our common shares could decline.
Risks Related to Our Jurisdiction of Organization
● 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 the United States.
● We were classified as a “passive foreign investment company” for 2022 and 2023 and may continue to be in future
taxable years, which may have adverse U.S. federal income tax consequences for U.S. shareholders and adversely
affect the level of interest in our common shares by U.S. investors.
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Risks Related to Our ReMEDy2 Trial, Future Clinical Trials and DM199 Product Candidate
We have had and may continue to have difficulty engaging clinical trial sites for, or enrolling patients in, our ReMEDy2
trial or we may experience other clinical testing delays or setbacks, which would delay our ability to obtain regulatory
approval for DM199 to treat AIS and commercialize it, or partner with a third party to obtain regulatory approval for or
commercialization of DM199 to treat AIS, which would substantially harm our business and prospects.
We have had and may continue to have difficulty engaging clinical trial sites for, and enrolling patients in, the ReMEDy2
trial, which could delay the completion of the trial. Concerns regarding the prior clinically significant hypotension events
and circumstances surrounding the clinical hold which was lifted in June 2023 may add to these difficulties. In addition, it
is possible that we may experience other clinical testing delays or setbacks, which would further delay the completion of
the ReMEDy2 trial. Our product development costs will increase if we experience delays in clinical testing. Significant
clinical trial delays could not only extend the time period for obtaining regulatory approval of DM199 to treat AIS, but also
shorten any periods during which we or a future partner may have the exclusive right to commercialize DM199 to treat AIS
or allow our competitors to bring competitive products to market before us, which would impair the ability to successfully
commercialize DM199 and may harm our financial condition, results of operations and prospects. The ReMEDy2 trial may
be delayed for a number of reasons, including among others:
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concerns regarding the prior clinically significant hypotension events and circumstances surrounding the clinical
hold which was lifted in June 2023;
patients choosing to participate in competing clinical trials or not at all;
scheduling conflicts with participating clinicians and clinical sites;
complexities in setting up and coordinating with sites that are located outside the United States and additional
risks involved in a trial that is being conducted, in part, outside the United States;
suspension or termination of the ReMEDy2 trial by regulators for any reason, including concerns about patient
safety or failure of our contract manufacturers to comply with current Good Manufacturing Practices (cGMP)
requirements;
any changes to our manufacturing process that may be necessary or desired which affect our ability to produce
adequate or timely clinical drug supply;
delays or failure to obtain clinical drug supply of DM199 from contract manufacturers necessary to conduct
clinical trials;
our DM199 product candidate demonstrating a lack of safety or efficacy at the planned interim analysis of the
ReMEDy2 trial;
patients failing to enroll or complete the ReMEDy2 trial at the rates and within the timelines we expect due to
dissatisfaction with the treatment, side effects or other reasons;
clinical investigators not performing the ReMEDy2 trial on their anticipated schedule, dropping out of a trial or
employing methods not consistent with the clinical trial protocol and regulatory requirements or other third parties
not performing data collection and analysis in a timely or accurate manner;
inspections of our clinical trial sites by regulatory authorities, Institutional Review Boards (IRBs) or ethics
committees finding regulatory violations that require us to undertake corrective action, resulting in suspension or
termination of one or more sites or the imposition of another clinical hold on the IND for our ReMEDy2 trial; or
public health crises, epidemics or pandemics, such as COVID-19, which may adversely impact our ability to
engage and activate clinical trial sites, recruit or enroll subjects for our ReMEDy2 trial or any future trial and
obtain the requisite staffing for our ReMEDy2 trial or any future trial.
Our product development costs may also increase 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 trial protocols or alter
our manufacturing processes to reflect these changes. Amendments typically require us to resubmit our trial protocols to
regulatory authorities and IRBs or ethics committees for re-examination, which may impact the cost, timing or successful
completion of our ReMEDy2 trial. Delays or increased product development costs or any of these events would likely have
a material adverse effect on our business, financial condition, and prospects.
The COVID-19 pandemic adversely impacted hospital and medical facilities, causing, among other things, staffing
shortages, which have previously delayed site activations and patient enrollments in our ReMEDy2 trial and could
continue to adversely affect the trial.
COVID-19 has had, and may continue to have, a severe effect on the clinical trials of many drug candidates, including our
ReMEDy2 trial. Prior to the clinical hold of our ReMEDy2 trial, we experienced challenges with engaging and activating
clinical trial sites. We believe this was due primarily to clinical staff shortages resulting from layoffs and employee
burnout, the reallocation of clinical nurses to COVID-19 care, particularly during surges in COVID-19 cases, a loss of
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study coordinators resulting from budget constraints and COVID-19 vaccination requirements. Hospital study sites have
been especially impacted by these factors. Additionally, prior to the clinical hold of our ReMEDy2 trial, we experienced
slower than expected enrollments in the trial due to these factors and patient concerns related to visiting clinical trial sites or
being visited by clinical study nurses. In an effort to mitigate the impact of these factors, we have worked with our contract
research organization to develop alternative procedures to support study sites and potential participants as needed. We
intend to continue to monitor the results of these efforts or implement additional actions to mitigate the impact of these
factors on our ReMEDy2 trial. It is also possible that these efforts may draw our employees away from their core
responsibilities and create additional expenses, which may adversely affect our business and results of operations. Note
however that these efforts may not be effective if patients are unwilling to enroll in our ReMEDy2 trial. We anticipate that
COVID-19, and variants of COVID-19, will likely continue to adversely affect our ability to initiate new clinical trial sites
and recruit or enroll subjects, and we cannot provide any assurance that we will be able to resolve these issues. Although
the severity of the COVID-19 virus has decreased significantly during the past two years, the extent to which COVID-19
may impact our ReMEDy2 trial will depend on future developments, which are highly uncertain and cannot be predicted
with confidence, such as the emergence of new variants, the duration and severity of each variant, and the effectiveness of
actions to contain, treat and prevent COVID-19, including the availability, effectiveness and acceptance of vaccines and
vaccine booster shots. The resurgence of COVID-19 caused by any new variants in the future or another pandemic could
cause us to experience continued and/or additional disruptions that could severely impact our ReMEDy2 trial, as well as
our business.
The adaptive design of our ReMEDy2 trial could result in the trial being required to enroll more patients than
anticipated, increasing the time and costs to complete the trial, which may require additional funding that may not be
available to us on favorable terms or at all.
Our ReMEDy2 trial is currently targeted to enroll approximately 350 patients at up to 100 sites globally. However, with the
trial’s adaptive design, it is possible that the number of patients required to complete the trial may increase significantly. If
we are required to enroll more patients than currently anticipated, it will increase the time and costs to complete the trial,
which may result in a need for additional funding that may not be available to us on acceptable terms, or at all.
If our ReMEDy2 trial fails to adequately demonstrate the safety and efficacy of DM199 to treat AIS, we will not be able
to obtain the regulatory approvals required to market and commercialize the product, which would substantially harm
our business and prospects.
Before obtaining marketing approval from regulatory authorities for the sale of DM199 to treat AIS, we must demonstrate
the safety and efficacy of DM199 to treat AIS to a level acceptable to the FDA or similar regulatory bodies other
jurisdictions. Clinical testing is expensive and difficult to design and implement, can take many years to complete and has
uncertain outcomes. The outcome of preclinical trials and early clinical trials may not predict the success of later clinical
trials, and the interim results of ReMEDy2 may not necessarily predict final results. A number of companies in the
pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of
efficacy or unacceptable safety profiles, including the emergence of undesirable side effects, notwithstanding promising
results in earlier trials. We do not know whether our ReMEDy2 trial by itself will demonstrate adequate efficacy and safety
to support regulatory approvals to market DM199 to treat AIS in the United States, or in any jurisdiction, or that a second
confirmatory trial will be required. A product candidate may fail for safety or efficacy reasons at any stage of the testing
process. In addition, the patient populations in our current clinical trial for DM199, and anticipated future clinical trials for
DM199, often have co-morbidities that may cause severe illness or death, which may be attributed to DM199 in a manner
that negatively affects the safety profile of our DM199 product candidate. If the results of our ReMEDy2 trial are
inconclusive with respect to efficacy, if we do not meet our clinical endpoints with statistical significance or if there are
unanticipated safety concerns or adverse events that emerge during the ReMEDy2 trial or other clinical trials, such as the
events that caused the FDA to place the prior clinical hold on the IND for our ReMEDy2 trial, we may be prevented from
or delayed in obtaining marketing approval, and even if we obtain marketing approval, any sales of DM199 for the
treatment of AIS may be limited.
We may be required to suspend, repeat or terminate our ReMEDy2 trial or other clinical trials if they are deemed not
conducted in accordance with regulatory requirements, the results are negative or inconclusive or the trial is not well
designed.
Clinical trials must be conducted in accordance with the FDA’s current Good Clinical Practice (cGCP) requirements, or
analogous requirements of applicable foreign regulatory authorities, and designed to provide statistically significant
evidence predictive of patient benefit. Clinical trials are subject to oversight by the FDA, other foreign governmental
agencies and IRBs or ethics committees at the trial sites where the clinical trials are conducted. In addition, clinical trials
must be conducted with product candidates produced in accordance with applicable cGMP. Clinical trials may be
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suspended by us or by the FDA, other foreign regulatory authorities or by an IRB or ethics committee with respect to a
particular 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 trial protocols;
● deficiencies in the clinical trial operations or trial sites;
● unforeseen adverse side effects or the emergence of undue risks to trial subjects;
● deficiencies in the trial design necessary to demonstrate efficacy;
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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 not successfully or cost-effectively design and implement clinical trials
that achieve our desired clinical endpoints. A clinical trial that is not well designed or that yields unforeseen adverse side
effects or undue risks to trial subjects may delay or even prevent initiation of the trial, can lead to increased difficulty in site
activations and enrolling patients, may make it more difficult to obtain regulatory approval for the product candidate on the
basis of the trial results or, even if a product candidate is approved, could make it more difficult to commercialize the
product successfully or obtain reimbursement from third party payers. Additionally, a trial that is not well designed or that
yields unforeseen adverse side effects or undue risks to trial subjects could be delayed and more expensive than it otherwise
would have been, or we may incorrectly estimate the costs to complete the clinical trial, which could lead to a shortfall in
funding. We can provide no assurance that our ReMEDy2 trial or any other clinical trial conducted by us has been or will
be designed and implemented successfully or achieve its desired clinical endpoints.
Our prospects depend on the clinical and commercial success of our DM199 product candidate which is in the clinical
stage of development.
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 clinical trials, for the treatment of AIS and
CRD. DM199 requires significant additional clinical testing and investment prior to seeking marketing approval. A
commitment of substantial resources by ourselves and any potential partner or collaborator to continue to conduct the
clinical trials for DM199 will be required to obtain required regulatory approvals and successfully commercialize this
product candidate. Although we intend to study the use of DM199 to treat multiple diseases, we have no other product
candidates in our current clinical development pipeline, with the exception of our new product candidate, DM300, which is
in the early, preclinical stage of development and is intended to treat other inflammatory diseases, such as acute
pancreatitis. Our ability to generate revenue from product sales and to achieve commercial success with DM199 will
depend almost entirely on our ability to demonstrate sufficient safety and efficacy to obtain regulatory approval for DM199.
We may fail to complete required clinical trials successfully and not be able to obtain regulatory approvals or
commercialize DM199. Competitors may develop alternative products and methodologies to treat the diseases or
indications that we are pursuing, thus reducing or eliminating the anticipated competitive advantages of DM199. We do not
know whether any of our product development efforts will prove to be effective, meet applicable regulatory standards
required to obtain the requisite regulatory approvals, be capable of being manufactured at a reasonable cost or be
successfully marketed. DM199 is not expected to be commercially viable for at least three or four years. In addition,
although the only significant adverse events that have occurred to date in our clinical trials have been three unexpected
instances of transient, clinically significant, hypotension (low blood pressure), it is possible that DM199 may be observed
to cause undesirable side effects. Results of early preclinical and clinical research may not be indicative of the results that
will be obtained in later stages of clinical research. If regulatory authorities do not approve DM199 for the treatment of AIS
or any other indications, or if we fail to maintain regulatory compliance, we would be unable to commercialize DM199 and
our business and results of operations would be harmed. If we do succeed in developing viable products from DM199, we
will face many potential future obstacles, such as the need to develop or obtain manufacturing, sales and marketing and
distribution capabilities.
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The clinical success and commercial potential of our DM199 product candidate will depend on a number of factors,
many of which are beyond our control.
The clinical success and commercial potential of our DM199 product candidate to treat AIS or any other indication will
depend on a number of factors, many of which are beyond our control, including, among others:
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the timely initiation, continuation and completion of clinical trials, including our Phase 2/3 ReMEDy2 trial
and future clinical trials for DM199, which will depend substantially upon 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 and/or third-party payers;
● whether we are required by the FDA or other regulatory authorities to conduct additional clinical trials, and
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the scope and nature of such clinical trials, prior to or after approval to market our DM199 product candidate;
the timely receipt of necessary marketing approvals from the FDA and foreign regulatory authorities, as well
as achieving adequate pricing and reimbursement determinations;
the ability to successfully commercialize DM199, if approved by the FDA or foreign regulatory authorities,
whether alone or in collaboration with others;
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● our ability and the ability of third-party manufacturers to manufacture the quantities of DM199, with quality
attributes necessary to meet regulatory requirements, sufficient to meet anticipated demand and at a cost that
allows us or a future partner to achieve profitability;
acceptance of DM199, if approved, as safe and effective by patients and healthcare providers;
the achievement and maintenance of compliance with all regulatory requirements applicable to DM199 by us
and our third-party manufacturers and supporting vendors;
the maintenance of an acceptable safety profile of DM199 following any approval;
the availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and
competitive treatments;
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● our ability to provide approved product with an acceptable patient administration method;
● our ability or the ability of a future partner to successfully enforce our intellectual property rights for DM199;
and
● our ability to avoid or succeed in defending any third-party patent interference or patent infringement claims.
In addition, because the plastic bags we use in the IV administration of DM199 are made of PVC, certain countries have
banned or limited the use of PVC in a manner that, unless we are able to find an alternative, may limit the salability of
DM199 in certain countries, thereby decreasing our worldwide market opportunity. 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
future partners or collaborators are not successful in obtaining approval for and commercializing DM199, or are delayed in
completing those efforts, our business and operations would be substantially harmed.
Risks Related to Our Financial Position and Need for Additional Capital
Since we currently have no revenue from product sales and do not expect any revenue from product sales for at least
three or four years, we will need additional funding to continue our clinical development activities and other operations,
which may not be available to us on acceptable terms, or at all.
We expect we will need substantial additional capital to further our R&D activities, planned clinical trials and regulatory
activities and to otherwise develop our DM199 product candidate to a point where it may be commercially sold. We expect
our current cash resources of $52.9 million in cash, cash equivalents and marketable securities as of December 31, 2023 to
be sufficient to allow us to continue our Phase 2/3 trial in patients with AIS and to otherwise fund our planned operations
for at least the next 12 months from the date of issuance of the financial statements included in this report. However, the
amount and timing of our future funding requirements will depend on many factors, including, among others:
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the rate of progress in the development of and the conduct of clinical trials with respect to DM199 or any
future product candidates;
the timing and results of our ongoing development efforts, including in particular our Phase 2/3 ReMEDy2
trial;
the costs of our development efforts, including the conduct of clinical trials with respect to DM199 or any
future product candidates;
the costs associated with identifying additional product candidates and the potential expansion of our current
development programs or potential new development programs;
the costs necessary to obtain regulatory approvals for DM199 or any future product candidates;
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● the costs of developing and validating manufacturing processes for DM199 or any future product candidates;
● the costs associated with being a U.S. public reporting company with shares listed on The Nasdaq Capital
Market;
● the costs we incur in the filing, prosecution, maintenance and defense of our intellectual property; and
● the costs related to general and administrative 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 such time. We may elect to raise additional funds even before we need them if
circumstances or 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, interest income on funds available for investment and government grants and tax
incentives. We expect to continue this practice for the foreseeable future. We do not have any 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, or through strategic collaborations and license agreements. We can give no assurances that we will be able to
secure additional sources of funds to support our operations, 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 if we experience
additional adverse events, if our clinical data is not positive, or economic and market conditions deteriorate.
Although we previously have been successful in obtaining financing through our equity securities offerings, there can be no
assurance that we will be able to do so in the 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 as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through
government or other third-party funding, marketing and distribution arrangements or other collaborations or strategic
alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future
revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. It is
possible that financing will not be available or, if available, may not be on favorable terms. The availability of financing
could be affected by many factors, including, among others:
● the results of our clinical trials and other scientific and clinical research;
● our ability to obtain regulatory approvals;
● market acceptance of DM199 or any future product candidates;
● the state of the capital markets generally with particular reference to pharmaceutical, biotechnology and
medical companies;
● various events outside our control, including without limitation geopolitical events, such as the current war
between Russia and Ukraine and the conflict between Israel and Hamas;
● the status of strategic alliance agreements; 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 DM199 or future product candidates or
obtain funds on less favorable terms than we would otherwise accept; and/or divest assets or cease operations through a
merger, sale or liquidation of our Company.
We have incurred substantial losses since our inception and expect to continue to incur substantial losses for at least
three or four years and may never become profitable, or if achieved, be able to sustain profitability.
We are a clinical stage biopharmaceutical company focused on the development of our DM199 product candidate.
Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront financial
expenditures and significant risk that a product candidate will fail to prove effective, gain regulatory approval or become
commercially viable. Additionally, there has been a general decline in the biotech sector since February 2021, which has
further increased the risks associated with investment in biopharmaceutical product development. We do not have any
products approved by regulatory authorities and have not generated any revenues from product sales to date, and do not
expect to generate any revenue from the sale of products for at least three or four years. We have incurred significant R&D
and other administrative expenses related 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 losses in every reporting period since our
inception. For the years ended December 31, 2023 and 2022, we incurred a net loss of $19.4 million and $13.7 million,
respectively. As of December 31, 2023, we had an accumulated deficit of $115.6 million. Our prior losses, combined with
expected future losses, have had and will continue to have an adverse effect on our shareholders’ equity and working
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capital. We expect to continue to incur substantial operating losses as we continue our R&D activities, planned clinical
trials, including our Phase 2/3 ReMEDy2 trial, regulatory activities and other administrative expenses and to support the
development of DM199 or any future product candidate to a point where it can be out-licensed or receives required
regulatory approvals and may be commercially sold and we begin to recognize future product sales, or receive royalty
payments, licensing fees and/or milestone payments sufficient to generate revenues to fund our continuing operations. We
expect our operating losses to increase in the near term as we continue development of DM199 and the clinical trials
required to seek regulatory approval for DM199, or any future product candidate. We are unable to predict the extent of any
future losses or when we will become profitable, 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, continue to develop DM199, or any future
product candidate, expand our business and product offerings or continue our operations. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on an ongoing basis.
Adverse developments with respect to the stability of financial institutions we do business with, or unstable banking,
credit and/or capital market conditions generally, or the perception thereof, could adversely affect our ability to access
our cash on deposit with financial institutions, obtain additional financing, or meet our liquidity requirements.
Potential future disruptions in access to bank deposits or lending commitments due to bank failure, could materially and
adversely affect our liquidity, our business, financial condition and stock price. The early 2023 closures of Silicon Valley
Bank, Signature Bank and First Republic Bank and their placement into receivership with the Federal Deposit Insurance
Corporation (FDIC) created bank-specific and broader financial institution liquidity risk and concerns. Although the
depositors at these financial institutions have continued to have access to their funds, even those in excess of the standard
FDIC insurance limits, future adverse developments with respect to specific financial institutions or the broader financial
services industry may lead to market-wide liquidity shortages. Although we did not have deposits at Silicon Valley Bank,
Signature Bank or First Republic Bank, the failure of any bank in which we deposit our funds could reduce the amount of
cash we have available for our operations or delay our ability to access such funds. Any such failure may increase the
possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or
custodial financial institutions. In the event we have a commercial relationship with a bank that has failed or is otherwise
distressed, we may experience delays or other issues in meeting our financial obligations. If other banks and financial
institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking
system and financial markets, our ability to access our cash and cash equivalents and investments may be threatened and
could have a material adverse effect on our business and financial condition. In addition, the ability of our suppliers,
vendors, and others in which we do business to access their cash and cash equivalents and investments or to obtain any
necessary financing to continue their respective businesses could be threatened, which in turn, could harm our business.
