Business Context and Reporting Period
Company: DiaMedica Therapeutics Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: December 27, 2019
Reporting Period: Event date December 27, 2019
Context: The Company entered into a Material Definitive Agreement to secure funding for pending litigation against PRA Health Sciences, Inc. and Pharmaceutical Research Associates Group B.V., initiated in November 2017 regarding a 2013 clinical research agreement.
Key Financial Metrics
This filing does not report standard operating financial metrics such as revenue, profit, cash flow, margins, or general debt levels. The financial data provided is specific to the Litigation Funding Agreement:
- Maximum Funding Amount: Up to $1,000,000 for legal fees, court costs, and expenses.
- Retroactive Funding: Includes $200,000 for fees previously paid by the Company (conditioned on venue transfer).
- Repayment Obligation: Non-recourse; limited strictly to proceeds from the litigation ("Claim Proceeds").
- Repayment Terms:
- Reimbursement of actual costs plus $10,000 diligence fee.
- Plus the greater of: (i) a fixed amount ranging from $1,000,000 to $3,000,000 based on timing relative to the venue transfer and trial start; or (ii) 20% of Claim Proceeds.
- Interest of 20% per annum applies to unpaid amounts if repayment is not made within 3.5 years of the venue transfer.
Material Changes
The primary material change is the execution of the Litigation Funding Agreement with LEGALIST FUND II, L.P. This agreement alters the Company's financial exposure regarding the pending lawsuit by introducing a non-recourse funding mechanism. The agreement is contingent upon the transfer of the litigation venue from Delaware to Minnesota, a motion for which is currently pending.
Guidance, Outlook, and Risks
Management Commentary: The Company retains sole decision-making authority regarding any settlement of the litigation, though it must notify the Funder of settlement offers.
Risks and Contingencies:
- Termination Risk: The Funder may terminate the agreement with 30 days' notice if they conclude the claims are not commercially viable, if lead counsel changes without consent, or if circumstances make recovery of sufficient proceeds unlikely.
- Condition Precedent: The $200,000 retroactive funding and potentially the full agreement activation are conditioned on the successful transfer of the case venue to Minnesota.
- Cost Escalation: The repayment obligation increases significantly if the litigation extends beyond nine months post-transfer or proceeds to trial.
Investor Verification Checklist
- Verify the status of the motion to transfer the litigation venue from Delaware to Minnesota.
- Confirm the current status of the underlying lawsuit (DiaMedica Therapeutics Inc. v. PRA Health Sciences, Inc., Case No. 1:18-cv-01318-MN).
- Review the full text of the Litigation Funding Agreement (Exhibit 10.1) for specific definitions of "Claim Proceeds" and termination triggers.
- Assess the Company's liquidity position outside of this specific litigation funding arrangement, as no general financial statements are included in this 8-K.