Risks Related to Governmental and Regulatory Compliance and Approvals
The regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future partner
or collaborator from obtaining approvals for the commercialization of DM199 or any future 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 vary substantially based upon a variety of factors, including the type, complexity and
novelty of the product candidate involved. Our DM199 or any future product candidate, and the activities associated with
their development and commercialization, including design, research, testing, manufacture, quality control, recordkeeping,
labeling, packaging, storage, advertising, promotion, sale, distribution, import, export and reporting of safety and other
post-market information, are subject to comprehensive regulation by the FDA, the EMA and other similar foreign
regulatory agencies. Failure to obtain marketing approval for DM199 or any future product candidate will prevent us or any
future partner or collaborator from commercializing the product candidate. We have only limited experience in filing and
supporting the applications necessary to gain marketing approvals and expect to rely on a future partner, collaborator or
third-parties to assist us in this process. Securing marketing approval requires the submission of extensive preclinical 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, the regulatory authorities. The FDA, EMA or other
regulatory authorities may determine that DM199 or any future product candidate may not be effective, may be only
moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may
preclude our obtaining marketing approval or prevent or limit its commercial use. One issue of which we are aware is that
because the plastic bags we use in the IV administration of DM199 are made of PVC, certain countries have banned or
limited the use of PVC in a manner that may limit our ability to conduct the trails in such countries, or in the future in the
event we are able to obtain required regulatory approvals, may limit the salability of DM199 in certain countries, thereby
decreasing our worldwide market opportunity. Additionally, the regulatory approval process and requirements can change
substantially based on amendments to federal regulations, new or amended FDA guidance documents governing the
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regulatory approval process, and even changes in FDA approval priorities based on the government administration as was
recently seen in response to the COVID-19 pandemic. As a result, any marketing approval we ultimately obtain may be
limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
Our or any future partner’s inability to obtain regulatory approval for DM199 or any future product candidate, or if such
approval is limited, could substantially harm our business.
Any product candidate for which we or any future partner or collaborator obtains marketing approval could be subject
to post-marketing restrictions or recall or withdrawal from the market, and we may be subject to penalties if we fail to
comply with regulatory requirements or if we experience unanticipated problems with the product candidate.
The FDA and other federal and state agencies, including the U.S. Department of Justice (DOJ), closely regulate compliance
with all requirements governing prescription drug products, including requirements pertaining to marketing and promotion
of drugs in accordance with the provisions of the approved labeling and manufacturing of products. The FDA and DOJ
impose stringent restrictions on manufacturers’ communications regarding off-label use, , sales and marketing activities,
transparency laws, and reimbursement obligations, which restrictions can change substantially based on new and/or
amended government interpretations of regulatory priorities, new and/or amended federal regulations, and other external
forces. If we do 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 to investigations alleging violations of the FDCA and other
statutes, including the False Claims Act, the Anti-Kickback Statute, the Sunshine Act and other federal and state health care
fraud and abuse laws, as well as state consumer protection laws.
Our or any future partner’s failure to comply with all regulatory requirements, or the later discovery of previously unknown
adverse events or other problems with our products, manufacturers or manufacturing 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;
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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 then current or potential partners;
unfavorable press coverage and damage to our or any future partner’s 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 partner or collaborator with regulatory requirements regarding ongoing safety
monitoring, or pharmacovigilance, and with requirements related to the development of products, can also result in
significant financial penalties. Similarly, failure to comply with regulatory requirements regarding the protection of
personal information can also lead to significant penalties and sanctions.
We may be unable to obtain FDA acceptance of INDs to commence future clinical trials in the United States or on the
timelines we expect, and even if we are able to, the FDA may not permit us to proceed in a timely manner.
Prior to commencing additional clinical trials in the United States for DM199 or any future product candidate, we will be
required to have an accepted IND for each product candidate and for each targeted indication. In April 2021, we filed, and
in May 2021, the FDA accepted, an IND for the Phase 2/3 ReMEDy2 trial in patients with AIS. However, in July 2022, the
FDA imposed a clinical hold on the IND under which we are conducting our Phase 2/3 ReMEDy2 trial, which clinical hold
was subsequently lifted in June 2023. A submission of an IND may not necessarily result in the FDA allowing further
clinical trials to begin and, once begun, issues, such as clinical holds, may arise that will require us to suspend or terminate
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such clinical trials. Additionally, even if relevant regulatory authorities agree with the design and implementation of the
clinical trials set forth in an IND, these regulatory authorities may change their requirements in the future. Failure to obtain
acceptance of any future INDs may cause the development of DM199 or any future product candidate to be delayed or
terminated, which could materially and adversely affect our business and prospects.
We have received Fast Track designation for DM199 for the treatment of AIS, and we may seek such designation for
other uses of DM199 or future product candidates. Fast Track designation may not lead to faster development or a
faster FDA review or approval process, and it does not increase the likelihood that DM199 will receive marketing
approval in the United States. Further, there is no guarantee we will be able to maintain such designation.
In September 2021, we received Fast Track designation from the FDA for DM199 for the treatment of AIS where tPA
and/or mechanical thrombectomy are not indicated or medically appropriate. The FDA may grant Fast Track designation to
a drug that is intended to treat a serious condition and nonclinical or clinical data demonstrate the potential to address
unmet medical need. The FDA provides opportunities for more frequent interactions with the review team for a Fast Track
product, including pre-IND meetings, end-of-phase 1 meetings and end-of-phase 2 meetings with the FDA to discuss study
design, extent of safety data required to support approval, dose-response concerns and use of biomarkers. A Fast Track
product may also be eligible for rolling review, where the FDA reviews portions of a marketing application before the
sponsor submits the complete application.
However, Fast Track designation for DM199 may not result in a faster development process or a faster review or approval
compared to products considered for approval under conventional FDA procedures and does not assure ultimate approval
by the FDA. Any delay in the review process or in the approval of DM199 will delay revenue from potential sales and will
increase the capital necessary to fund our development programs and operations. In addition, the FDA may rescind the Fast
Track designation for DM199 if the FDA later determines that DM199 no longer meets the qualifying criteria for Fast
Track designation.
Current and future legislation may increase the difficulty and cost for us and any future partner or collaborator to
obtain marketing approval of and commercialize DM199 or any future product candidate and affect the prices we may
obtain.
In the United States and many foreign jurisdictions, there have been a number of legislative and regulatory changes and
proposed changes regarding the healthcare system and data privacy that could prevent or delay marketing approval of
DM199 or any future product candidate, restrict or regulate post-approval activities and affect our ability to profitably sell
DM199 or any future product candidate for which we obtain marketing approval.
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 of containing healthcare costs, improving quality and/or expanding access. For
example, the Affordable Care Act (“ACA”) enacted in the United States in 2010, and principally taking effect in 2014,
included measures to change health care delivery, decrease the number of individuals without insurance, ensure access to
certain basic health care services and contain the rising cost of care. This healthcare reform movement, including the
enactment of the ACA, has significantly changed health care financing by both governmental and private 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 and government health care programs, fees for the manufacture or
importation of certain branded drugs and transparency reporting requirements under the Physician Payments Sunshine Act.
In addition to the ACA, other federal health reform measures have been proposed and adopted in the United States. 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 additional downward pressure on the price that we may receive for any product, if approved.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in
payments from private payers.
The U.S. federal government has prioritized and will likely continue to prioritize policies targeting reducing drug prices and
healthcare spending and are committed to lowering spending in federal government programs. The Inflation Reduction Act
of 2022, which was signed into law on August 16, 2022, includes provisions aimed at lowering prescription drug costs for
Medicare patients and reducing the federal government’s spending on prescription drugs by requiring certain prescription
drug prices to be negotiated directly with the government, certain rebates to be paid by prescription drug companies, and
certain spending caps to be implemented, among other measures. The implementation of cost containment measures or
other healthcare reforms may prevent us or a future partner from being able to generate sufficient revenue, attain
profitability or even commercialize at all DM199 or any future product candidate.
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Future legislation in the United States, Europe or other countries, and/or regulations and policies adopted by the FDA,
the EMA or comparable regulatory authorities, may increase the time and cost required for us or any future partners or
collaborators to conduct and complete clinical trials of our current or any future product candidates.
The FDA and the European Medicines Agency (EMA) have each established regulations to govern the drug product
development and approval process, as have other foreign regulatory authorities. The policies 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, the EMA issued Annex 1: the Manufacture of Sterile
Medicinal Products which was effective August 15, 2023, intended to update standards to reflect change in regulatory and
manufacturing environments and to remove ambiguity and inconsistencies in regulations governing the manufacture of
sterile medicinal products.. We cannot predict what if any effect the Cures Act, Annex 1 or any existing or future guidance
from the FDA, EMA or other regulatory authorities will have on the development of DM199 or any future product
candidate.
Risks Related to Our Reliance on Third Parties
We rely and will continue to rely on third parties to support the planning, execution and/or monitoring of our preclinical
and clinical trials, and their failure to perform as required could cause delays in completing our product development
and 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 in vivo studies in specific disease models, pharmacology and
toxicology studies and assay development. Clinical development activities include trial design, regulatory submissions,
clinical site and patient recruitment, clinical trial monitoring, clinical data management and analysis, safety monitoring and
project management. If there is any dispute 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, including as a result of staffing disruptions, our
development programs may face delays. Further, if any of these third parties fail to perform as we expect or if their work
fails to meet regulatory requirements, our clinical testing could be delayed, cancelled or rendered ineffective. This
happened to us in the past and resulted in us commencing litigation against Pharmaceutical Research Associates Group
B.V., which was acquired by ICON plc in July 2021 (PRA Netherlands), as a result of its handling of a double-blinded,
placebo-controlled, single-dose and multiple-dose study to evaluate the safety, tolerability, pharmacokinetics,
pharmacodynamics and proof of concept of DM199 in healthy subjects and in patients with Type 2 diabetes mellitus, as
described later in this report, and could happen again.
We rely on contract manufacturers over whom we have limited control. If we are subject to quality, cost or delivery
issues with the materials supplied by these or future contract manufacturers, we may be unable to produce adequate
supplies of DM199 or any future product candidate, and our clinical and business operations could suffer significant
harm.
Completion of our clinical trials and commercialization of our DM199 product candidate and any future product candidate
require access to, or development of, facilities to manufacture our product candidates at sufficient yields and, ultimately,
assuming approval, at commercial scale. Clinical and commercial drug product must be produced under applicable cGMP
regulations. Failure of our CMOs to comply with these regulations may require us to repeat clinical trials, which would
delay the regulatory approval process. We rely on CMOs for manufacturing, filling, labeling, packaging, storing and
shipping DM199 in compliance with applicable cGMP regulations. The FDA and other regulatory agencies ensure the
quality of drug products by carefully monitoring drug manufacturers’ compliance with cGMP regulations.
As a company, we have no direct experience in manufacturing or managing third parties in manufacturing our DM199
product candidate in the volumes that are expected to be necessary to support commercialization, if DM199 is approved.
Our efforts to establish these capabilities may not meet our requirements as to scale-up, timeliness, yield, cost or quality in
compliance with applicable cGMP regulations. We or any future partner or collaborator or our CMOs may encounter
difficulties in production, which may include the following, among others:
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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 backup suppliers;
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;
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establishment of commercial supply capacity through binding supply agreements or to do so on acceptable terms;
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, which could subject us to an increased regulatory burden and increased costs of
compliance, or other force majeure events that affect CDMO facilities and possibly limit production or cause loss
of product inventory.
We do not have long-term supply agreements with any of our CMOs and we purchase our required supply on an order-by-
order basis. 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 any future product candidate. If we are unable to arrange for alternative
third-party manufacturing sources on commercially reasonable terms or in a timely manner, we may be delayed in the
development of DM199 or any future product candidate. Our dependence upon our current CMOs and any future CMOs for
the manufacture of our product candidates may adversely affect our ability to develop our product candidates in a timely
and competitive basis and, if we or a future partner are able to commercialize our product candidates, may adversely affect
our revenues from product sales and significantly harm our business.
Future development collaborations are expected to be important to us. If we are unable to enter into or maintain these
collaborations, or if these collaborations are not successful, our business could be adversely affected.
In the future, we intend to seek to collaborate with pharmaceutical and biotechnology companies for the development
and/or commercialization of DM199. We face significant competition in seeking appropriate collaborators or partners. Our
ability to reach a definitive agreement for any collaboration will depend, among other things, upon our assessment of the
collaborator’s or partner’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed
collaborator’s or partner’s evaluation of a number of factors. If we are unable to reach agreements with suitable
collaborators or partners on a timely basis, on acceptable terms, or at all, we may have to curtail the development of and/or
seek alternative means to commercialize our DM199 product candidate resulting in, among other things, reducing or
delaying our development program, delaying our potential development schedule or reducing the scope of research
activities. If we fail to enter into one or more collaborations and do not have sufficient funds or expertise to undertake the
necessary development or commercialization activities, we may not be able to continue or further develop DM199 and our
business may be materially and adversely affected.
Future collaborations we may enter into may involve significant risks, including, among others:
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collaborators may have significant discretion in determining the efforts and resources that they will apply to the
collaboration;
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 competing priorities;
collaborators may delay nonclinical or clinical development, provide insufficient funding for product development
of targets selected by us, stop or abandon nonclinical or clinical development for a product candidate, or repeat or
conduct new nonclinical and clinical development for a product candidate;
collaborators could independently develop, or develop with third parties, products that compete directly or
indirectly with our products or product candidates 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 or products, which may cause collaborators to cease to devote resources to the
development of our product candidates;
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the
preferred course of development, might cause delays or termination of the preclinical or clinical development or
commercialization of product candidates, might lead to additional responsibilities 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 proprietary information in such a way as to invite litigation that could jeopardize or
invalidate our intellectual property or proprietary information or expose us to potential 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 pursue further development or commercialization of the applicable product
candidates.
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If a collaborator terminates its agreement with us, we may find it more difficult to attract new collaborators and the way we
are perceived in the business and financial communities could be adversely affected.
If our collaborations do not result in the successful development of DM199, or any future product candidate, development
could be delayed, and we may need additional resources to develop DM199 or any future product candidates. All of the
risks relating to product development, regulatory approval and commercialization described in this report also apply to the
activities of our future collaborators.
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 trial results. If we are unable to enter into and maintain these relationships, our
ability to develop, obtain required regulatory approvals for, and market our DM199 or any future product candidate 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 transfers of value, such as gifts or meals, to surgeons and other healthcare providers could have a chilling
effect on the relationships with individuals or entities that may, among other things, want to avoid public scrutiny of their
financial relationships with us.
Risks Related to Intellectual Property
We could lose important intellectual property rights that we currently license from a third party if we fail to comply with
our obligations under the license agreements under which we license intellectual property rights from this third party or
otherwise experience disruptions to our business relationships with our licensor.
We are a party to a license agreement relating to an expression system and cell line for use in the production of DM199 and
DM300. We may need to obtain additional 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 current or future in-
licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors or other third
parties may gain access to technologies that are material to our business, and we may be required to cease our development
and commercialization of DM199 or other product candidates that we may identify or to seek alternative manufacturing
methods. However, suitable alternatives may not be available or the development of suitable alternatives may result in a
significant delay in our commercialization of DM199. Any of the foregoing could have a material adverse effect on our
competitive position, business, financial condition, results of operations and prospects.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including, among others:
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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 licensing agreement;
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 and our partners; and
the priority of invention of patented technology.
In addition, the agreements under which we currently license intellectual property or technology from a third party are
complex and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any
contract interpretation disagreement that may arise could narrow what we believe to be the 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
relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of
operations, and prospects. Moreover, if disputes over intellectual property that we have in-licensed prevent or impair our
ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable 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.
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We may be unable to adequately protect our technology and enforce our intellectual property rights and our competitors
may take advantage of our development efforts or acquired technology and compromise our prospects for marketing and
selling DM199 or any future product candidate.
We believe that patents and other proprietary rights are key to our business. Our policy is to file patent applications to
protect technology, inventions and improvements that may be important to the development of DM199 or any future
product candidate. We also rely upon trade secrets, know-how and continuing technological innovations to develop and
maintain our competitive position. We plan to enforce our issued patents and our rights to proprietary information and
technology. We review third-party patents and patent applications, both to refine our own patent strategy and to monitor the
landscape related to our technology.
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 others or 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 our compounds, product candidates and technology,
but we cannot be certain that they will be enforceable or provide adequate protection or that pending patent applications
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 fee for service contracts. Under the contracts, all intellectual property,
technology know-how and trade secrets related to our product candidate arising under such agreements are our exclusive
property and 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 such technologies. Disputes may arise as to the scope of the contract or possible
breach of contract. No assurance can be given that our contracts will be enforceable or would 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 which important legal issues remain unresolved. Therefore, it is not clear whether our pending
patent applications will result in the issuance of patents with commercially meaningful protections or at all, or whether we
will develop additional proprietary products which are patentable. Part of our strategy is based on our ability to secure a
patent position to protect our technology. There is no assurance that we will be successful in this approach and failure to
secure adequate patent protection may have a material adverse effect upon us and our financial condition. 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 of challenges 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 by means of alternate
processes. Furthermore, it is possible for others to develop products that have the same effect as our product candidates or
technologies on an independent basis or to design around technologies patented by us. Patent applications relating to or
affecting our business may have been filed by pharmaceutical or biotechnology companies or academic institutions. Such
applications may conflict with our technologies or patent applications and such conflict could reduce the scope 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 into licensing arrangements on commercially reasonable terms or develop or obtain alternative technology in
respect of patents issued to third parties that incidentally cover our products or production technologies. Any inability to
secure licenses or alternative technology could result in delays in the introduction of some of our product candidates or
even lead to us being prevented from pursuing the development, manufacture or sale of certain products. Moreover, we
could potentially incur substantial legal costs in defending legal actions that allege patent infringement, or by initiating
patent infringement suits against others. It is not possible for us 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 any such inventions. While
we have used commercially reasonable efforts to obtain assignments of intellectual property from all individuals who may
have created materials on our behalf (including with respect to inventions covered by our patents and pending patent
applications), it is not possible for us to be certain that we have obtained all necessary rights to such materials. No
assurance can be given that our patents, or patent applications if issued, would be upheld by a court, or that a competitor’s
technology 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 of their 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 commercially reasonable efforts to obtain executed copies of such agreements from
all employees, consultants, advisors and collaborators, no assurance can be given that executed copies of all such
agreements have been obtained.
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We or a future partner may require additional third-party licenses to effectively develop, manufacture and
commercialize DM199, or any future product candidate, and such licenses might not be available on commercially
acceptable terms, or at all.
A substantial number of patents have already been issued to other biotechnology and pharmaceutical companies. To the
extent that valid third-party patent rights cover our product candidates, we or any future collaborator, would be required to
seek licenses from the holders of these patents in order to manufacture, use or sell our product candidates, and payments
under them would reduce profits from our product candidates. We are currently unable to predict the extent to which we
may wish 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 on acceptable 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 acceptable terms. Our inability to obtain
such licenses may hinder or eliminate our ability to develop, manufacture and market our product candidates and have a
material adverse effect on our business, financial condition, results of operations, and prospects.
Changes in patent law and its interpretation could diminish the value of our patents in general, thereby impairing our
ability to protect DM199 or any future product candidate.
As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual
property rights, particularly patents. Obtaining and 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 protection available in certain circumstances or weakening the rights of patent owners in certain situations. In
addition to increasing uncertainty with regard to our or any licensors’ 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, the U.S. Patent and Trademark Office (USPTO) and the European Patent
Office (EPO), the laws and regulations governing patents could change in unpredictable ways that would weaken our or any
licensors’ or collaborators’ ability to obtain new patents or to enforce existing patents and patents we or any 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 could increase the uncertainties and costs surrounding the prosecution of patent applications and
the enforcement or defense of issued patents.
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 (the America Invents Act), enacted in
September 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements
for patentability are met, the first inventor to file a patent application is entitled to the patent on an invention regardless of
whether a third party was the first to invent the 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 an invention 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 a patent 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 be certain that we or any licensor 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 or any 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 in USPTO-administered post-grant
proceedings, including post-grant review, inter partes review, and derivation proceedings. Because of a lower evidentiary
standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to
invalidate a patent claim, a third party could potentially provide evidence 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 first presented 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 been invalidated 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 the uncertainties and costs surrounding the prosecution of
our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents, all
of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
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Intellectual property litigation may be expensive, time consuming and may cause delays in the development,
manufacturing and commercialization of DM199 or any future product candidate.
Third parties may claim that we are using their proprietary information without authorization. Third parties may also have
or obtain patents and may claim that technologies 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 our own patent rights or otherwise to
protect our proprietary information and to prevent its disclosure, we may be required to pay substantial litigation costs and
managerial attention 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 from carrying on our commercial activities relating to the affected
technologies could subject us to monetary liability (including treble damages and attorneys’ fees if we are found 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 whether we 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 may be able to sustain the costs of
complex patent litigation more effectively than we can because they have substantially greater resources.
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 product candidates, 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 several statutory requirements, including lack of novelty, obviousness, written description or non-enablement.
Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent
withheld relevant information from the USPTO, or made a misleading statement, during prosecution. The outcome
following legal assertions of invalidity and unenforceability is unpredictable. Moreover, similar challenges may be made by
third parties outside the context of litigation, 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 other countries/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 inventions with 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 it from 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-exclusive license is offered and our competitors gain access to the same technology. Our defense of litigation,
validity or enforceability, interference or derivation proceedings may fail and, even if successful, may result in substantial
costs and distract our management and other employees. In addition, the uncertainties associated with litigation 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 research programs, 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 that some of our confidential information could be compromised by disclosure.
There could also be public announcements of the results of hearings, motions or other interim proceedings or
developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect
on the market price of our common shares.
Our reliance on third parties may require us to share our trade secrets, which increases the possibility that a competitor
will discover them.
Because we rely on third parties to develop and manufacture our DM199 product candidate, we may share trade secrets
with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if
applicable, material transfer agreements, collaborative research agreements, employment or consulting agreements or other
similar agreements with our collaborators, advisors, employees, and consultants prior to beginning research or disclosing
proprietary information. These agreements typically restrict the ability of our collaborators, advisors, employees, and
consultants to publish data potentially relating to our trade secrets. In the future, we may also conduct joint R&D programs
which may require us to share trade secrets under the terms of R&D collaboration or similar agreements. We cannot be
certain that our current or any future agreements have been or will be entered into with all relevant parties. Moreover,
despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of
these agreements, independent development or publication of information including our trade secrets in cases where 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 our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for
misappropriating any trade secrets. A competitor’s discovery of our trade secrets may impair our competitive position and
could have a material adverse effect on our business, financial condition, results of operations, and prospects.
39
Patent terms may be inadequate to protect the competitive position of DM199 or any future product candidate 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. Certain extensions may be available, but the
life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once
the patent life has expired, we may be open to competition from competitive products, including generics or biosimilars.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents
protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned
and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing 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 parties or 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 or pharmaceutical companies, including our competitors or potential competitors.
Although we try to ensure that our employees, consultants and independent contractors do 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 independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or
other proprietary information, of any of our employees’ former employers or other third parties. Litigation may be
necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are
successful in defending against 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 requirements imposed 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 and various 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 to remind 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
various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment
and other similar provisions during the patent application 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 a late 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 the patent 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 the market and this circumstance would have a material adverse effect
on our business.
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 intellectual property 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 not protect 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 from practicing 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 or other jurisdictions. Competitors may use our technologies in
jurisdictions where we have not obtained patent protection to develop their own products and may also export infringing
products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These
products may compete with our products and our patents or other intellectual property rights may not be effective or
sufficient to prevent them from competing.
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Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement
of patents, trade secrets, and other intellectual property protection, particularly those relating 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 our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not
successful, could result in substantial costs and divert our efforts 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 applications at 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 remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our
intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the
intellectual property that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third
parties. In addition, many countries limit the enforceability of patents against government agencies or government
contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of
such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to
our business, our competitive position may be impaired, and our business, financial condition, results of operations, and
prospects may be adversely affected.
Risks Related to Human Capital Management
We rely heavily on the capabilities and experience of our key executives, clinical personnel and advisors and the loss of
any of them could affect our ability to develop DM199 or any future product candidate.
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 clinical collaborators 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 in large part upon our ability to
attract and retain highly skilled scientific, managerial, medical, clinical and regulatory personnel, particularly as we
continue to expand our activities and seek regulatory approvals for clinical trials and eventually our DM199 product
candidate. We enter into agreements with scientific and clinical collaborators and advisors, key opinion leaders and
academic partners in the ordinary course of our business. We also enter into agreements with physicians and institutions
that will recruit patients into our clinical trials on our behalf in the ordinary course of our business. Notwithstanding these
arrangements, we face significant competition for these types of personnel from other companies, research and academic
institutions, government entities and other organizations. We cannot predict our success in hiring or retaining the personnel
we require for our continued growth. The loss of the services of any of our key executive officers, clinical personnel and
advisors could potentially harm our business, operating results or financial condition.
We will likely need to expand our operations and increase the size of our Company and we may experience difficulties in
managing our growth.
As we advance our DM199 product candidate through clinical trials, or develop any future product candidates, we expect to
increase our product development, scientific, clinical, regulatory and compliance and administrative headcount to manage
these programs. In furtherance of these efforts, we recently hired a new Chief Medical Officer and hired a Chief Business
Officer during 2023. In addition, to continue to meet our obligations as a U.S. public reporting company, we will likely
need to increase our general and administrative capabilities. Our management, personnel and systems currently in 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 have been and will continue to be 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.
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Risks Related to the Future Commercialization of DM199 or Any Future Product Candidate
The successful commercialization of DM199 or any future product candidate, if approved, will depend on achieving
market acceptance and we may not be able to gain sufficient acceptance to generate significant revenue.
Even if DM199 or any future product candidate is successfully developed and receives regulatory approval, it may not gain
market acceptance among physicians, patients, healthcare payers, such as private insurers or governments and other funding
parties. The degree of market acceptance for DM199 or any product candidate we develop will depend on a number of
factors including, among others:
● demonstration of sufficient 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;
●
the availability of alternative treatment methods and the superiority of alternative treatment methods;
●
the effectiveness of marketing and distribution methods and support for the product; and
●
coverage and reimbursement policies of government and third-party payers to the extent that the product
●
could receive regulatory approval but not be approved for coverage by or receive adequate reimbursement
from government and quasi-government agencies or other third-party payers.
If we fail to obtain coverage and adequate reimbursement for DM199 or any future product candidate, its revenue-
generating ability will be diminished and there is no assurance that the anticipated market for the product will develop
or be sustained.
Our or any future partner’s ability to successfully commercialize DM199 or any future product candidate will depend, in
part, on the extent to which coverage of and adequate reimbursement for such product and related treatments will be
available from governmental health payer programs at the federal and state levels, including Medicare and Medicaid,
private health insurers, managed care plans and other organizations. No assurance can be given that third-party coverage or
adequate reimbursement will be available that will allow us or any future partner to obtain or maintain price levels
sufficient for the realization of an appropriate return on our investment in product development. Coverage and adequate
reimbursement are critical 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 are or subsequently become available. Even if coverage is obtained for
DM199 or any future product candidate, the related reimbursement rates might not be adequate to make the product
attractive to providers, or may require patient cost sharing (e.g., copayments and/or deductibles) that patients find
unacceptably high. In addition, healthcare reform and controls on healthcare spending may limit coverage of the product
and the price we charge and get paid for the product and the volumes thereof that we can sell. Patients are unlikely to use
DM199 or any future product candidate unless coverage is provided and reimbursement is adequate to cover a significant
portion of its cost.
Outside of the United States, the successful commercialization of DM199 or any future product candidate will depend
largely on obtaining and maintaining government coverage, because in many countries, patients are unlikely to use
prescription drugs that are not covered by their government healthcare programs. Negotiating coverage and reimbursement
with governmental authorities can delay commercialization by 12 months or more. Coverage and reimbursement policies
may adversely affect our or a future partner’s ability to sell DM199 or any future product candidate on a profitable basis. In
many international markets, governments control the prices of prescription pharmaceuticals, including through the
implementation of reference pricing, 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 as volumes increase.
42
We or any future partner will likely face competition from other biotechnology and pharmaceutical companies, many of
which have substantially greater resources, and our DM199 product candidate may face competition sooner than
expected and our financial condition and operations will suffer if we fail to compete effectively.
Technological competition is intense in the industry in which we operate. Development of new, potentially competitive
therapies comes from pharmaceutical companies, biotechnology companies and universities, as well as companies that offer
non-pharmaceutical solutions. Many of our competitors have substantially greater financial and technical resources; more
extensive R&D capabilities; and greater marketing, distribution, production and human resources than we do. Moreover,
competitors may develop products more quickly than us and may obtain regulatory approval for such products more rapidly
than we do. Products and processes 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 DM199 product candidate 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 (BPCIA), which was enacted 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 the FDA,
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 the approval of biosimilar and interchangeable 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.
This law is complex and is 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 processes could have a material adverse effect on the future
commercial prospects for DM199 or any future product candidate that is a biologic. There is also a risk that the U.S.
Congress could repeal or amend the BPCIA to shorten this exclusivity period, potentially creating the opportunity for
biosimilar competition sooner than anticipated after the expiration 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 to traditional 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.
Even if, as we expect, our DM199 product candidate is considered to be a reference product eligible for 12 years of
exclusivity under the BPCIA, another company 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 and well-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 shorter exclusivity period for our DM199 product candidate, which could have a material adverse effect on our business,
financial condition, results of operations, and prospects.
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.” During 2023, the sale price
of our common shares ranged from $1.27 to $4.75 per share. A number of factors could influence the volatility in the
trading price of our common shares, including changes in the economy or in the financial markets, industry related
developments, such as a general decline in the biotech sector, and the impact of material events and changes in our
operations, such as our clinical results including the prior clinical hold on the IND for our ReMEDy2 trial, operating results
and financial condition. Each of these factors could lead to increased volatility in the market price of our common shares. In
addition, 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 history of a very active trading market for our common shares.
During 2023, the daily trading volume of our common shares ranged from 4,700 shares to 905,600 shares. Although we
anticipate a more active trading market for our common shares in the future, we can give no assurance that a more active
trading market will develop or be sustained. If we do not have an active trading market for our common shares, it may be
difficult for you to sell our common shares at a favorable price or at all.
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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 debt securities, the ownership interests of our shareholders will be diluted. In
addition, as of December 31, 2023, we had outstanding options to purchase 3,423,103 common shares, deferred stock units
representing 196,572 common shares and 927,215 common shares reserved for future issuance in connection with future
grants under the DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan and the DiaMedica
Therapeutics Inc. 2021 Employment Inducement Incentive Plan and options to purchase 447,910 common shares and
deferred stock units representing 17,333 common shares under our prior equity compensation plan. If these or any future
outstanding options or deferred stock units are exercised or otherwise converted into our common shares, our shareholders
will experience additional dilution.
If there are substantial sales of our common shares or the perception that such sales may occur, the market price of our
common shares could decline.
Sales of substantial numbers of our common shares, or the perception that such sales may occur, could cause a decline in
the market price of our common shares. Any sales 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 affect the market price of our common
shares.
We are a “smaller reporting company,” and because we have opted to use the reduced disclosure requirements available
to us, certain investors may find investing in our common shares less attractive.
We are currently a “smaller reporting company” under the federal securities laws and, as such, are subject to scaled
disclosure requirements afforded to such companies. For example, 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 a “smaller reporting company” and our reliance on the reduced disclosure requirements
afforded to these companies. If some of our shareholders or investors find our common shares less attractive 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.
Risks Related to Our Jurisdiction of Organization
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 the United 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 Corporations Act (BCBCA) and applicable securities laws, which laws may differ from
those governing a company formed under the laws of a United States jurisdiction. The provisions under the 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 and may, together with our Notice of Articles and Articles, have the effect of delaying, deferring
or discouraging another party from acquiring control of our Company by means 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 differences
between the BCBCA and the Delaware General Corporation Law (DGCL), 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 a
majority 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 annual meeting 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 the affirmative 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 shares and (b) create additional classes or series of shares; whereas,
under the DGCL, a majority vote by shareholders is generally required to amend a corporation’s certificate of
incorporation and a separate class vote may be required to authorize alternations to a corporation’s authorized
share structure.
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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 as a result, there may be a less active trading market for our common
shares and our share price may be more volatile.
We were classified as a “passive foreign investment company” in 2022 and 2023 and may continue to be in future
taxable years, which may have adverse U.S. federal income tax consequences for U.S. shareholders and adversely affect
the level of interest in our common shares by U.S. investors.
General Rule. For any taxable year in which 75% or more of our gross income is passive income, or at least 50% of the
value of our assets (where the value of our total assets is determined based upon the market value of our common shares at
the end of each quarter or other measuring period) are held for the production of, or produce, passive income, we would be
characterized as a passive foreign investment company (PFIC) for U.S. federal income tax purposes. The percentage of a
corporation’s assets that produce or are held for the production of passive income generally is determined based upon the
average ratio of passive assets to total assets calculated at the end of each measuring period. Calculation of the value of
assets at the end of each measuring period is generally made at the end of each of the four quarters that make up the
company’s taxable year, unless an election is made to use an alternative measuring period (such as a week or month). The
“weighted average” of those periodic values is then used to determine the value of assets for the passive asset test for the
taxable year. In proposed regulations section 1.1297-1(d)(2), a limited exception to the passive asset test valuation rules is
provided for the treatment of working capital in order to take into account the short-term cash needs of operating
companies. This new rule provides that an amount of cash held in a non-interest bearing account that is held for the present
needs of an active trade or business and is no greater than the amount reasonably expected to cover 90 days of operating
expenses incurred in the ordinary course of the trade or business of the foreign corporation (for example, accounts payable
for ordinary operating expenses or employee compensation) is not treated as a passive asset. The Treasury Department and
the IRS indicated that they continue to study the appropriate treatment of working capital for purposes of the passive asset
test.
PFIC Status Determination. 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 our assets, 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 year
ended December 31, 2016, (ii) we do not believe that we were a PFIC for any of the taxable years ended December 31,
2017 through December 31, 2021, and (iii) we believe that we were a PFIC for the taxable years ended December 31, 2022
and December 31, 2023. 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, 2024 or for future taxable years.
U.S. shareholders who own our common shares for any period during which we are a PFIC (which we believe would
currently only be those shareholders that held our common shares in the taxable year ended December 31, 2016, December
31, 2022 or December 31, 2023) will be required to file IRS Form 8621 for each tax year during which they hold our
common shares, unless, after we are no longer a PFIC, any such shareholder makes the “purging election” discussed below.
PFIC Consequences. 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 Qualified Electing 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 to treat 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 than as capital gain, and the preferential tax rate applicable to dividends received on our
common shares would not be available. This income generally would be allocated over 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
effect for 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 of the 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 a PFIC, 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 market value 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 such
common shares. Proposed regulations, that are not yet effective, address domestic partnerships and S corporations that own
stock in a PFIC for which a QEF election or “mark-to-market” election could be made. Currently, only the domestic
partnership or S corporation (and not the partners or S corporation shareholders) can make these elections. The proposed
regulations would reverse the current rule so that only the partners or S corporation shareholders — not the partnership or S
corporation — could make the elections. These proposed regulations would only apply to partnership or S corporation
shareholders’ tax years beginning on or after the date they are issued in final form.
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QEF Election. A U.S. shareholder may avoid the adverse tax consequences described above by making a timely and
effective QEF election. A U.S. shareholder who makes a QEF election generally must 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 be
required to comply with specified information reporting requirements. Any gain subsequently recognized upon the sale by
that U.S. shareholder of the common shares generally 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 company characterized as a PFIC
provides a U.S. shareholder with certain information regarding its earnings and capital gains, as required under applicable
U.S. Treasury regulations. 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 tax purposes (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).
Mark-to-Market Election. 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. A U.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
shares and 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 basis of 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 the common shares. A mark-to-market election may be made and maintained only if our common shares
are regularly traded on a qualified exchange, including The Nasdaq Capital Market. 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. 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.
Election Tax Risks. 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 earned income will be reported to a U.S. shareholder as taxable income and
income taxes will be due and payable on such an amount. A U.S. shareholder of our common shares may pay tax on such
“phantom” income, i.e., where income is reported to it pursuant to the QEF Election, but no cash is distributed with respect
to such income. 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 a net 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 in another 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
in taxable 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 the QEF 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 revoke the election is granted by the
IRS.
Purging Election. 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 we cease 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 a so-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 to be a PFIC. When a foreign corporation no longer qualifies as a PFIC (due to a change in
facts or law), the foreign corporation nonetheless retains its PFIC status with respect to a shareholder unless and until the
shareholder makes an election under Code section 1298(b)(1) and regulations section 1.1298–3 (purging election) on IRS
Form 8621 attached to the shareholder’s tax return (including an amended return), or requests the consent of the IRS
Commissioner to make a late election under Code section 1298(b)(1) and regulations section 1.1298–3(e) (late purging
election) on Form 8621-A.
46
RULES RELATING TO A PFIC ARE VERY COMPLEX. YOU SHOULD CONSULT YOUR TAX ADVISER
CONCERNING THE RELATIVE MERITS AND THE ECONOMIC AND TAX IMPACT OF THE PFIC RULES TO
YOUR INVESTMENT IN OUR COMMON SHARES AS A NON-ELECTING U.S. SHAREHOLDER, A U.S.
SHAREHOLDER MAKING A QEF ELECTION, A U.S. SHAREHOLDER MAKING A MARK-TO-MARKET
ELECTION, OR A U.S. SHAREHOLDER MAKING ANY AVAILABLE PURGING ELECTION.
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 advisors with respect to the possibility of making these elections and the U.S.
federal income tax consequences of the acquisition, ownership and disposition of our common shares. 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 adverse impact on the market price of our common shares and our ability to raise additional financing by
selling equity securities, including our common shares.
It may be difficult for non-Canadian shareholders or investors to obtain and enforce judgments against us because of
our organization as a British Columbia corporation.
We are a corporation governed under the BCBCA. Two of our directors are residents of Canada, and all or a substantial
portion of their assets, and a small 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 effect service 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 the
United 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, and officers under the United States federal securities laws. Our shareholders and
other investors should not assume that British Columbian or Canadian courts (i) would enforce judgments of United States
courts obtained in actions against us or such directors, or officers predicated upon the civil liability provisions of the United
States federal 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 us or 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 United States. 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 the United States.
General Risk Factors
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 number of
clinical sites and pace of enrollment for our ReMEDy2 trial. 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 projected timing of events such as the
anticipated number of clinical sites and pace of enrollment for our ReMEDy2 trial or the filing of an application to obtain
regulatory approval or an announcement of additional clinical trials for a product candidate may ultimately vary from what
is publicly disclosed. These variations in timing or events that we anticipate may occur as a result of different factors,
including regulatory actions, the nature of the results obtained during a clinical trial or during a research phase, problems
with a CMO or contract research organization, health crises, epidemics or pandemics, full or partial clinical holds that may
be imposed by the FDA or any other event having the effect of delaying the publicly announced timeline or leading to
results that are different from what we expect. We undertake no obligation to update or 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 the timing of previously announced milestones or changes in other events of which we anticipate could have a
material adverse effect on our business plan, financial condition or operating results, and the trading price of our common
shares.
If securities or industry analysts do not continue to publish research or reports about our business, or publish negative
reports about our business, the market price of our common 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 our business. 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 or more of the analysts who cover us
downgrade our common shares or negatively change their opinion of our common shares, the market price of our common
shares would likely decline. 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, which could cause the market price of our common shares or
trading volume to decline.
47
We, or our third-party contract research organizations or consultants, may be subject to information technology systems
failures, network disruptions, breaches in data security and computer crime and cyber-attacks, which could result in a
material disruption of our product candidates' development programs, compromise sensitive information related to our
business or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely
affecting our business.
We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the
ordinary course of business, we collect, store and transmit confidential information (including but not limited to intellectual
property, proprietary business information and personal information). It is critical that we do so in a secure manner to
maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our
operations to third parties, and as a result we manage a number of third-party consultants who have access to our
confidential information.
Information technology system failures, network disruptions, breaches of data security and sophisticated and targeted
computer crime and cyber-attacks could disrupt our operations by impeding our drug development programs, including
delays in our regulatory efforts, the manufacture or shipment of products, the processing of transactions or reporting of
financial results, or by causing an unintentional disclosure of confidential information. Despite our security measures, our
information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error,
malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could
be accessed, publicly disclosed, lost or stolen. In the ordinary course of our business, we collect and store sensitive data on
our network, including IP, proprietary business information, and personal information of our business partners and
employees. Despite our efforts to protect sensitive, confidential or personal data or information, our facilities and systems
and those of our third-party service providers may be vulnerable to security breaches, theft, misplaced or lost data,
programming and/or human errors that could potentially lead to the compromising of sensitive, confidential or personal
data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure,
modification or destruction of information, defective products, production downtimes and operational disruptions, which in
turn could adversely affect our reputation, competitiveness and results of operations. Although we have been the target of
cyber attacks and expect them to continue as cybersecurity threats have been rapidly evolving in sophistication, the
aggregate impact of these attacks on our operations and financial condition has not been material to date. In addition, we
and the third parties on which we rely may be more susceptible to security breaches and other security incidents due to
many of our and their employees working remotely for some portion of time. While management has taken steps to address
these concerns by conducting employee training, implementing certain data and system redundancy, hardening and fail-
over along with other network security, comprehensive monitoring of our networks and systems, maintenance of backup
and protective systems and other internal control measures, there can be no assurance that the measures we have
implemented to date would be sufficient in the event of a system failure, loss of data or security breach. As a result, in the
event of such a failure, loss of data or security breach, our financial condition and operating results could be adversely
affected.
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 significant decline or
increase in the market price of its securities or certain significant 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 into an 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 our resources, which could harm our business. This is particularly true in light of our limited
securities litigation insurance coverage.
A variety of risks are associated with operating our business internationally which could materially adversely affect our
business.
In the past, we have conducted R&D operations and/or clinical trials in the United States, Canada and Australia. In the
future, we expect to conduct certain clinical trials, and plan to seek regulatory approval of DM199, or any future product
candidates, outside of the United States. Accordingly, we will be subject to risks related to operating in foreign countries
including, among others:
●
●
differing regulatory requirements for drug approvals;
different standards of care in various countries that could complicate the design of our clinical trials and/or
the evaluation of our product candidates;
48
● different reimbursement systems and different competitive drugs indicated to treat the indications for which
our product candidates are or will be developed;
● different United States and foreign drug import and export rules;
●
● withdrawal from, or revision to or unexpected changes in international trade policies or agreements and the
reduced protection for intellectual property rights in certain countries;
imposition or increases in import and export licensing and other compliance requirements, customs duties and
tariffs, import and export quotas and other trade restrictions, license obligations, and other non-tariff barriers
to trade;
the imposition of U.S. or international sanctions against a country, company, person or entity with whom we
do business that would restrict or prohibit continued business with that country, company, person or entity;
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 to doing business in another country;
●
●
●
●
●
●
● difficulties in managing and staffing international operations and increases in infrastructure costs, including
legal, tax, accounting, and information technology;
● workforce uncertainty in countries where labor unrest is more common than in the United States;
● production shortages or shipping delays resulting from any events affecting raw material supply or
manufacturing capabilities abroad, such as supply chain disruptions, closures and slowdowns caused by
COVID-19;
● potential liability resulting from development work conducted by foreign partners or collaborators;
●
● business interruptions resulting from natural disasters or geopolitical actions, including war, such as the
transportation delays and interruptions;
current war between Russia and Ukraine and the conflict between Israel and Hamas, and terrorism or systems
failure, including cybersecurity breaches; and
compliance with evolving and expansive international data privacy laws, such as the European Union General
Data Protection Regulation.
●
We face the risk of product liability claims, which could exceed our insurance coverage, deplete our cash resources and
lead to clinical trial delays.
A risk of product liability claims, and related negative publicity, is inherent in the development of human therapeutics. We
are exposed to the risk of product liability claims alleging that use of DM199, or any future product candidate, caused an
injury or harm. These claims can arise at any point in the development, testing, manufacture, marketing or sale of a product
candidate and may be made directly by patients involved in clinical trials of our product candidate, by consumers,
healthcare providers or by individuals, organizations or companies selling our products, if and when approved. Product
liability claims can be expensive to defend, even if the product or product candidate did not actually cause the alleged
injury or harm, and could lead to clinical trial delays and could negatively impact existing or future collaborations.
Insurance covering product liability claims becomes increasingly expensive as a product candidate moves through the
development pipeline to commercialization. To protect against potential product liability risks, we carry product liability
insurance coverage at a level we deem appropriate for our stage of development. However, there can be no assurance that
such insurance coverage is or will continue to be 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 insurance coverage 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 own cash resources, and otherwise have a material adverse effect on our
business, financial condition, and results of operations.
If we are unable to maintain product liability insurance required by third parties, certain agreements, such as those with
clinical trial sites, contract research organizations and other supporting vendors, would be subject to termination, which
could have a material adverse impact on our operations.
Some of our agreements with third parties require, and in the future will likely require, us to maintain product liability
insurance in at least certain specified minimum amounts. If we cannot maintain acceptable amounts of coverage on
commercially reasonable terms in accordance with the terms set forth in these agreements, the corresponding agreements
would be subject to termination, which could have a material adverse impact on our operations.
49
Our insurance policies are expensive and protect us only from certain business risks, which could leave us exposed to
significant uninsured liabilities. Additionally, future fluctuations in insurance cost and availability could adversely
affect our operating results or risk management profile.
We hold a number of insurance policies, including, but not limited to, product and general liability insurance, directors’ and
officers’ liability insurance, property insurance and workers’ compensation insurance. The costs of maintaining adequate
insurance coverage, most notably directors’ and officers’ liability insurance, have increased significantly during the last few
years and may continue to do so in the future, thereby adversely affecting our operating results. If such costs increase, we
may be forced to accept lower coverage levels and higher deductibles, which, in the event of a claim, could require
significant, unplanned expenditures of cash, which could adversely affect our business. Future potential directors and
officers could view our directors’ and officers’ liability insurance coverage as limited or even inadequate. Limited
directors’ and officers’ liability insurance coverage, or the perception that our directors’ and officers’ liability insurance
coverage is inadequate, may make it difficult to attract and retain directors and officers, and we may lose potential
independent board members and management candidates to other companies that have more extensive directors’ and
officers’ liability insurance coverage. In addition, if any of our current insurance coverages should become unavailable to
us or become economically impractical, we would be required to operate our business without indemnity from commercial
insurance providers.
Scrutiny and evolving expectations from regulators, investors and other stakeholders with respect to our environmental,
social and governance practices may impose additional costs on us or expose us to new or additional risks.
Companies are facing scrutiny from regulators, investors, and other stakeholders related to their environmental, social and
governance (ESG) practices and disclosure. For example, during 2022, the SEC proposed new climate disclosure rules,
which, if adopted, would require new climate-related disclosure in SEC filings, including certain climate-related metrics
and greenhouse gas emissions data, information about climate-related targets and goals, transition plans, if any, and
extensive attestation requirements. In addition to requiring companies to quantify and disclose direct emissions data, the
new rules also would require disclosure of climate impact arising from the operations and uses by the company’s business
partners and contractors and end-users of the company’s products and/or services. We are currently assessing the impact of
the new rules, if adopted as proposed, but at this time, we cannot predict the costs of implementation or any potential
adverse impacts resulting from the new rules if adopted. However, we may incur increased costs relating to the assessment
and disclosure of climate-related risks and increased litigation risks related to disclosures made pursuant to the new rules,
either of which could materially and adversely affect our future results of operations and financial condition.
Further, investor advocacy groups, investment funds and influential investors are also increasingly focused on these
practices, especially as they relate to the environment, climate change, health and safety, supply chain management,
diversity, labor conditions and human rights, both in our own operations and in our supply chain. Increased ESG-related
compliance costs could result in material increases to our overall operational costs. Our ESG practices may not meet the
standards of all of our stakeholders and advocacy groups may campaign for further changes. A failure, or perceived failure,
to adapt to or comply with regulatory requirements or to respond to investor or stakeholder expectations and standards
could negatively impact our business and reputation and have a negative impact on the trading price of our common shares.
We no longer qualify as an emerging growth company, and as a result, we now have to comply with increased public
company disclosure and compliance requirements, which may have a negative impact on our business and results of
operations.
We no longer qualify as an emerging growth company. As such, we are now subject to certain disclosure and compliance
requirements that apply to other public companies but did not previously apply to us due to our status as an emerging
growth company. While we remain a smaller reporting company and are still subject to certain scaled disclosure
requirements, we expect that the loss of emerging growth company status may still increase our legal and financial
compliance costs and cause management and other personnel to divert attention from operational and other business matters
to devote substantial time to public company reporting requirements, all of which may have a negative impact on our
business and results of operations.
Our business or the value of our common shares could be negatively affected as a result of actions by activist
shareholders.
We value constructive input from our shareholders, and our Board of Directors and management team are committed to
acting in the best interests of our shareholders. However, shareholders may from time to time engage in proxy solicitations,
advance shareholder proposals or otherwise attempt to effect changes or acquire control over the Company. Responding to
proxy contests and other actions by activist shareholders can be costly and time-consuming, disrupting our operations and
50
diverting the attention of our Board of Directors and senior management from the pursuit of business strategies. In addition,
perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist shareholder
initiatives may result in the loss of potential business opportunities, harm our ability to attract new investors, customers,
employees, and joint venture partners, and cause our stock price to experience periods of volatility or stagnation.
Item 1B. Unresolved Staff Comments
This Item 1B is inapplicable to us as a smaller reporting company.
Item 1C. Cybersecurity
Cybersecurity, data privacy, and data protection are critical to our business. In the ordinary course of our business, we
collect and store certain confidential information such as information about our employees, contractors, vendors, suppliers,
and clinical data. We continue to augment the capabilities of our people, processes, and technologies in order to address our
cybersecurity risks. Our cybersecurity risks, and the controls designed to mitigate those risks, are integrated into our overall
risk management governance and are reviewed yearly by our Board of Directors.
Risk Management and Strategy
As of December 31, 2023, we have implemented cybersecurity and data protection policies and procedures for assessing,
identifying, and managing cybersecurity threats. We take a risk-based approach to cybersecurity, which begins with the
identification and evaluation of cybersecurity risks or threats that could affect our operations, finances, legal or regulatory
compliance, or reputation. The scope of our evaluation encompasses risks that may be associated with both our internally
managed IT systems and key business functions and sensitive data operated or managed by third-party service providers,
thereby safeguarding our integrated operations. Risks from cybersecurity threats are regularly evaluated as a part of our
broader risk management activities and as a fundamental component of our internal control systems. Our employees receive
ongoing cybersecurity awareness trainings, including specific topics related to social engineering and email frauds. We use
information technology consultants with significant expertise in cybersecurity related to our industry. We utilize advanced
technologies for continuous cybersecurity monitoring across our information technology environment which are designed
to prevent, detect, and minimize cybersecurity attacks, as well as alert management of such attacks.
Our IT general controls are firmly established based on recognized industry standards and cover areas such as risk
management, data backup, and disaster recovery. We have utilized an outsourced IT services vendor to reduce and monitor
security threats and vulnerabilities and respond to all cybersecurity incidents affecting us, including prompt escalation and
communication of major security incidents to senior business leadership and our Board of Directors.
Governance
Our Board of Directors is responsible for overseeing our cyber security risk management and strategy, including overseeing
management’s responsibility to assess, manage and mitigate risks associated with our business and operational activities, to
administer our various compliance programs, in each case including cybersecurity concerns, and to oversee our IT systems,
processes and data. Our senior leadership, including our Chief Executive Officer and Chief Financial Officer, regularly
meet with and provides periodic briefings to our Board of Directors regarding our cybersecurity risks and activities,
including any recent cybersecurity incidents, if any, and related responses, cybersecurity systems testing, and activities of
third parties.
Management has implemented risk management policies and procedures, and management is responsible for the day-to-day
cybersecurity risk management. Our Chief Financial Officer is responsible for the day-to-day assessment and management
of our cybersecurity risks.
Cybersecurity Threat Disclosure
To date, we are not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially
affect our Company’s business strategy, results of operations or financial condition.
For further discussion of cybersecurity risks, please see Item 1A, "Risk Factors".
51
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 at 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota, USA 55305.
We lease these premises, which consist of approximately 6,000 square feet, pursuant to a lease that expires in January 2028.
We believe that our facilities are adequate for our current needs and that suitable additional space will be available as and
when needed on acceptable terms.
Item 3.
Legal Proceedings
Litigation with Pharmaceutical Research Associates Group B.V.
In March 2013, we entered into a clinical research agreement with Pharmaceutical Research Associates Group B.V.,
acquired by ICON plc as of July 1, 2021, (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 in healthy 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 two subcutaneous dose levels of DM199 over a 28-day period. This study
achieved its primary endpoint and demonstrated that DM199 was well-tolerated. The secondary endpoints for this study,
however, were not met. The secondary efficacy endpoints were confounded due to what we believe were significant
execution errors caused by protocol deviations occurring at the clinical study site that were unable to be reconciled. To date,
we have been unable to obtain the complete study records from PRA Netherlands necessary to generate a final study report.
On November 14, 2017, we initiated litigation with PRA Netherlands in the United States District Court, Southern District
of New York. The complaint alleged, among other things, that PRA Netherlands failed to conduct the study in accordance
with the study protocol and with generally accepted standards for conducting such clinical studies and that PRA
Netherlands further refused to provide us with all data, records and documentation, and/or access thereto, related to the
study in accordance with the clinical trial study agreement. The complaint sought to compel PRA Netherlands to comply
with the terms of the clinical trial study agreement, including providing full study records and to recover damages.
After several procedural stages, we ceased action against PRA Netherlands in the United States and commenced an action
in a Dutch Court, which was subsequently moved to the Netherlands Commercial Court (NCC), which specializes in
handling international commercial disputes. On November 23, 2022, we filed a petition requesting leave for a prejudgment
attachment of all relevant documents in possession of PRA Netherlands, which was granted on November 28, 2022, by the
District Court of Northern Netherlands. A representative of the District Court served PRA Netherlands with the
prejudgment attachment on or about December 7 and 8, 2022. The case was formally introduced to the NCC on December
28, 2022 and a hearing by the NCC to determine whether we are entitled to take possession of the records seized was
scheduled and held on March 16, 2023. On April 21, 2023, the NCC issued a judgment affirming our ownership of the
documents related to the clinical studies performed by PRA Netherlands and seized by the Dutch courts in December 2022.
The NCC further ordered PRA Netherlands to allow and tolerate the surrender of the documents. Additionally, the NCC
found that we were not in breach of any obligation under the clinical study agreement and PRA Netherlands had no basis to
suspend the fulfillment of its obligations under the clinical study agreement to provide us all clinical data and access to
perform an audit of the study. On June 15, 2023, PRA Netherlands filed an appeal of this decision and requested a hearing
with the NCC. The hearing of this case was conducted on December 7, 2023. On February 7, 2024, the NCC issued a
judgement in which they found that, although all data related to the study is the rightful property of DiaMedica, they found
that there was an insufficient causal link between PRA Netherlands withholding study data and the damages claimed by
us. We have 90 days, or until approximately May 7, 2024, to file an appeal of the decision. We are currently evaluating our
options.
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 of business, which may include employment matters and breach of contract disputes. Such
matters are subject to many uncertainties and to outcomes that are not predictable 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 of
any threatened legal actions.
Item 4.
Mine Safety Disclosures
Not applicable.
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Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
PART II
Market Information
Our common shares are listed on The Nasdaq Capital Market under the trading symbol “DMAC”.
Number of Record Holders
As of March 15, 2024, we had 25 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 our future 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, or prohibitions 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 of Directors and will depend upon such factors as earnings levels, capital requirements, our overall financial
condition and any other factors deemed relevant by our Board of Directors. As a result, our shareholders will likely need to
sell their common shares to realize a return on their investment and may not be able to sell their shares at or above the price
paid for them.
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, 2023.
Recent Sales of Unregistered Equity Securities
We did not sell any unregistered equity securities of our company during the fourth quarter ended December 31, 2023.
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 the remittance 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 15, 2024, a summary of the principal Canadian federal income tax considerations under the
Income Tax Act (Canada) (Tax Act) generally applicable 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 Canada for 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 the course 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 of subsection 18(5) of the Tax Act) and holds our common shares
as capital property (Holder). A “specified shareholder” for these purposes generally includes a person who (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 or control 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 a Holder 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 more transactions
considered to be an adventure or concern in the nature of trade.
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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 “specified financial 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 report its 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 “authorized foreign 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 tax advisors.
This summary is based upon the provisions of the Tax Act (including the regulations (Regulations) thereunder) in force as
of March 1, 2023 and our understanding of the current administrative policies and assessing practices of the Canada
Revenue Agency (CRA) published in writing by the CRA prior to March 1, 2023. This summary 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 Tax Proposals 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 or assessing practices of
the CRA, whether by legislative, governmental or judicial decision or action. This summary is not exhaustive of all possible
Canadian federal income tax considerations and does not take into account other federal or any provincial, territorial or
foreign income tax legislation or considerations, which may differ materially 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 no representations concerning the tax consequences to any particular Holder are
made. Holders should consult their own tax advisors regarding the income tax considerations 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 of an applicable tax treaty or convention. For example, under the Canada-
United States Tax Convention (1980), as amended (US Treaty), the dividend withholding tax rate is generally 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 or credited 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 the US 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 to relief
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 on their 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, unless the 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 from tax 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 the disposition, 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) such Holder, 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 holds a 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 series of 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 for civil 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 certain circumstances the common shares may be deemed to
be “taxable Canadian property” under the Tax Act.
Holders whose common shares may be “taxable Canadian property” should consult their own tax advisers.
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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 our common 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 general information 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 not be 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 tax considerations
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 tax consequences 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 a position 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 to various 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 and judicial 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 are subject 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 Convention and 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 circumstances or 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 traders in securities or other persons
that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, retirement plans,
regulated investment 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 that own (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 compensation arrangement, corporations that accumulate earnings to avoid U.S. federal income tax, partnerships and
other pass-through entities, and investors in such pass-through entities). 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 tax considerations. In addition,
except as specifically set forth below, this summary does not discuss applicable tax reporting requirements.
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 a citizen 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 laws of 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) a trust (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 have the 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. federal income 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 in the 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 advisor regarding the U.S. federal income tax
considerations applicable to it and its partners of the purchase, ownership and disposition of the common shares.
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Persons holding common shares should consult their own tax advisors as to the particular tax considerations applicable
to them relating to the purchase, ownership and 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 common shares generally will be required to include the gross amount of such distribution
(before reduction for any Canadian withholding taxes) in gross income as a dividend when 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 under U.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 our current 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-taxable return 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 the U.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 dollars so 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), a U.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 of receipt (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 of receipt (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 as ordinary 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
of receiving, owning, and disposing of foreign currency.
Distributions on the common shares that are treated as dividends generally will constitute income from sources outside the
United States for foreign tax credit purposes and generally will constitute “passive category income.” Because we are not a
United States corporation, such dividends will not be eligible for the “dividends received” deduction generally allowed to
corporate shareholders with respect to dividends received from U.S. corporations. Dividends paid by a “qualified foreign
corporation” 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 capital gains rate rather than the marginal tax rates generally applicable to ordinary
income provided that a holding period requirement (more than 60 days of ownership, without protection 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 a PFIC for the taxable year in which the dividend is paid or the preceding taxable year (see discussion
below under “Passive Foreign Investment Company Considerations”), we will not be treated as a qualified foreign
corporation, and therefore the reduced capital gains tax rate described above will 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 “Certain Canadian Federal Income Tax Considerations for U.S. Holders—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 tax for 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 of our 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
certain elections 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 of a 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. Each U.S. Holder is advised
to consult its tax advisor regarding the availability of the foreign tax credit under its particular circumstances.
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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. federal income 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., the amount 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 of loss 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 loss generally 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 one year. Net long-
term capital gain derived by a non-corporate U.S. Holder with respect to capital assets is currently subject to tax at reduced
rates. The deductibility of a capital 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 from sources 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 made under
the Code.
Passive Foreign Investment Company Considerations
General Rule. 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 “passive income” or (2) at least 50% of the average value of its assets is
attributable to assets that produce passive income or are held for the production of passive income. Passive income for this
purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from commodities
transactions and from the 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 as working capital or raised in a public offering, marketable
securities and other assets that may produce passive income. The percentage of a corporation’s assets that produce or are
held for the production of passive income generally is determined based upon the average ratio of passive assets to total
assets calculated at the end of each measuring period. Calculation of the value of assets at the end of each measuring period
is generally made at the end of each of the four quarters that make up the company’s taxable year, unless an election is
made to use an alternative measuring period (such as a week or month). The “weighted average” of those periodic values is
then used to determine the value of assets for the passive asset test for the taxable year. In proposed regulations section
1.1297-1(d)(2), a limited exception to the passive asset test valuation rules is provided for the treatment of working capital
in order to take into account the short-term cash needs of operating companies. This working capital rule provides that an
amount of cash held in a non-interest bearing account that is held for the present needs of an active trade or business and is
no greater than the amount reasonably expected to cover 90 days of operating expenses incurred in the ordinary course of
the trade or business of the foreign corporation (for example, accounts payable for ordinary operating expenses or employee
compensation) is not treated as a passive asset. The Treasury Department and the IRS indicated that they continue to study
the appropriate treatment of working capital for purposes of the passive asset test. 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 into account.
PFIC Status Determination. Although 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 our assets, the market price of our common
shares, and the amount and type of our gross income, based on those tests: (i) we believe that we were a PFIC for the
taxable year ended December 31, 2016, and (ii) we do not believe that we were a PFIC for any of the taxable years ended
December 31, 2017 through December 31, 2021, and (iii) we believe that we were a PFIC for the taxable year ended
December 31, 2023. Our status as a 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 December 31, 2023 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 for each 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 is currently 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 before such 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 no assurance 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 expresses any opinion with respect to our PFIC status.
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PFIC Consequences. 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 (QEF election) 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 (described below).
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 neither of 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 annual distributions 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. The amount 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 which we were a PFIC during such holding period will be taxed as ordinary income earned in the
current taxable year and the preferential tax rate applicable to capital gains or dividends 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 at the highest marginal rate in effect (for individuals or corporations as applicable) for ordinary income in each such
taxable year, and an interest charge, generally applicable 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 would not 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 or otherwise 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 our common 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 basis equal to the
lower of the fair market value of such common shares or the decedent’s tax basis in such common shares. Newly proposed
regulations, that are not yet effective, address domestic partnerships and S corporations that own stock in a PFIC for which
a QEF election or "mark-to-market" election could be made. Currently, only the domestic partnership or S corporation (and
not the partners or S corporation shareholders) can make these elections. The proposed regulations would reverse the
current rule so that only the partners or S corporation shareholders — not the partnership or S corporation — could make
the elections. These proposed regulations would only apply to partnership or S corporation shareholders' tax years
beginning on or after the date they are issued in final form.
QEF Election. 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. For each 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 ordinary income 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 be increased 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 would decrease 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 a capital
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 tax return 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 test or 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 we become 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 tax
purposes (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).
Mark-to-Market Election. 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, provided the 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 the decrease 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 tax basis 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 with respect 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 from a 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 the common 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 income and 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 in income) and thereafter as a capital loss. If we cease to
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be a PFIC, any gain or loss recognized by a U.S. Holder on the sale or exchange of the common shares would be classified
as a capital gain or loss.
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 of stock 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 are listed 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 are not 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 we own.
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-market election. 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.
Election Tax Risks. 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 earned income will be reported to a U.S. shareholder as taxable income and
income taxes will be due and payable on such an amount. A U.S. shareholder of our common shares may pay tax on such
“phantom” income, i.e., where income is reported to it pursuant to the QEF Election, but no cash is distributed with respect
to such income. 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 a net 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 in another 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
in taxable 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 the QEF 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 revoke the election is granted by the
IRS.
Purging Election. 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 all succeeding 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) to recognize 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 fair market value on the last day of the last taxable year
during which we were a PFIC. The shareholder makes a purging election under Code section 1298(b)(1) and regulations
section 1.1298–3 on IRS Form 8621 attached to the shareholder’s tax return (including an amended return), or requests the
consent of the IRS Commissioner to make a late election under Code section 1298(b)(1) and regulations section 1.1298–
3(e) (late purging election) on Form 8621-A. In addition, for a U.S. Holder making such an election, a new holding period
would be deemed 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 was made will not be treated as shares in a PFIC unless we subsequently
again become 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 to file 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 returns filed by such U.S. person.
Should we be classified as a PFIC during a U.S. Holder’s holding period for our common shares, each such U.S. Holder
should consult their own tax advisors with respect to the possibility of making these elections and the U.S. federal income
tax consequences of the acquisition, ownership and disposition of our common shares. 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
adverse impact on the market price of our common shares and our ability to raise additional financing by selling equity
securities, including our common shares.
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, ownership and 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 IRS information reporting
obligations with respect to the purchase, ownership and disposition of common shares in the event we are considered a
PFIC.
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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 subject to 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 common shares. Further, excess
distributions treated as dividends, gains treated as excess distributions, and mark-to-market inclusions and deductions are
all included in the calculation 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 previously taxed 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 capital gain 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 QEF election 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 a QEF 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 inclusions and 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 advisors regarding the applicability of this tax to any of their income or gains in respect of the common shares.
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 is referred 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 us with 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. In general, 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 attributable to 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 our common 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 to the 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 the Non-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 are met.
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 gain from 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, your earnings and profits that are attributable to the effectively connected income, which are subject to
certain adjustments, may be subject to an additional branch profits tax at 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 threshold amounts 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 to persons who fail to comply with
these rules. Specified foreign financial assets include not only financial accounts maintained in foreign financial
institutions, but also any stock or security issued by a non-U.S. person, such as our common shares, unless held in accounts
maintained by certain financial institutions. Upon the issuance of future U.S. Treasury regulations, these information
reporting requirements may apply to certain U.S. entities that own specified foreign financial assets. The failure to report
information required under the current regulations could result in substantial penalties and in the extension of the statute of
60
limitations with respect to federal income 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 an investment 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 or indirectly, 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 date of 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 tax advisors regarding these filing requirements.
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 a basis 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 reporting unless 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 not apply 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 is made 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 the United
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. EACH U.S. HOLDER IS URGED TO CONSULT ITS OWN TAX
ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN COMMON SHARES IN LIGHT
OF THE INVESTOR’S OWN CIRCUMSTANCES.
Item 6.
[Reserved]
61
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 the United States of America and discusses the financial condition and results
of operations for DiaMedica Therapeutics Inc. and our subsidiaries for the years ended December 31, 2023 and 2022.
This discussion should be read in conjunction with our consolidated financial statements and related notes included
elsewhere in this report. The following discussion contains forward-looking statements that involve numerous risks and
uncertainties. Our actual results could differ materially from the forward-looking statements as a result 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 committed to improving the lives of people suffering from serious
diseases. Our lead candidate DM199 is the first pharmaceutically active recombinant (synthetic) form of the human tissue
kallikrein-1 (KLK1) protein to be clinically studied in patients. KLK1 is an established therapeutic modality in Asia, with
human urinary KLK1, for the treatment of acute ischemic stroke and porcine KLK1 for the treatment of cardio renal
disease, including hypertension. We have also produced a potential novel treatment for severe inflammatory diseases,
DM300, which is currently in the early preclinical stage of development. Our long-term goal is to use our patented and in-
licensed technologies to establish our Company as a leader in the development and commercialization of therapeutic
treatments from novel recombinant proteins. Our current focus is on the treatment of acute ischemic stroke (AIS) and cardio
renal disease (CRD). We plan to advance DM199, our lead drug candidate, through required clinical trials to create
shareholder value by establishing its clinical and commercial potential as a therapy for AIS and CRD.
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 well as an important role in
inflammation and oxidative stress (an imbalance between potentially damaging reactive oxygen species, or free radicals,
and antioxidants in your body). 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 product development pipeline is as follows:
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AIS Phase 2/3 ReMEDy2 Trial
We are currently conducting our ReMEDy2 clinical trial of DM199 for the treatment of AIS. ReMEDy2 clinical trial is a
Phase 2/3, adaptive design, randomized, double-blind, placebo-controlled trial intended to enroll approximately 350
patients at up to 100 sites globally. Patients enrolled in the trial will be treated with either DM199 or placebo within 24
hours of the onset of AIS symptoms. The trial excludes patients treated with tissue plasminogen activator (tPA), a
thrombolytic agent intended to dissolve blood clots, and those with large vessel occlusions. The study population is
representative of the approximately 80% of AIS patients who do not have treatment options today, primarily due to the
limitations on treatment with tPA and/or mechanical thrombectomy. The primary endpoint of the ReMEDy2 trial is
physical recovery from stroke as measured by the well-established modified Rankin Scale (mRS) at day 90, specifically
recovering to an mRS score of 0-1 (mRS range of 0-6). We believe that the proposed trial has the potential to serve as a
pivotal registration study of DM199 in this patient population.
We voluntarily paused participant enrollment in the ReMEDy2 trial in May 2022 to investigate three unexpected instances
of clinically significant hypotension (low blood pressure) occurring shortly after initiation of the intravenous (IV) dose of
DM199. The acutely low blood pressure levels in the three participants recovered back to their baseline blood pressure
within minutes after the IV infusion was stopped, and the participants suffered no injuries. On July 6, 2022, we announced
that the FDA placed a clinical hold on the investigational new drug application (IND) for our ReMEDy2 trial and the
clinical hold was subsequently lifted in June 2023. In our request for lifting of the clinical hold, we submitted to the FDA
in-vitro data supporting that the cause of the hypotensive events was likely related to switching to a new type of IV bag for
use in the ReMEDy2 trial, as well as results of an additional in-use, in vitro stability study of all of the materials and
equipment used in the IV administration of DM199, which included testing the combination of the IV bag, IV tubing and
mechanical infusion pump, to further rule out any other cause of the hypotension events. We also modified the protocol to
mitigate the risk of future hypotensive events, including a reduction in the DM199 dose level for the initial IV dose to
effectively match the well tolerated IV dose administered in the ReMEDy1 trial.
Concurrently with performing the requested in-use study, we also conducted a Phase 1C open label, single ascending dose
(SAD) study of DM199 administered with the PVC IV bags used in the ReMEDy2 trial. The purpose of the study was to
confirm, with human data, the DM199 blood concentration levels achieved with the IV dose and further evaluate safety and
tolerability. We also included a cohort of hypertensive patients being treated with ACEi prior to enrolling. All ACEi
patients received the full IV dose at the 0.5 µg/kg level with no instances of hypotension. We believe that these results
provide further assurance to potential investigators that ACEi patients may be safely included in the ReMEDy2 trial.
Prior to the clinical hold of our ReMEDy2 trial, we had experienced slower than expected site activations and enrollment in
our ReMEDy2 trial and may continue to experience these conditions as we activate additional clinical sites and enroll
participants. We believe this was due primarily to clinical staff shortages resulting from layoffs and employee burnout, the
reallocation of clinical nurses to COVID-19 care, particularly during surges in COVID-19 cases, a loss of study
coordinators resulting from budget constraints and COVID-19 vaccination requirements and concerns managing logistics
and protocol compliance for participants discharged from the hospital to an intermediate care facility. In an effort to
mitigate the impact of these factors, we have worked with our contract research organization to develop alternative
procedures to support study sites and potential participants as needed. We intend to continue to monitor the results of these
efforts or implement additional actions to mitigate the impact of these factors on our ReMEDy2 trial, however no
assurances can be provided as to if and when these issues will resolve.
Cardio Rental Program
We plan to disclose additional data related to blood pressure control as part of supporting our plans for our cardio renal
program, which we expect to disclose in 2024.
DM300
We have also produced a potential novel treatment for severe inflammatory diseases, DM300, which is currently in the
early preclinical stage of development.
63
Financial Overview
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 of warrants and stock options, interest income on funds available for investment
and government grants. We have incurred losses in each year since our inception. Our net losses were $19.4 million and
$13.7 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an
accumulated deficit of $115.6 million. Substantially all of our operating losses resulted from expenses incurred in
connection with our product candidate development programs, our primary R&D activities, and general and administrative
(G&A) support costs associated with our operations and status as a publicly listed company.
We expect to continue to incur significant expenses and increased operating losses for at least the next several years. We
anticipate that our quarterly expenses will increase relative to recent prior periods as we expand our ReMEDy2 trial
globally and enrollment increases. Our efforts to expand our team to provide support for our operations and maintaining,
expanding and protecting our intellectual property portfolio will also likely contribute to such increases.
While we expect our rate of future negative cash flow per month will generally increase as we globally expand our
ReMEDy2 trial, we expect our current cash resources will be sufficient to allow us to continue our ReMEDy2 trial and
otherwise fund our planned operations for at least the next 12 months from the date of issuance of the consolidated financial
statements included in this report. However, the amount and timing of our future funding requirements will depend on
many factors, including the timing and results of our ongoing development efforts, and the global expansion of our
ReMEDy2 trial, specifically the rate of site activations and enrollment, the ongoing effects on our trial of COVID-19,
including site staffing shortages, and competition for research staff due to other neurologic trials. Other factors, such as the
potential expansion of our current and new development programs, and operating expenses incurred in connection with
such activities may also contribute to fluctuations in the amount and timing of our future funding requirements. 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 such time. We may elect to raise additional funds even before we need them if market conditions
for raising additional capital are favorable.
Components of Our Results of Operations
Research and Development Expenses
We incurred R&D expenses of $13.1 million and $7.8 million for the years ended December 31, 2023 and 2022,
respectively. R&D expenses consist primarily of fees paid to external service providers such as contract research
organizations; clinical support services; clinical development including clinical site costs; outside nursing services and
laboratory testing; and preclinical trials; fees paid to our contract manufacturing and development organizations and outside
laboratories for development of DM199 and related manufacturing processes; costs for production runs of DM199; salaries,
benefits, share-based compensation; and other personnel costs. Over the past approximately ten 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 clinical stage of our product development programs, we are unable to estimate with any certainty the costs
we will incur in developing DM199 through marketing approval or any of our preclinical development programs. The
process of conducting clinical studies necessary to obtain regulatory approval and manufacturing scale-up to support
expanded development and potential future commercialization is costly and time consuming. Any failure by us or delay in
completing clinical studies, manufacturing scale-up or in obtaining regulatory approvals could lead to increased R&D
expenses and, in turn, have a material adverse effect on our results of operations.
General and Administrative Expenses
We incurred G&A expenses of $8.2 million and $6.2 million for the years ended December 31, 2023 and 2022,
respectively. G&A expenses consist primarily of salaries and related benefits, including share-based compensation related
to our executive, finance, business development and support functions. G&A expenses also include insurance, including
directors and officers liability coverage, rent and utilities, travel expenses, patent costs, and professional fees, including for
auditing, tax and legal.
Other Income, Net
Other income, net consists primarily of interest income earned on marketable securities.
64
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 prepared in accordance with U.S. generally accepted accounting principles. The
preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported
amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical
experience and on various other factors that we believe are reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions and any such 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 the following discussion addresses our most critical accounting policies,
which are those that are most important to the portrayal of our financial condition and results of operations and require our
most difficult, subjective and complex judgments.
Research and Development Costs
R&D costs include expenses incurred in the conduct of human clinical trials such as fees paid to external service providers
such as contract research organizations; clinical support services; clinical development including clinical site costs; outside
nursing services and laboratory testing. R&D costs also include non-clinical research studies; fees paid to contract
manufacturing and development organizations and outside laboratories for the development of DM199 and related
manufacturing processes; and costs to produce sufficient amounts of the DM199 compound for use in our clinical studies;
consulting resources with specialized expertise related to execution of our development plan for our DM199 product
candidate; and personnel costs, including salaries, benefits and share-based compensation.
We charge R&D costs to expense when incurred. Our human clinical trials are performed at clinical trial sites and are
generally administered by us with assistance from contract research organizations (CROs), and include outside service
providers such as outside nursing services, testing laboratories and data coordination and collection. Costs of setting up
clinical trial sites are accrued upon execution of the trial agreement. Expenses related to the performance of clinical trials
are accrued based on contracted amounts and the achievement of agreed upon milestones, such as participant enrollment,
participant follow-up, etc. While we utilize electronic data capture systems to facilitate the transmission and capture of
clinical trial activity, such information is often incomplete or delayed. Therefore we are required to estimate levels of
performance under each significant contract, including, among other things, the extent of participant enrollment, the extent
of supporting services performed and other activities through communications with the clinical trial sites, CROs and
supporting vendors and adjust the estimates, if required, on a quarterly basis so that clinical expenses reflect the actual work
performed at each clinical trial site and by each CRO or supporting vendor.
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 of equity instruments is measured and recognized based on the estimated grant
date fair value of those awards. Compensation cost is recognized ratably using the straight-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 by our common share price, as well as assumptions regarding a number of
complex and subjective variables. Risk-free interest rates are based upon United States Government securities rates
appropriate for the expected term of each award. Expected volatility rates are based on the historical volatility equal to the
expected term 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 is estimated 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.
65
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 the years ended December 31, 2023 and 2022:
Common share fair value ..................................................................................... $1.57 – $3.24
3.5 – 4.6%
Risk-free interest rate ...........................................................................................
Expected dividend yield .......................................................................................
0%
Expected option life (in years) .............................................................................
5.0 – 5.7
Expected stock price volatility ............................................................................. 101.7 – 108.1% 102.1 – 104.0%
2022
$1.47 – $3.88
1.4 – 3.6%
0%
5.0 – 5.6
2023
Results of Operations
Comparison of the Years Ended December 31, 2023 and 2022
The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands):
Research and development expense ............................................................................ $
General and administrative expense ............................................................................
Other income, net ........................................................................................................
13,110 $
8,157
(1,929)
7,839
6,162
(353)
Year Ended December 31,
2023
2022
Research and Development Expenses
R&D expenses increased to $13.1 million for the year ended December 31, 2023, up from $7.8 million in the prior year.
The increase was driven principally by costs incurred for the in-use studies performed to address the recently lifted clinical
hold on our ReMEDy2 AIS trial, costs incurred for the Phase 1C study and increased manufacturing and process
development costs for DM199. Also contributing to the increase were higher personnel costs, including non-cash share-
based compensation, associated with expanding the clinical team. We expect our R&D expenses to increase moderately as
we globally expand the ReMEDy2 trial. The increases will be moderated by the completion of the REDUX and Phase 1C
trials during 2023.
General and Administrative Expenses
G&A expenses were $8.2 million and $6.2 million for the year ended December 31, 2023 and 2022, respectively. This
increase was primarily driven by increased legal fees incurred in connection with our lawsuit against PRA Netherlands and
increased personnel costs incurred in conjunction with expanding our team. Increased costs for patent prosecution and non-
cash share-based compensation also contributed to the increase. We expect that G&A expenses will remain steady or
decline slightly as compared to prior periods.
Other Income, Net
Other income, net, was $1.9 million for the year ended December 31, 2023 compared to $0.4 million for 2022. This
increase was driven by increased interest income recognized during 2023 as compared to 2022, related to both higher
interest rates and increased marketable securities balances during 2023.
66
Liquidity and Capital Resources
The following tables summarize our liquidity and capital resources as of December 31, 2023 and 2022 and cash flows for
each of the years ended December 31, 2023 and 2022, and are intended to supplement the more detailed discussion that
follows (in thousands):
Liquidity and Capital Resources
December 31,
2023
December 31,
2022
Cash, cash equivalents and marketable securities .................................................... $
Total assets ..............................................................................................................
Total current liabilities .............................................................................................
Total shareholders’ equity .......................................................................................
Working capital .......................................................................................................
52,895 $
54,160
2,786
51,057
50,889
33,502
34,395
2,168
31,827
31,667
Cash Flow Data
Cash flow provided by (used in):
Year Ended December 31,
2023
2022
Operating activities .............................................................................................. $
Investing activities ...............................................................................................
Financing activities ..............................................................................................
Net increase (decrease) in cash and cash equivalents .............................................. $
(18,728) $
(18,299)
36,842
(185) $
(11,511)
11,538
(6)
21
Liquidity and Capital Resources
We had cash, cash equivalents and marketable securities of $52.9 million, current liabilities of $2.8 million and working
capital of $50.9 million as of December 31, 2023, compared to $33.5 million in cash, cash equivalents and marketable
securities, $2.2 million in current liabilities and $31.7 million in working capital as of December 31, 2022. The increases in
our combined cash, cash equivalents and marketable securities and in our working capital were due primarily to the net
proceeds received from our April and June 2023 private placements, partially offset by cash used to fund our operations.
Cash Flows
Operating Activities
Net cash used in operating activities for the year ended December 31, 2023 was $18.7 million compared to $11.5 million
for the year ended December 31, 2022. The increase in cash used in operating activities is driven primarily by our higher
net loss and increased amortization of discounts on purchased marketable securities, partially offset by non-cash share-
based compensation and the effects of the changes in operating assets and liabilities during 2023.
Investing Activities
Investing activities consist primarily of purchases and maturities of marketable securities. Net cash used in investing
activities was $18.3 million for the year ended December 31, 2023 compared to net cash provided by investing activities of
$11.5 million for the year ended December 31, 2022. This change resulted primarily from the timing of maturities and, in
the current year, investments of the net proceeds from our June 2023 private placement.
Financing Activities
Net cash provided by financing activities was $36.8 million for the year ended December 31, 2023 consisting primarily of
net proceeds from the sale of common shares in our April and June 2023 private placements. For the year ended December
31, 2022, net cash used in financing activities of $6,000 was comprised entirely of principal payments on finance lease
obligations.
67
Capital Requirements
Since our inception, we have incurred losses while advancing the R&D of our DM199 product candidate. We have not
generated any revenues from product sales and do not expect to do so for at least three to four years. We do not know when
or if, we will generate any revenues from product sales or out-licensing of our DM199 product candidate or any future
product candidate. We do not expect to generate any revenue from product sales unless and until we obtain regulatory
approval. We expect to continue to incur substantial operating losses until such time as any future product sales, licensing
fees, milestone payments and/or royalty payments are sufficient to generate revenues to fund our continuing operations. We
expect our operating losses to increase as compared to prior periods as we continue the research, development and clinical
studies of, and seek regulatory approval for, our DM199 product candidate, including, in particular, the resumption and
global expansion of our ReMEDy2 trial. In the long-term, subject to obtaining regulatory approval of our DM199 product
candidate, or any future product candidate, and in the absence of the assistance of a strategic partner, we expect to incur
significant commercialization expenses for product sales, marketing, manufacturing and distribution.
Accordingly, and notwithstanding the completion of our April and June 2023 private placements from which we received
aggregate net proceeds of $36.8 million, we expect we will need substantial additional capital to further our R&D activities,
current and anticipated future clinical studies, regulatory activities and otherwise develop our product candidate, DM199, or
any future product candidate, to a point where the product candidate may be out-licensed or commercially sold. Although
we are striving to achieve these plans, there is no assurance that these and other strategies will be achieved or that
additional funding will be obtained on favorable terms or at all. We expect our rate of future negative cash flow per month
will vary depending on our clinical activities and the timing of expenses incurred and will increase as we resume and
globally expand our ReMEDy2 trial. We expect our current cash resources will be sufficient to continue our ReMEDy2 trial
and otherwise fund our planned operations for at least the next twelve months from the date of issuance of the consolidated
financial statements included in this report. However, the amount and timing of our future funding requirements will
depend on many factors, including the timing and results of our ongoing development efforts, and specifically our
ReMEDy2 trial, the rate of site activation and enrollment in such trial, the effects on such trial of COVID-19, site staffing
shortages, competition for research staff and trial subjects due to other stroke trials, and other factors, as well as the
potential expansion of our current and potential new development programs, and operating expenses incurred in connection
with such activities. 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 such time, especially if market conditions for raising additional
capital are favorable.
Historically, we have financed our operations primarily from sales of equity securities and the exercise of warrants and
stock options, and we expect to continue this practice for the foreseeable future. Our most recent equity financing was our
June 2023 private placement in which we issued and sold an aggregate of 11,011,406 common shares pursuant to a
securities purchase agreement at a purchase price of $3.40 per share to accredited investors, or $3.91 per share in the case
of our participating directors and officers. As a result of the offering, we received gross proceeds of $37.5 million, which
resulted in net proceeds to us of approximately $36.1 million, after deducting offering expenses. We do not have any
existing credit facilities under which we could borrow funds. We may seek to raise additional funds through various
sources, such as equity or debt financings, or through strategic collaborations and license agreements. We can give no
assurances that we will be able to secure additional sources of funds to support our operations, 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 if our 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. Debt financing, if available, may involve agreements that include conversion discounts,
pledging our intellectual property as collateral or covenants limiting or restricting our ability to take specific actions, such
as incurring additional debt or making capital expenditures. If we raise additional funds through government or other third-
party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing
arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams,
research programs or product candidates or grant licenses on terms that may not be favorable to us. The availability of
financing will be affected by our clinical data and other results of scientific and clinical research; the ability to attain
regulatory approvals and other regulatory actions; market acceptance of our product candidates; the state of the capital
markets generally with particular reference to pharmaceutical, biotechnology and medical companies; the status of strategic
alliance agreements; and other relevant commercial considerations.
68
If adequate funding is not available when needed, we may be required to scale back our operations by taking actions that
may include, among other things, implementing cost reduction strategies, such as reducing use of outside professional
service providers, reducing the number of our employees or employee compensation, modifying or delaying the
development of our DM199 product candidate; licensing to third parties the rights to commercialize our DM199 product
candidate for AIS, CRD or other indications that we would otherwise seek to pursue, or otherwise relinquishing significant
rights to our technologies, future revenue streams, research programs or product candidates or granting licenses on terms
that may not be favorable to us; and/or divesting assets or ceasing operations through a merger, sale, or liquidation of our
company.
Commitments and Contingencies
In the normal course of business, we incur obligations to make future payments as we execute our business plan. These
obligations may relate to preclinical or clinical studies, manufacturing or manufacturing process development and other
related or supporting activities. Currently, these obligations include costs to be incurred with contract research
organizations, central laboratory and pharmacy services, clinical study sites, home nursing services, various other vendors
supporting the performance of our clinical trials and contract manufacturing and development organizations. The contracts
we enter into with these vendors and the commitments within these contracts are subject to significant variability based
upon the actual activities/services performed by each vendor. As a result, the ultimate amounts due may be materially
different as these obligations are affected by, among other factors, the number and pace of clinical study sites activated, the
number of participants enrolled, the amount of time to complete trial enrollment and the time required to finalize, analyze
and report our clinical trial results. Clinical research agreements are generally cancelable upon up to 60-90 days’ notice,
with our obligation limited to costs incurred up to that date, including any non-cancelable costs. Cancelation terms for
product manufacturing and process development contracts vary and are generally dependent upon timelines for sourcing
research materials and reserving laboratory time. As of December 31, 2023, we estimate that our outstanding commitments,
including such cancellable contracts, are approximately $15.3 million over the next 12 months and approximately $12.5
million in the following 12 months.
As of December 31, 2023, we had future operating lease obligation totaling approximately $396,000 over the remainder of
the lease, of which approximately $80,000 is due over the next 12 months.
We have entered into a license agreement with Catalent Pharma Solutions, LLC (Catalent) whereby we have licensed
certain gene expression technology and we contract with Catalent for the manufacture of DM199. Under the terms of this
license, certain milestone and royalty payments may become due under this agreement and are dependent upon, among
other factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and
timing of which is uncertain As of December 31, 2023, one milestone payment obligation remains which is tied to the first
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 indefinite 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 make required milestone and royalty payments.
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.
69
Item 8.
Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 23) ......................................................
Consolidated Balance Sheets as of December 31, 2023 and 2022 ................................................................................
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2023
Page
71
72
and 2022 ....................................................................................................................................................................
73
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2023 and 2022 .........................
74
75
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 ........................................
Notes to Consolidated Financial Statements ................................................................................................................. 76-88
70
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of DiaMedica 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, 2023 and 2022, the related consolidated statements of operations and comprehensive loss,
shareholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its
cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required 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 and Exchange 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 assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, 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 financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved or are especially challenging, subjective, or complex judgments. We determined that
there are no critical audit matters.
/s/ Baker Tilly US, LLP
We have served as the Company’s auditor since 2018.
Minneapolis, MN
March 19, 2024
71
DiaMedica Therapeutics Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
December 31,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents ...................................................................................... $
Marketable securities .............................................................................................
Prepaid expenses and other assets ..........................................................................
Amounts receivable ................................................................................................
Total current assets ......................................................................................
Non-current assets:
Operating lease right-of-use asset ..........................................................................
Property and equipment, net ...................................................................................
Total non-current assets ...............................................................................
4,543 $
48,352
411
369
53,675
354
131
485
4,728
28,774
251
82
33,835
424
136
560
Total assets .................................................................................................. $
54,160 $
34,395
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable ................................................................................................... $
Accrued liabilities ..................................................................................................
Finance lease obligation .........................................................................................
Operating lease obligation ......................................................................................
Total current liabilities ................................................................................
Non-current liabilities:
Finance lease obligation, non-current ....................................................................
Operating lease obligation, non-current .................................................................
Total non-current liabilities .........................................................................
Commitments and contingencies (Note 10)
Shareholders’ equity:
Common shares, no par value; unlimited authorized; 37,958,000 and 26,443,067
shares issued and outstanding, as of December 31, 2023 and 2022,
respectively .........................................................................................................
Paid-in capital ........................................................................................................
Accumulated other comprehensive income (loss) ..................................................
Accumulated deficit ...............................................................................................
Total shareholders’ equity ...........................................................................
Total liabilities and shareholders’ equity ............................................................... $
926 $
1,777
3
80
2,786
1
316
317
734
1,365
6
63
2,168
4
396
400
—
166,609
6
(115,558)
51,057
54,160 $
—
128,078
(74)
(96,177)
31,827
34,395
See accompanying notes to consolidated financial statements.
72
DiaMedica Therapeutics Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
Year Ended December 31,
2023
2022
Operating expenses:
Research and development ..................................................................................... $
General and administrative .....................................................................................
Total operating expenses .............................................................................
13,110 $
8,157
21,267
7,839
6,162
14,001
Operating loss ........................................................................................................
(21,267)
(14,001)
Other income:
Other income, net ...................................................................................................
Total other income, net ...................................................................................
1,929
1,929
353
353
Loss before income tax expense .................................................................................
(19,338)
(13,648)
Income tax expense ................................................................................................
(43)
(28)
Net loss .......................................................................................................................
(19,381)
(13,676)
Other comprehensive income (loss)
Unrealized gain (loss) on marketable securities .....................................................
80
(23)
Net loss and comprehensive loss ................................................................................ $
(19,301) $
(13,699)
Basic and diluted net loss per share ............................................................................ $
Weighted average shares outstanding – basic and diluted .....................................
(0.60) $
32,566,723
(0.52)
26,443,067
See accompanying notes to consolidated financial statements.
73
DiaMedica Therapeutics Inc.
Consolidated Statements of Shareholders’ Equity
(In thousands, except share amounts)
Common
Shares
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Shareholders’
Equity
Balances at December 31, 2021 ..... 26,443,067 $
126,576 $
(51 ) $
(82,501 ) $
44,024
Share-based compensation
expense ......................................
—
1,502
—
—
1,502
Unrealized loss on marketable
securities ....................................
Net loss .........................................
—
—
Balances at December 31, 2022 ..... 26,443,067 $
—
—
128,078 $
(23 )
—
(74 ) $
—
(13,676 )
(96,177 ) $
(23)
(13,676)
31,827
Issuance of common shares, net of
offering costs of $1.4 million .... 11,480,156
36,848
—
—
36,848
Issuance of common shares in
settlement of deferred stock
units ...........................................
Issuance of common shares in
settlement of restricted stock
units ...........................................
Share-based compensation
17,621
—
—
—
17,156
—
expense ......................................
—
1,683
Unrealized gain on marketable
securities ....................................
Net loss .........................................
—
—
Balances at December 31, 2023 ..... 37,958,000 $
—
—
166,609 $
—
—
80
—
6 $
—
—
—
(19,381 )
(115,558 ) $
—
—
1,683
80
(19,381)
51,057
See accompanying notes to consolidated financial statements.
74
DiaMedica Therapeutics Inc.
Consolidated Statements of Cash Flows
(In thousands, except share amounts)
Year Ended December 31,
2023
2022
(19,381) $
(13,676 )
1,502
(11 )
64
25
48
(54 )
225
366
(11,511 )
(45,684 )
57,303
(81 )
11,538
—
(6 )
(6 )
21
4,707
4,728
27
446
Cash flows from operating activities:
Net loss ........................................................................................................................ $
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation ...........................................................................................
Amortization of discounts on marketable securities ....................................................
Non-cash lease expense ...............................................................................................
Depreciation .................................................................................................................
Changes in operating assets and liabilities:
Amounts receivable ..............................................................................................
Prepaid expenses and other assets ........................................................................
Accounts payable ..................................................................................................
Accrued liabilities .................................................................................................
Net cash used in operating activities .................................................................
Cash flows from investing activities:
Purchase of marketable securities ................................................................................
Maturities of marketable securities ..............................................................................
Purchase of property and equipment ............................................................................
Net cash provided by (used in) investing activities ...........................................
Cash flows from financing activities:
Proceeds from issuance of common shares, net of offering costs ................................
Principal payments on finance lease obligations .........................................................
Net cash provided by (used in) financing activities ..........................................
Net increase (decrease) in cash and cash equivalents ......................................................
Cash and cash equivalents at beginning of period ...........................................................
Cash and cash equivalents at end of period ..................................................................... $
1,683
(1,223)
70
30
(287)
(160)
192
348
(18,728)
(69,410)
51,135
(24)
(18,299)
36,848
(6)
36,842
(185)
4,728
4,543 $
Supplemental disclosure of cash flow information:
Cash paid for income taxes ...................................................................................... $
Assets acquired under operating lease ...................................................................... $
33 $
— $
See accompanying notes to consolidated financial statements.
75
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 our proprietary recombinant KLK1 protein called DM199, for the treatment of neurological
and cardio-renal diseases. Currently, our primary focus is on developing DM199, a recombinant form of the human tissue
kallikrein-1 (KLK1) protein, for the treatment of acute ischemic stroke (AIS) and cardio-renal disease (CRD). Our parent
company is governed under British Columbia’s Business Corporations Act, and our common shares are publicly traded on
The Nasdaq Capital Market under the symbol “DMAC.”
2.
Risks and Uncertainties
DiaMedica operates in a highly regulated and competitive environment. The development, manufacturing and marketing of
pharmaceutical products require approval from, and are subject to ongoing oversight by, the United States Food and Drug
Administration (FDA) in the United States, the European Medicines Agency (EMA) in the European Union and
comparable agencies in other countries. We are in the clinical stage of development of our initial product candidate,
DM199, for the treatment of AIS and CRD. We have not completed the development of any product candidate and do not
generate any revenues from the commercial sale of any product candidate. DM199 requires significant additional clinical
testing and investment prior to seeking marketing approval and is not expected to be commercially available for at least
three years, if at all.
On July 6, 2022, we announced that the FDA placed a clinical hold on the investigational new drug application (IND) for
our Phase 2/3 ReMEDy2 trial. The clinical hold was issued following us voluntarily pausing participant enrollment in the
trial to investigate three unexpected instances of clinically significant hypotension (low blood pressure) occurring shortly
after initiation of the intravenous (IV) dose of DM199. In September 2022, we submitted our analysis of the events leading
to and causing the hypotensive events, and proposed protocol modifications to address the mitigation of these events for
future trial participants. Following review of this analysis, the FDA informed us that they were continuing the clinical hold
and requesting, among other items, an additional in-use in vitro stability study of the IV administration of DM199, which
includes testing the combination of the IV bag, IV tubing and mechanical infusion pump, to further rule out any other cause
of the hypotension events. The requested in-use study was completed at an independent laboratory and the results were
substantially consistent with our earlier testing of the IV bags. In May 2023, these additional supporting data were
submitted to the FDA in our clinical hold response. In June 2023, the FDA completed review of our clinical hold response
and informed us that the clinical hold was removed allowing us to resume our Phase 2/3 ReMEDy2 trial.
Prior to the clinical hold of our ReMEDy2 trial, we had experienced slower than expected site activations and enrollment in
our ReMEDy2 trial and may continue to experience these conditions as we activate additional clinical sites and enroll
participants. We believe this was due primarily to clinical staff shortages resulting from layoffs and employee burnout, the
reallocation of clinical nurses to COVID-19 care, particularly during surges in COVID-19 cases, a loss of study
coordinators resulting from budget constraints and COVID-19 vaccination requirements and concerns managing logistics
and protocol compliance for participants discharged from the hospital to an intermediate care facility. In an effort to
mitigate the impact of these factors, we have worked with our contract research organization to develop alternative
procedures to support study sites and potential participants as needed. We intend to continue to monitor the results of these
efforts or implement additional actions to mitigate the impact of these factors on our ReMEDy2 trial, however no
assurances can be provided as to if and when these issues will resolve.
Our future success is dependent upon the success of our development efforts, our ability to demonstrate clinical progress
for our DM199 product candidate in the United States or other markets, our ability, or the ability of any future partner, to
obtain required governmental approvals of our product candidate, our ability to license or market and sell our DM199
product candidate and our ability to obtain additional financing to fund these efforts.
As of December 31, 2023, we have incurred losses of $115.6 million since our inception in 2000. For the year ended
December 31, 2023, we incurred a net loss of $19.4 million and negative cash flows from operating activities of $18.7
million. We expect to continue to incur operating losses until such time as any future product sales, licensing fees,
milestone payments and/or royalty payments generate revenue sufficient to fund our continuing operations. For the
foreseeable future, we expect to incur significant operating losses as we continue the development and clinical study of, and
76
to seek regulatory approval for, our DM199 product candidate. As of December 31, 2023, we had combined cash, cash
equivalents and marketable securities of $52.9 million, working capital of $50.9 million and shareholders’ equity of $51.1
million.
Our principal source of cash has been net proceeds from the issuance of equity securities. Although we have previously
been successful in obtaining financing through equity securities offerings, there is 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 if 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 studies, regulatory activities and manufacturing development for our product candidate, DM199, or any
future product candidates, to a point where they may be licensed or commercially sold. We expect our current cash, cash
equivalents and marketable securities to continue our ReMEDy2 trial and otherwise fund our planned operations for at least
the next 12 months from the date of issuance of these consolidated financial statements. The amount and timing of our
future funding requirements will depend on many factors, including timing and results of our ongoing development efforts,
including our current ReMEDy2 trial and the rate of site activation and enrollment in the study, the potential expansion of
our current development programs, potential new development programs, the effects of COVID-19, staffing shortages and
other factors on our clinical trials and our operating expenses. 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 such time, especially if
market conditions for raising capital are favorable.
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 factors including the currency of historical and future expenditures and the
currency in which funds from financing activities are mostly generated by the Company. A change in the functional
currency occurs only when there is a material change in the underlying transactions, events and condition. A change in
functional currency could result in material differences in the amounts recorded in the consolidated statements of operations
and comprehensive loss for foreign exchange gains and losses. All amounts in the accompanying 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 management to make estimates and assumptions that affect the amounts reported in the
financial statements and the accompanying notes. Actual results could differ from those estimates.
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 months or 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.
Marketable securities
The Company’s marketable securities may consist of obligations of the United States government and its agencies, bank
certificates of deposit and/or investment grade corporate obligations, which are classified as available-for-sale. Marketable
securities which mature within 12 months from their date of purchase are included in current assets. Securities are valued
based on market prices for similar assets using third party certified pricing sources. Available-for-sale securities are carried
at fair value. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization or accretion is included in interest income. Realized gains and losses, if any, are calculated on
the specific identification method and are included in other income in the consolidated statements of operations.
77
We conduct periodic reviews to identify and evaluate each available-for-sale debt security that is in an unrealized loss
position in order to determine whether an other-than-temporary impairment exists. An unrealized loss exists when the
current fair value of an individual security is less than its amortized cost basis. Declines in fair value considered to be
temporary and caused by noncredit-related factors, are recorded in accumulated other comprehensive loss, which is a
separate component of shareholders’ equity. Declines in fair value that are other than temporary or caused by credit-related
factors, are recorded within earnings as an impairment loss. There were no other-than-temporary unrealized losses as of
December 31, 2023.
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. The Company maintains its cash balances primarily with two financial institutions.
These balances generally exceed federally insured limits. The Company has not experienced 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
credit risk related to marketable securities is limited due to the adherence to an investment policy focused on the
preservation of principal.
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 to transfer a liability in an orderly transaction between market participants as of
the measurement date. The authoritative guidance also establishes a hierarchy for inputs used 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 be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability
developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that
reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability
developed based upon the best information available in the circumstances. The categorization of financial assets and
financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value
measurement.
The hierarchy is broken down into three levels defined as follows:
Level 1 Inputs — quoted prices in active markets for identical assets and liabilities
Level 2 Inputs — observable inputs other than quoted prices in active markets for identical assets and liabilities
Level 3 Inputs — unobservable inputs
As of December 31, 2023, the Company believes that the carrying amounts of its other financial instruments, including
amounts receivable, accounts payable and accrued liabilities, approximate their fair value due to the short-term maturities
of these instruments. See Note 4, titled “Marketable Securities” for additional information.
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 method over 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 related accumulated 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 may not 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.
Leases
We determine if an arrangement is a lease at inception. We have made a policy election to not separate lease and non-lease
components for our real estate leases to the extent they are fixed. Non-lease components that are not fixed are expensed as
incurred as variable lease expense. Our facility lease includes variable non-lease components, such as common-area
maintenance costs. Our operating lease is included in operating lease right-of-use (“ROU”) asset and operating lease
obligations on our consolidated balance sheets. Our operating lease ROU asset represents our right to use an underlying
78
asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the
lease. The operating lease ROU asset and operating lease obligation are recognized based on the present value of lease
payments over the lease term. The 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 incremental
borrowing rate. The operating lease ROU asset excludes lease incentives. Our lease includes an option to extend or
terminate the lease; lease terms are only adjusted for these options when it is reasonably certain that we will exercise such
options to extend or terminate the lease. Lease expense is recognized on a straight-line basis over the lease term.
Assumptions made by us at the commencement date are re-evaluated upon occurrence of certain events, including a lease
modification. A lease modification results in a separate contract when the modification grants the lessee an additional right
of use not included in the original lease and when lease payments increase commensurate with the standalone price for the
additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a
new lease.
Research and development costs
Research and development (R&D) costs include expenses incurred in the conduct of human clinical trials such as fees paid
to external service providers such as contract research organizations; clinical support services; clinical development
including clinical site costs; outside nursing services and laboratory testing. R&D costs also include non-clinical research
studies; fees paid to contract manufacturing and development organizations and outside laboratories for the development of
DM199 and related manufacturing processes; and costs to produce sufficient amounts of the DM199 compound for use in
our clinical studies; consulting resources with specialized expertise related to execution of our development 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 are administered jointly by us with assistance from various contract research
organizations. Costs of setting up clinical trial sites are accrued upon execution of the study agreement. Expenses related to
the performance of clinical trials are recorded or accrued based on actual invoices received and estimates of work
completed to date by clinical trial sites, contract research organizations and outside vendors that assist with management
and performance of the trials, and those that manufacture the investigational product. While we utilize electronic data
capture systems to facilitate the transmission and capture of clinical trial activity, such information is often incomplete or
delayed. Therefore we are required to estimate the levels of performance under each significant contract, including, among
other things, the extent of participant enrollment, the extent of supporting services performed and other activities through
communications with the clinical trial sites, CROs and supporting vendors and adjust the estimates, if required, on a
quarterly basis so that clinical expenses reflect the actual work performed at each clinical trial site and by each CRO or
supporting vendor. Additionally, actual costs may be charged to us and are recognized as the tasks are completed by the
clinical trial site. Accrued R&D costs may be subject to revisions as clinical trials, non-clinical research and DM199
development programs 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, the resulting probable future economic benefit to the Company. Patent-related costs,
consisting primarily of legal expenses and filing/maintenance fees, are included in general and administrative costs and
were $318,000 and $146,000 for the years ended December 31, 2023 and 2022, 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 date fair value of those awards. Compensation cost is recognized ratably using the
straight-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 option awards is estimated at the date of grant using the Black-Scholes option pricing model. The
determination of the fair value of share-based awards 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 United States Government bond rates
appropriate for the expected term of each award. Expected volatility rates are based on the historical volatility over a period
equal to the expected term of the option. The assumed dividend yield is zero, as we do not expect to declare any dividends
79
in the foreseeable future. The expected term of options is estimated 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.
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 consequences attributable to differences between the consolidated financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and operating loss 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 and liabilities of a change in tax rates is recognized in operations in
the period that includes the enactment date. Valuation allowances are established when necessary to reduce 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 tax assets as of December 31, 2023 and 2022. See Note 14, “Income Taxes” for additional
information. The Company’s policy is to classify interest and penalties related to income taxes as income tax expense.
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 the period. 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. The computation 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
additional common 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 the exclusion 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):
Net loss ........................................................................................................................ $
Weighted average shares outstanding—basic and diluted ...........................................
Basic and diluted net loss per share ............................................................................. $
Year Ended December 31,
2023
(19,381) $
32,566,723
(0.60) $
2022
(13,676)
26,443,067
(0.52)
The following outstanding potential common shares were not included in the diluted net loss per share calculations as their
effects were not dilutive:
Employee and non-employee stock options ................................................................
Common shares issuable under common share purchase warrants .............................
Common shares issuable upon settlement of deferred stock units ..............................
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Year Ended December 31,
2023
3,871,013
—
213,905
4,084,918
2022
2,782,248
265,000
134,402
3,181,650
In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, Financial Instruments – Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of
expected credit losses for financial assets held at amortized cost. This ASU replaces the existing incurred loss impairment
model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit
losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a
reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. The
standard was effective for smaller reporting companies in fiscal years beginning after December 15, 2022 with early
adoption permitted for all periods beginning after December 15, 2018. We adopted ASU No. 2016-13 on January 1, 2023,
which did not have an impact on our consolidated financial statements.
80
4. Marketable Securities
The available-for-sale marketable securities are primarily comprised of investments in commercial paper, corporate bonds
and government securities and consist of the following, measured at fair value on a recurring basis (in thousands):
Fair Value Measurements as of
December 31, 2023
Using Inputs Considered as
Commercial paper and corporate bonds ............................... $
Government securities ..........................................................
Total marketable securities ................................................... $
Fair Value Level 1
21,764 $
26,588
48,352 $
— $
—
— $
Level 2
Level 3
21,764 $
26,588
48,352 $
—
—
—
Commercial paper and corporate bonds ............................... $
Government securities ..........................................................
Total marketable securities ................................................... $
Fair Value Measurements as of
December 31, 2022
Using Inputs Considered as
Level 2
Level 3
Fair Value Level 1
14,209 $
14,565
28,774 $
— $
—
— $
14,209 $
14,565
28,774 $
—
—
—
Accrued interest receivable on available-for-sale securities was $298,000 and $80,000 for the years ended December 31,
2023 and 2022, respectively, 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, 2023.
Under the terms of the Company’s investment policy, purchases of marketable securities are limited to investment grade
governmental and corporate obligations and bank certificates of deposit with a primary objective of principal preservation.
Maturities of individual securities are less than one year, and the amortized cost of all securities approximated fair value as
of December 31, 2023 and 2022.
5.
Amounts Receivable
Amounts receivable consisted of the following (in thousands):
Accrued interest receivable on marketable securities ...................................................... $
Other ................................................................................................................................
Total amounts receivable ......................................................................................... $
298 $
71
369 $
80
2
82
December 31,
2023
December 31,
2022
6.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets consisted of the following (in thousands):
December 31,
2023
December 31,
2022
Advances to vendors ....................................................................................................... $
Prepaid expenses .............................................................................................................
Total prepaid expenses and other assets ................................................................... $
317 $
94
411 $
42
209
251
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 the Company
through partial reductions of ongoing invoices, application against final study/project invoices or refunded upon completion
of services to be provided. Deposits are classified as current or non-current based upon their expected recovery time.
81
7.
Property and Equipment
Property and equipment consisted of the following (in thousands):
December 31,
2023
December 31,
2022
Furniture and equipment ................................................................................................. $
Computer equipment .......................................................................................................
Leasehold Improvements ................................................................................................
Less accumulated depreciation ........................................................................................
Property and equipment, net ..................................................................................... $
128 $
87
16
231
(100 )
131 $
124
76
16
216
(80)
136
Depreciation expense was $30,000 and $25,000 for each of the years ended December 31, 2023 and 2022, respectively.
During 2023 and 2022, we disposed of $10,000 and $12,000 of equipment, respectively.
8.
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
Accrued compensation ....................................................................................................
Accrued research and other professional fees .................................................................
Accrued clinical trial costs ..............................................................................................
Accrued other liabilities ..................................................................................................
Total accrued liabilities ............................................................................................ $
766
730
258
23
1,777 $
667
215
472
11
1,365
December 31,
2023
December 31,
2022
9. Operating Lease
In June 2022, we entered into an agreement to lease approximately 6,000 square feet of office space in Minneapolis,
Minnesota, near our former office space. The lease commencement date was September 1, 2022, has a term of 65 months
expiring on January 31, 2028 and includes an incentive of five months of full rent abatement. This incentive is subject to
repayment if we default in performance of any material obligations under the lease prior to the 48th month of the lease and
the landlord terminates the lease. Upon lease commencement, the Company recognized an operating lease right-of-use asset
and a corresponding operating lease obligation of $446,000, respectively.
Our operating lease costs were $104,000 and $78,000 for the years ended December 31, 2023 and 2022, respectively. Our
variable lease costs were $92,000 and $25,000 for the years ended December 31, 2023 and 2022, respectively. Variable
lease costs consist primarily of common 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, 2023 (in thousands):
2024 ...............................................................................................................................................................
2025 ...............................................................................................................................................................
2026 ...............................................................................................................................................................
2027 ...............................................................................................................................................................
2028 ...............................................................................................................................................................
Total lease payments .................................................................................................................................. $
Less interest portion ...............................................................................................................................
Present value of lease obligation................................................................................................................ $
109
113
116
119
10
467
(71 )
396
82
Former office lease
We leased certain office space under a non-cancelable operating lease that terminated on August 31, 2022, and we did not
renew it. This lease included lease (e.g., fixed rent) and non-lease components (e.g., common-area and other maintenance
costs). The right-of-use asset for this lease was fully amortized as of August 31, 2022.
10. Commitments and Contingencies
Clinical trials and product development
In the normal course of business, we incur obligations to make future payments as we execute our business plan. These
obligations may relate to preclinical or clinical studies, manufacturing or manufacturing process development and other
related or supporting activities. Currently, these obligations include costs to be incurred with contract research
organizations, central laboratory and pharmacy services, clinical study sites, home nursing services, various other vendors
supporting the performance of our clinical trials and contract manufacturing and development organizations. The contracts
we enter into with these vendors and the commitments within these contracts are subject to significant variability based
upon the actual activities/services performed by each vendor. As a result, the ultimate amounts due may be materially
different as these obligations are affected by, among other factors, the number and pace of clinical study sites activated, the
number of participants enrolled, the amount of time to complete trial enrollment and the time required to finalize, analyze
and report our clinical trial results. Clinical research agreements are generally cancelable upon up to 60-90 days’ notice,
with our obligation limited to costs incurred up to that date, including any non-cancelable costs. Cancelation terms for
product manufacturing and process development contracts vary and are generally dependent upon timelines for sourcing
research materials and reserving laboratory time. As of December 31, 2023, we estimate that our outstanding commitments,
including such cancellable contracts, are approximately $15.3 million over the next 12 months and approximately $12.5
million in the following 12 months.
Technology license
We have entered into a license agreement with Catalent Pharma Solutions, LLC (Catalent) whereby we have licensed
certain gene expression technology and we contract with Catalent for the manufacture of DM199. Under the terms of this
license, certain milestone and royalty payments may become due under this agreement and are dependent upon, among
other factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and
timing of which is uncertain. As of December 31, 2023, one milestone payment obligation remains which is due upon our
first regulatory approval of DM199 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 indefinite 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 make required milestone and
royalty payments.
Indemnification of directors and officers
The Company, as permitted under laws of the BCBCA and in accordance with the Company’s Articles and indemnification
agreements, will indemnify and advance expenses 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 has secured 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 the Company. As of December 31, 2023, there was no pending litigation or proceeding involving any director or officer
of the Company 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, officers and controlling persons of
the Company, the Company has been advised that, in the opinion of the United States Securities and Exchange Commission
(SEC), such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. The
Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company had not
recorded any liabilities for these obligations as of December 31, 2023 or 2022.
83
11.
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 general meeting and any extraordinary or special general meeting.
Equity issued during the year ended December 31, 2023
On April 10, 2023, in conjunction with his appointment as Chief Business Officer of DiaMedica, David Wambeke
purchased 468,750 of DiaMedica’s common shares at an aggregate purchase price of $750,000 or $1.60 per share.
On June 21, 2023, we issued and sold an aggregate 11,011,406 common shares pursuant to a securities purchase agreement
at a purchase price of $3.40 per share, or $3.91 per share in the case of our participating directors and officers, in a private
placement. As a result of the offering, we received gross proceeds of $37.5 million, which resulted in net proceeds to us of
approximately $36.1 million, after deducting the offering expenses.
In connection with the June 2023 private placement, we entered into a registration rights agreement (Registration Rights
Agreement) with the investors pursuant to which we agreed to file with the United States Securities and Exchange
Commission (SEC) a registration statement registering the resale of the shares sold in the June 2023 private placement
(Resale Registration Statement). The Resale Registration Statement was filed with the SEC on June 30, 2023 and declared
effective by the SEC on July 7, 2023. Under the terms of the Registration Rights Agreement, we agreed to keep the Resale
Registration Statement effective at all times until the shares are no longer considered “Registrable Securities” under the
Registration Rights Agreement and if we fail to keep the Resale Registration Statement effective, subject to certain
permitted exceptions, we will be required to pay liquidated damages to the investors in an amount of up to 10% of the
invested capital, excluding interest. We also agreed, among other things, to indemnify the selling holders under the Resale
Registration Statement from certain liabilities and to pay all fees and expenses incident to our performance of or
compliance with the Registration Rights Agreement.
During the year ended December 31, 2023, 17,621 common shares were issued in settlement of deferred share units and
17,156 common shares were issued in settlement of restricted stock units.
Equity issued during the year ended December 31, 2022
During the year ended December 31, 2022, we did not issue any common shares or other equity securities, other than stock
options and deferred stock units.
Shares reserved
Common shares reserved for future issuance are as follows:
Employee and non-employee stock options ...............................................................................................
Common shares issuable upon settlement of deferred stock units .............................................................
Common shares issuable under common share purchase warrants ............................................................
Shares available for grant under the Amended and Restated 2019 Omnibus Incentive Plan ....................
Shares available for grant under the 2021 Employment Inducement Incentive Plan .................................
Total ....................................................................................................................................................
December 31,
2023
3,871,013
213,905
—
927,215
395,000
5,407,133
12.
Share-Based Compensation
Amended and Restated 2019 Omnibus Incentive Plan
The DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan (the 2019 Plan) was adopted by the
Board of Directors (Board) on March 10, 2022 and approved by our shareholders at our 2022 Annual General Meeting of
Shareholders held on May 18, 2022.
84
The 2019 Plan permits the Board, or a committee or subcommittee thereof, to grant to the Company’s eligible employees,
non-employee directors and certain consultants non-statutory and incentive stock options, stock appreciation rights,
restricted stock awards, restricted stock units (RSUs), deferred stock units (DSUs), performance awards, non-employee
director awards and other stock-based awards. We grant options to purchase common shares 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 over one to four years. Options granted to non-
employees have a maximum term of five years and generally vest over one year. Subject to adjustment as provided in the
2019 Plan, the maximum number of the Company’s common shares authorized for issuance under the 2019 Plan is
4,000,000 shares. As of December 31, 2023, options to purchase an aggregate of 2,818,103 common shares were
outstanding and 196,572 common shares were reserved for issuance upon settlement of DSUs under the 2019 Plan.
2021 Employment Inducement Incentive Plan
On December 3, 2021, the Board adopted the DiaMedica Therapeutics Inc. 2021 Employment Inducement Incentive Plan
(Inducement Plan) to facilitate the granting of equity awards as an inducement material to new employees joining the
Company. The Inducement Plan was adopted without shareholder approval pursuant to Nasdaq Listing Rule 5635(c)(4) and
is administered by the Compensation Committee of the Board of Directors. The Board reserved 1,000,000 common shares
of the Company for issuance under the Inducement Plan, which permits the grant of non-statutory options, stock
appreciation rights, restricted stock awards, restricted stock units, performance awards and other stock-based awards, to
eligible recipients. The only persons eligible to receive awards under the Inducement Plan are individuals who are new
employees and satisfy the standards for inducement grants under Nasdaq Listing Rule 5635(c)(4) or 5635(c)(3), as
applicable. Also on December 3, 2021, the Compensation Committee adopted a form of notice of option grant and option
award agreement for use under the Inducement Plan, which contains terms substantially identical to the form of notice of
option grant and option award agreement for use under the shareholder-approved 2019 Plan. The Inducement Plan has a
term of 10 years. The share reserve under the Inducement Plan may be increased at the discretion of and approval by the
Board. As of December 31, 2023, options to purchase an aggregate of 605,000 common shares were outstanding under the
Inducement Plan.
Prior 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 conjunction with 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, 2023, options to purchase an
aggregate of 447,910 common shares were outstanding under the Prior Plan.
Prior Deferred Stock Unit Plan
The DiaMedica Therapeutics Inc. Amended and Restated Deferred Stock Unit Plan (Prior DSU Plan) was terminated by the
Board of Directors in conjunction with the shareholder approval of the 2019 Plan. Awards outstanding under the Prior DSU
Plan remain outstanding in accordance with and pursuant to the terms thereof. As of December 31, 2023, there were 17,333
common shares reserved for issuance upon settlement of DSUs outstanding under the Prior DSU Plan.
Share-based compensation expense for each of the periods presented is as follows (in thousands):
Research and development .............................................................................................. $
General and administrative ..............................................................................................
Total share-based compensation .............................................................................. $
619 $
1,064
1,683 $
460
1,042
1,502
We recognize share-based compensation based on the fair value of each award as estimated using the Black-Scholes option
valuation model. Ultimately, the actual expense recognized over the vesting period will only be for those shares that
actually vest.
December 31,
2023
December 31,
2022
85
A summary of option activity is as follows (in thousands except share and per share amounts):
Shares
Underlying
Options
Weighted
Average
Exercise
Price Per
Share
Balances as of December 31, 2021 .....................................................
Granted ........................................................................................
Exercised .....................................................................................
Expired/cancelled ........................................................................
Forfeited ......................................................................................
Balances as of December 31, 2022 .....................................................
Granted ........................................................................................
Exercised .....................................................................................
Expired/cancelled ........................................................................
Forfeited ......................................................................................
Balances as of December 31, 2023 .....................................................
1,896,600 $
1,014,398
—
(68,437)
(60,313)
2,782,248 $
1,172,515
—
(58,750)
(25,000)
3,871,013 $
5.25 $
2.58
—
4.25
11.05
4.12 $
2.59
—
8.08
3.24
3.61 $
Aggregate
Intrinsic Value
169
17
832
A summary of the status of our unvested shares underlying options during the year ended and as of December 31, 2023 is
as follows:
Weighted
Average
Grant Date
Fair
Value Per
Share
Shares
Underlying
Options
Unvested as of December 31, 2022 .................................................................................
Granted .....................................................................................................................
Vested ......................................................................................................................
Forfeited ...................................................................................................................
Unvested as of December 31, 2023 .................................................................................
1,241,137 $
1,172,515
(723,968 )
(25,000 )
1,664,684 $
2.31
2.09
2.38
2.65
2.11
Information about stock options outstanding, vested and expected to vest as of December 31, 2023, is as follows:
Per Share
Exercise
Price
$1.00 - $1.99
$2.00 - $2.99
$3.00 - $3.99
$4.00 - $4.99
$5.00 - $16.00
Outstanding, Vested and Expected to Vest
Weighted
Average
Remaining
Contractual
Life (Years)
Weighted
Average Exercise
Price
Options Vested and Exercisable
Weighted
Average
Remaining
Contractual Life
(Years)
Options
Exercisable
Shares
343,443
1,706,470
448,726
862,849
509,525
3,871,013
9.0 $
7.8
6.8
5.5
6.5
7.1 $
1.55
2.62
3.75
4.59
6.56
3.61
78,112
612,581
282,324
857,849
375,463
2,206,329
8.9
6.8
5.7
5.5
6.1
6.1
The cumulative grant date fair value of employee options vested during the years ended December 31, 2023 and 2022 was
$1.7 million and $1.0 million, respectively. No options were exercised during the years ended December 31, 2023 and
2022.
As of December 31, 2023, total compensation expense related to unvested employee stock options not yet recognized was
$3.3 million, which is expected to be allocated to expenses over a weighted-average period of 2.7 years.
86
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 the Company for the years ended December 31, 2023 and 2022:
Common share fair value ............................................................................................. $1.57 – $3.24
3.5 – 4.6%
Risk-free interest rate ...................................................................................................
0%
Expected dividend yield ...............................................................................................
Expected option life (years) .........................................................................................
5.0 – 5.7
Expected stock price volatility ..................................................................................... 101.7 – 108.1% 102.1 – 104.0%
$1.47 – $3.88
1.4 – 3.6%
0%
5.0 – 5.6
2023
2022
Deferred Stock Units and Restricted Stock Units
Under our non-employee director compensation program, non-employee directors may elect to receive RSUs or DSUs in
lieu of all or a portion of the annual cash retainers payable to such director. Each RSU or DSU represents the right to
receive one share of our common stock. These recipients receive a number of RSUs or DSUs equal to the amount of the
elected portion of the annual cash retainers divided by the 10-trading day average closing sale price of the common stock as
determined on the third (3rd) business day prior to the anticipated grant date of the award. Vesting for these annual RSU and
DSU grants is quarterly over one year, conditioned on continuous service. The cost of the RSUs and DSUs is measured and
recognized based on the fair market value of our common shares on the date of grant. RSUs will be settled immediately
upon vesting and DSU awards will be settled following a separation from service by such director.
There were approximately 214,000 and 134,000 vested DSUs and no RSUs outstanding under our share-based
compensation plans as of December 31, 2023 and 2022, respectively. During 2023, 17,621 common shares were issued
upon settlement of 17,621 DSUs held by a former non-employee director and 17,156 common shares were issued upon
settlement of 17,156 RSUs. No common shares were issued upon settlement of DSUs or RSUs during 2022. There were no
unvested DSUs or RSUs as of December 31, 2023 and 2022.
13. 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-deferred contributions 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 amount up to 4% of each employees’ compensation under the safe harbor provisions provided by the Internal
Revenue Service rules governing 401(k) plans. Employee and employer safe harbor contributions vest immediately.
We have recorded contribution expenses of $137,000 and $112,000 for the years ended December 31, 2023 and 2022,
respectively.
14. 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 accompanying consolidated 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 the amounts used for income tax purposes as well as operating losses and tax
credit carryforwards.
87
The significant components of our deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets (liabilities):
Non-capital losses carried forward ........................................................................... $
Research and development expenditures..................................................................
Share issue costs .......................................................................................................
Patents and other ......................................................................................................
Accruals ...................................................................................................................
Share-based compensation .......................................................................................
Property and equipment ...........................................................................................
Total deferred tax asset, net .............................................................................................
Valuation allowance .................................................................................................
Net deferred tax asset ...................................................................................................... $
December 31,
2023
2022
26,044 $
817
495
358
214
212
(102)
28,038
(28,038)
— $
21,000
817
338
320
213
166
(117)
22,737
(22,737)
—
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 operating losses, management believes that the deferred tax assets arising
from the above-mentioned future tax benefits are currently not likely to be realized and, accordingly, we have 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 (in thousands):
Statutory income tax rate .................................................................................................
Income tax recovery based on statutory rate ................................................................... $
Share-based compensation ..............................................................................................
Prior-year true-ups ...........................................................................................................
Share issuance costs ........................................................................................................
Other ................................................................................................................................
Change in valuation allowance ........................................................................................
Income tax expense ......................................................................................................... $
Net operating losses and tax credit carryforwards as of December 31, 2023, are as follows:
December 31,
2023
2022
27.0%
(5,225) $
409
(388)
(71)
17
5,301
43 $
27.0%
(3,685)
340
(33)
—
62
3,344
28
Amount
Non-capital income tax losses, net ........................................................................ $
Research and development expense carry forwards ..............................................
Tax credits .............................................................................................................
(In thousands) Expiration Years
Beginning 2026
Indefinitely
Beginning 2024
92,955
3,027
474
The Company is subject to taxation in Canada, the United States and Australia. Tax returns, since the inception of
DiaMedica Therapeutics Inc., are subject to examinations by Canadian tax authorities and may change upon examination.
Tax returns of DiaMedica USA, Inc., since its inception in 2012 and thereafter, are subject to 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, are subject to examination by the Australian tax authorities.
88
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 Exchange Act, is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is
accumulated and communicated to our management, including our principal executive officer and principal financial
officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our
management evaluated, with the participation of its Chief Executive Officer and its Chief Financial Officer, the
effectiveness 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, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of such period to provide reasonable assurance that information
required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief 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 the Exchange 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 concluded that, as of December 31, 2023, 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 reporting due to an exemption established by the JOBS Act for “smaller reporting
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, 2023 that has materially affected or is reasonably likely to materially affect our internal control over financial
reporting.
Item 9B. Other Information
Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications
During the three months ended December 31, 2023, none of our directors or “officers” (as defined in Rule 16a-1(f) under
the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,”
as each term is defined in Item 408(a) and 408(c) respectively of SEC Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
89
Item 10. Directors, Executive Officers and Corporate Governance
PART III
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 annual general 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-Oxley Act, 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 code of 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 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 Investor Relations,
DiaMedica Therapeutics Inc., 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305.
Changes to Nomination Procedures
During the fourth quarter of fiscal 2023, we made no material changes to the procedures by which shareholders may
recommend nominees to our Board of Directors.
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 annual general 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 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.
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 of directors, is incorporated in this
annual report on Form 10-K by reference.
90
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, 2023. Our equity compensation plans as of December 31, 2022 were the DiaMedica Therapeutics Inc. Amended and
Restated 2019 Omnibus Incentive Plan (2019 Plan), the DiaMedica Therapeutics Inc. Stock Option Plan, Amended and
Restated November 6, 2018 (Prior Plan), the DiaMedica Therapeutics Inc. Amended and Restated Deferred Share Unit Plan
(DSU Plan) and the DiaMedica Therapeutics Inc. 2021 Employment Inducement Incentive Plan (Inducement Plan).
Equity Compensation Plan Information
(a)
(b)
Number of
Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
Plan Category
Equity compensation plans approved by security
(c)
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation Plans
(excluding securities
reflected in column
(a))
holders ..............................................................
3,479,918(1) $
Equity compensation plans not approved by
security holders .................................................
Total ...................................................
605,000 $
4,084,918 $
4.14(2)
2.52
5.10(2)
927,215
395,000(3)
1,322,215(4)
(1) Amount includes 2,818,103 common shares issuable upon the exercise of stock options and 196,572 common shares
issuable upon the settlement of DSU awards outstanding under the 2019 Plan, 447,910 common shares issuable upon
the exercise of stock options under the Prior Plan and 17,333 common shares issuable under the DSU Plan.
(2) Not included in the weighted-average exercise price calculation are 196,572 deferred stock unit awards under the
2019 Plan and 17,333 deferred stock unit awards under the DSU Plan.
(3) On December 3, 2021, the Board adopted Inducement Plan to facilitate the granting of equity awards as an
inducement material to new employees joining the Company. The Inducement Plan was adopted without shareholder
approval pursuant to Nasdaq Listing Rule 5635(c)(4) and is administered by the Compensation Committee of the
Board of Directors. The Board reserved 1,000,000 common shares of the Company for issuance under the
Inducement Plan, which permits the grant of non-statutory options, stock appreciation rights, restricted stock awards,
restricted stock units, performance awards and other stock-based awards, to eligible recipients. The only persons
eligible to receive awards under the Inducement Plan are individuals who are new employees and satisfy the
standards for inducement grants under Nasdaq Listing Rule 5635(c)(4) or 5635(c)(3), as applicable. Also on
December 3, 2021, the Compensation Committee adopted a form of notice of option grant and option award
agreement for use under the Inducement Plan, which contains terms substantially identical to the form of notice of
option grant and option award agreement for use under the shareholder-approved 2019 Plan. The Inducement Plan
has a term of 10 years. The share reserve under the Inducement Plan may be increased at the discretion of and
approval by the Board. As of December 31, 2023, 605,000 option awards had been granted under the Inducement
Plan.
(4) Amount includes 927,215 shares remaining available for future issuance under the 2019 Plan and 395,000 remaining
available for future issuance under the Inducement Plan.
91
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 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.
Item 14. Principal Accountant Fees and Services
The information in the “Voting Proposal Two—Appointment of Baker Tilly US, LLP as our Independent Registered Public
Accounting Firm and Authorization 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.
92
Item 15. Exhibits and Financial Statement Schedules
Financial Statements
PART IV
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 of a written request for any such exhibit. Such request should be sent to: Mr.
Scott Kellen, Chief Financial Officer and Corporate Secretary, DiaMedica Therapeutics Inc., 301 Carlson Parkway, Suite
210, Minneapolis, Minnesota 55305, Attn: Shareholder Information.
Item
No.
Item
3.1 Notice of Articles of DiaMedica Therapeutics Inc. dated
May 31, 2019
3.2 Amended and Restated Articles of DiaMedica
Therapeutics Inc. Effective May 17, 2023
4.1 Description of Securities Registered Pursuant to Section
12 of the Securities Exchange Act of 1934
4.2 Specimen Certificate representing Voting Common
Shares of DiaMedica Therapeutics Inc.
4.3 Registration Rights Agreement dated as of September 28,
2021 among DiaMedica Therapeutics Inc. and the
Purchasers Party Thereto
4.4 Registration Rights Agreement dated as of June 23, 2023
among DiaMedica Therapeutics Inc. and the Purchasers
Party Thereto
10.1# DiaMedica Therapeutics Inc. Amended and Restated
2019 Omnibus Incentive Plan
10.2# Form of Option Award Agreement under the DiaMedica
Therapeutics Inc. 2019 Omnibus Incentive Plan
Method of Filing
Incorporated by reference to Exhibit 3.1 to DiaMedica’s
Current Report on Form 8-K as filed with the Securities
and Exchange Commission on June 4, 2019
(File No. 001-36291)
Incorporated by reference to Exhibit 3.1 to DiaMedica’s
Current Report on Form 8-K as filed with the Securities
and Exchange Commission on May 18, 2023
(File No. 001-36291)
Filed herewith
Incorporated by reference to Exhibit 4.2 to DiaMedica’s
Current Report on Form 8-K as filed with the Securities
and Exchange Commission on June 4, 2019
(File No. 001-36291)
Incorporated by reference to Exhibit 4.5 to DiaMedica’s
Registration Statement on Form S-3 as filed with the
Securities and Exchange Commission on October 5,
2021
(File No. 333-260066)
Incorporated by reference to Exhibit 4.6 to DiaMedica’s
Registration Statement on Form S-3 as filed with the
Securities and Exchange Commission on June 30, 2023
(File No. 333-273068)
Incorporated by reference to Exhibit 10.1 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on May 19,
2022
(File No. 001-36291)
Incorporated by reference to Exhibit 10.2 to
DiaMedica’s Annual Report on Form 10-K for the year
ended December 31, 2021
(File No. 001-36291)
93
Item
No.
Item
10.3# Form of Restricted Stock Unit Award Agreement under
the DiaMedica Therapeutics Inc. 2019 Omnibus
Incentive Plan
10.4# Form of Deferred Stock Unit Award Agreement under
the DiaMedica Therapeutics Inc. 2019 Omnibus
Incentive Plan
10.5# DiaMedica Therapeutics Inc. 2021 Employment
Inducement Incentive Plan
10.6# Form of Inducement Option Award Agreement under the
DiaMedica Therapeutics Inc. 2021 Employment
Incentive Plan
10.7# DiaMedica Therapeutics Inc. Stock Option Plan
Amended and Restated November 6, 2018
10.8# Form of Option Agreement under the DiaMedica
Therapeutics Inc. Stock Option Plan Amended and
Restated November 6, 2018
10.9# Form of Option Agreement under the DiaMedica
Therapeutics Inc. Stock Option Plan Amended and
Restated December 21, 2017
10.10# DiaMedica Therapeutics Inc. Amended and Restated
Deferred Share Unit Plan
10.11# DiaMedica Therapeutics Inc. Short-Term Incentive Plan
10.12# Form of Indemnification Agreement between DiaMedica
Therapeutics Inc. and Each Director and Officer
10.13# Employment Agreement effective as of September 12,
2018 between DiaMedica USA, Inc. and Rick Pauls
Method of Filing
Incorporated by reference to Exhibit 10.3 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on
June 21, 2019
(File No. 001-36291)
Incorporated by reference to Exhibit 10.1 to
DiaMedica’s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2020
(File No. 001-36291)
Incorporated by reference to Exhibit 10.5 to
DiaMedica’s Annual Report on Form 10-K for the year
ended December 31, 2021
(File No. 001-36291)
Incorporated by reference to Exhibit 10.6 to
DiaMedica’s Annual Report on Form 10-K for the year
ended December 31, 2021
(File No. 001-36291)
Incorporated by reference to Exhibit 10.1 to
DiaMedica’s Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on
November 9, 2018
(File No. 333-228313)
Incorporated by reference to Exhibit 10.3 to
DiaMedica’s Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on
November 9, 2018
(File No. 333-228313)
Incorporated by reference to Exhibit 10.2 to
DiaMedica’s Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on
November 9, 2018
(File No. 333-228313)
Incorporated by reference to Exhibit 10.4 to
DiaMedica’s Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on
November 9, 2018
(File No. 333-228313)
Incorporated by reference to Exhibit 10.1 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on
June 21, 2019
(File No. 001-36291)
Incorporated by reference to Exhibit 10.1 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on
June 4, 2019
(File No. 001-36291)
Incorporated by reference to Exhibit 10.6 to
DiaMedica’s Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on
November 9, 2018
(File No. 333-228313)
94
Item
Item
No.
10.14# Employment Agreement effective as of September 12,
2018 between DiaMedica USA, Inc. and Scott Kellen
10.15# Employment Agreement effective as of January 3, 2022
between DiaMedica USA, Inc. and Kirsten Gruis
10.16# Consulting Services Agreement dated as of September 1,
2023 between DiaMedica USA, Inc. and Kirsten Gruis,
M.D.
10.17# Separation Agreement and Release dated as of September
3, 2023 between Kirsten Gruis, M.D. and DiaMedica
USA, Inc.
10.18 301 Carlson Parkway Office Lease dated June 22, 2022
between Medica Services Company, LLC and DiaMedica
USA Inc.
10.19 Lease Guaranty Agreement dated June 22, 2022 by
DiaMedica Therapeutics Inc.
10.20(1) GPEx® - Derived Cell Line Sale Agreement dated
February 2, 2012 between DiaMedica Therapeutics Inc.
and Catalent Pharma Solutions, LLC
10.21 First Amendment to GPEx® Development and
Manufacturing Agreement dated April 10, 2017 between
DiaMedica Therapeutics Inc. and Catalent Pharma
Solutions, LLC
10.22 Second Amendment to GPEx® Development and
Manufacturing Agreement dated as of October 22, 2018
between DiaMedica Therapeutics Inc. and Catalent
Pharma Solutions, LLC
10.23 Third Amendment to GPEx® Development and
Manufacturing Agreement dated as of April 11, 2022
between DiaMedica Therapeutics Inc. and Catalent
Pharma Solutions, LLC
10.24 Securities Purchase Agreement dated as of September 26,
2021 among DiaMedica Therapeutics Inc. and the
Purchasers Party Thereto
Method of Filing
Incorporated by reference to Exhibit 10.7 to
DiaMedica’s Annual Report on Form 10-K for the year
ended December 31, 2018
(File No. 001-36291)
Incorporated by reference to Exhibit 10.17 to
DiaMedica’s Annual Report on Form 10-K for the year
ended December 31, 2022
(File No. 001-36291)
Incorporated by reference to Exhibit 10.1 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on
September 5, 2023
(SEC File No. 001-36291)
Incorporated by reference to Exhibit 10.2 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on
September 5, 2023
(SEC File No. 001-36291)
Incorporated by reference to Exhibit 10.1 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on
June 29, 2022
(File No. 001-36291)
Incorporated by reference to Exhibit 10.2 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on
June 29, 2022
(File No. 001-36291)
Incorporated by reference to Exhibit 10.12 to
DiaMedica’s Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on
November 9, 2018
(File No. 333-228313)
Incorporated by reference to Exhibit 10.13 to
DiaMedica’s Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on
November 9, 2018
(File No. 333-228313)
Incorporated by reference to Exhibit 10.19 to
DiaMedica’s Annual Report on Form 10-K for the year
ended December 31, 2019
(File No. 001-36291)
Filed herewith
Incorporated by reference to Exhibit 10.1 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on September
27, 2021
(File No. 001-36291)
95
Item
Item
No.
10.25# Securities Purchase Agreement dated as of June 21, 2023
among DiaMedica Therapeutics Inc. and the Purchasers
Party Thereto
21.1 Subsidiaries of DiaMedica Therapeutics Inc.
23.1 Consent of Baker Tilly US, LLP
31.1 Certification of President and Chief Executive Officer
Pursuant to SEC Rule 13a-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to SEC
Rule 13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Method of Filing
Incorporated by reference to Exhibit 10.1 to
DiaMedica’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on June 21,
2023
(SEC File No. 001-36291)
Incorporated by reference to Exhibit 21.1 to
DiaMedica’s Annual Report on Form 10-K for the year
ended December 31, 2019
(File No. 001-36291)
Filed herewith
Filed herewith
Filed herewith
32.1 Certification of President and Chief Executive Officer
Furnished herewith
Pursuant to Rule 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2 Certification 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 2002
97.1 DiaMedica Therapeutics Inc. Clawback Policy
101 The following materials from DiaMedica Therapeutics
Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2023, formatted in Inline XBRL
(Extensible Business Reporting Language): (i) the
Consolidated Balance Sheets, (ii) the Consolidated
Statements of Operations, (iii) the Consolidated
Statements of Comprehensive Income (Loss), (iv) the
Consolidated Statements of Equity, (v) the Consolidated
Statements of Cash Flows, and (vi) Notes to Consolidated
Financial Statements
Furnished herewith
Filed herewith
Filed herewith
104 Cover Page Interactive Data File
Embedded within the Inline XBRL document
#
(1)
Indicates a management contract or compensatory plan or arrangement.
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 of 1933, 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.
96
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 the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 19, 2024
DIAMEDICA THERAPEUTICS INC.
By: /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 the capacities and on the dates indicated.
Name
Title
Date
/s/ Rick Pauls
Rick Pauls
/s/ Scott Kellen
Scott Kellen
/s/ Richard Pilnik
Richard Pilnik
President, Chief Executive Officer and Director
(principal executive officer)
Chief Financial Officer and Secretary
(principal financial and accounting officer)
March 19, 2024
March 19, 2024
Chairman of the Board
March 19, 2024
/s/ Michael Giuffre, M.D.
Michael Giuffre, M.D.
Director
/s/ Richard Kuntz
Richard Kuntz
/s/ Tanya N. Lewis
Tanya N. Lewis
/s/ James Parsons
James Parsons
Director
Director
Director
/s/ Charles P. Semba, M.D.
Charles P. Semba, M.D.
Director
March 19, 2024
March 19, 2024
March 19, 2024
March 19, 2024
March 19, 2024
97
[page intentionally left blank]
EXECUTIVE AND OTHER
OFFICERS
PROFESSIONAL
SERVICE PROVIDERS
BOARD OF DIRECTORS
Richard Pilnik
Chairman of the Board
Rick Pauls
President and Chief Executive Officer
Michael Giuffre, M.D.
Clinical Professor of Cardiac Sciences
and Pediatrics at the University of
Calgary
Lorianne Masuoka, M.D.
Chief Medical Officer
Richard Kuntz, M.D., M.Sc.
Former Chief Medical Officer and
Scientific Officer of Medtronic plc
Tanya Lewis
Advisor and Former Chief
Development Operations Officer of
Replimune Group, Inc.
James Parsons
Former Chief Financial Officer and
Corporate Secretary of Trillium
Therapeutics Inc.
Rick Pauls
President and Chief Executive Officer
DiaMedica Therapeutics Inc.
Charles Semba, M.D.
Chief Medical Officer
Eluminex Biosciences
Scott Kellen
Chief Financial Officer and Corporate
Secretary
Ambarish Shah, Ph.D.
Chief Technology Officer
David Wambeke
Chief Business Officer
Dominic Cundari
Chief Commercial Officer
Julie VanOrsdel Daves
Senior Vice President, Clinical
Development Operations
ANNUAL GENERAL MEETING
The Annual General Meeting of our
shareholders will be held on
Wednesday, May 22, 2024,
beginning at 9:00 a.m., Central
Daylight Savings Time, at the offices
of:
DiaMedica Therapeutics Inc.
301 Carlson Parkway
Suite 210
Minneapolis, MN 55305
DiaMedica Therapeutics Inc.
301 Carlson Parkway, Ste 210
Minneapolis, MN 55305
+1.763.479.1196 Phone
www.diamedica.com
info@diamedica.com
Independent Auditors
Baker Tilly US, LLP
225 South Sixth Street
Suite 2300
Minneapolis, MN 55402
Legal Counsel
Fox Rothschild LLP
City Center
33 South Sixth Street
Suite 3600
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
SHARE INFORMATION
Our voting common shares are
traded on The Nasdaq Capital
Market under the symbol “DMAC.”
DiaMedica Therapeutics Inc.
301 Carlson Parkway, Ste 210
Minneapolis, MN 55305
+1.763.496.5454 Phone
www.diamedica.com
(cid:69)(cid:71)(cid:35)(cid:71)(cid:76)(cid:68)(cid:80)(cid:72)(cid:71)(cid:76)(cid:70)(cid:68)(cid:17)(cid:70)(cid:82)(cid:80)