Exhibit 4.2


 





 


Consolidated financial statements of


 


Medicenna Therapeutics Corp.


 


(Expressed in Canadian Dollars)


 


For the years ended March 31, 2020 and 2019


 






    


     


    

 


REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM


 


To the Shareholders and Directors of 


Medicenna Therapeutics Corp


 


Opinion on the Consolidated Financial Statements


 


We have audited the accompanying consolidated
financial statements of Medicenna Therapeutics Corp (the “Company”), which comprise the consolidated statements of
financial position as of March 31, 2020 and 2019, the consolidated statements of operations, cash flows and changes in shareholders’
equity for the years ended March 31, 2020 and 2019 and the related notes, comprising a summary of significant accounting policies
and other explanatory information (collectively referred to as the consolidated financial statements).


 


In our opinion, these consolidated financial
statements present fairly, in all material respects, the financial position of the Company as at March 31, 2020 and 2019 and
its financial performance and its cash flows for the years ended March 31, 2020 and 2019 in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board.


 


Basis for Opinion


 


A - Management’s Responsibility
for the consolidated Financial Statements


 


Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.


 


B - Auditors’ Responsibility


 


Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards and the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement, whether due to error or fraud. Those standards also require that we comply with ethical requirements,
including independence. We are required to be independent with respect to the Company in accordance with the ethical requirements
that are relevant to our audit of the consolidated financial statements in Canada, the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB. We are a public accounting firm registered
with the PCAOB.


 


An audit includes performing procedures
to assess the risks of material misstatements of the consolidated financial statements, whether due to error or fraud, and performing
procedures to respond to those risks. Such procedures included obtaining and examining, on a test basis, audit evidence regarding
the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of
the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Accordingly, we express no
such opinion.


 






    1


     


    

 


An audit also includes evaluating the appropriateness
of accounting policies and principles used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.


 


We believe that the audit evidence we have
obtained in our audits is sufficient and appropriate to provide a reasonable basis for our audit opinion.


 


We have served as the Company’s auditor
since 2015.


 


	Vancouver, Canada	Chartered Professional Accountants




 


May 13, 2020


 




    2


     


    

 


Medicenna Therapeutics
Corp.


Consolidated
Statements of Financial Position


(Expressed
in Canadian Dollars)


 


as at





	 	 	March
    31, 2020	 	 	March
    31, 2019	 
	 	 	$	 	 	$	 
	Assets	 	 	 	 	 	 	 	 
	Current assets	 	 	 	 	 	 	 	 
	Cash and cash equivalents	 	 	22,697,654	 	 	 	2,370,976	 
	Marketable securities	 	 	15,002,548	 	 	 	-	 
	Prepaids and deposits	 	 	93,752	 	 	 	258,423	 
	Government grant receivable
    (Note 11)	 	 	-	 	 	 	2,444,285	 
	Other receivables	 	 	58,295	 	 	 	32,539	 
	 	 	 	37,852,249	 	 	 	5,106,223	 
	Intangible assets (Note 12)	 	 	76,259	 	 	 	81,205	 
	Right-of-use assets (Note 4)	 	 	67,760	 	 	 	-	 
	 	 	 	37,996,268	 	 	 	5,187,428	 
	Liabilities	 	 	 	 	 	 	 	 
	Current liabilities	 	 	 	 	 	 	 	 
	Accounts payable and accrued
    liabilities (Note 7)	 	 	1,779,883	 	 	 	2,396,439	 
	Current
    portion of lease liability (Note 4)	 	 	35,344	 	 	 	-	 
	 	 	 	1,815,227	 	 	 	2,396,439	 
	License fee payable (Note 12)	 	 	-	 	 	 	174,432	 
	Lease liability
    (Note 4)	 	 	31,969	 	 	 	-	 
	 	 	 	1,847,196	 	 	 	2,570,871	 
	Shareholders' Equity	 	 	 	 	 	 	 	 
	Common shares (Note 8)	 	 	56,577,414	 	 	 	16,615,648	 
	Contributed surplus (Notes 9
    and 10)	 	 	10,389,926	 	 	 	8,633,395	 
	Accumulated other comprehensive
    income	 	 	248,452	 	 	 	157,165	 
	Deficit	 	 	(31,066,720	)	 	 	(22,789,651	)
	 	 	 	36,149,072	 	 	 	2,616,557	 
	 	 	 	37,996,268	 	 	 	5,187,428	 





 


	Nature of business (Note
    1)	 	 
	Subsequent events (Note 16)	 	 
	 	 	 
	 	 	 
	Approved by the Board	 	 
	 	 	 
	/s/
    Albert Beraldo	 	Director
	 	 	 
	/s/
    Chandra Panchal	 	Director



 


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


 






    3


     


    





 


Medicenna Therapeutics
Corp.


Consolidated Statements
of Operations


(Expressed in Canadian Dollars)


 


	 	 	Year ended	 	 	Year ended	 
	 	 	March 31,	 	 	March 31,	 
	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	Operating expenses	 	 	 	 	 	 	 	 
	General and administration (Note 15)	 	 	2,375,211	 	 	 	1,709,286	 
	Research and development (Note 15)	 	 	5,869,588	 	 	 	3,017,997	 
	Total operating expenses	 	 	8,244,799	 	 	 	4,727,283	 
	Finance income	 	 	(6,727	)	 	 	(102	)
	Foreign exchange (gain) loss	 	 	38,997	 	 	 	(19,150	)
	 	 	 	32,270	 	 	 	(19,252	)
	Net loss for the year	 	 	(8,277,069	)	 	 	(4,708,031	)
	Cummulative translation adjustment	 	 	91,287	 	 	 	6,256	 
	Comprehensive loss for the year	 	 	(8,185,782	)	 	 	(4,701,775	)
	Basic and diluted loss per share for the year	 	 	(0.26	)	 	 	(0.18	)
	Weighted average number of common shares outstanding (Note 8(b))	 	 	31,899,640	 	 	 	25,674,027	 




 


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


 






    4


     


    

 


Medicenna Therapeutics Corp.


Consolidated Statements of Cash Flows


(Expressed
in Canadian Dollars)


 


	 	 	Year ended	 	 	Year ended	 
	 	 	March 31,	 	 	March 31,	 
	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	Operating activities	 	 	 	 	 	 	 	 
	Net loss for the year	 	 	(8,277,069	)	 	 	(4,708,031	)
	Items not involving cash	 	 	 	 	 	 	 	 
	Depreciation	 	 	7,892	 	 	 	6,818	 
	Stock based compensation	 	 	1,124,977	 	 	 	998,619	 
	R&D warrant expense	 	 	-	 	 	 	710,574	 
	Government grant expense recoveries	 	 	(1,076,538	)	 	 	(5,646,227	)
	Unrealized foreign exchange	 	 	61,526	 	 	 	(82,419	)
	Accrued interest	 	 	(2,548	)	 	 	-	 
	Changes in non-cash working capital	 	 	 	 	 	 	 	 
	Other receivables and deposits	 	 	138,915	 	 	 	56,862	 
	Accounts payable and accrued liabilities	 	 	(931,556	)	 	 	626,799	 
	 	 	 	(8,954,401	)	 	 	(8,037,005	)
	Investing activities	 	 	 	 	 	 	 	 
	Purchase of marketable securities	 	 	(15,000,000	)	 	 	-	 
	Long term license fee payable	 	 	-	 	 	 	(354,458	)
	 	 	 	(15,000,000	)	 	 	(354,458	)
	Financing activities	 	 	 	 	 	 	 	 
	Repayment of lease liabilities	 	 	(3,393	)	 	 	-	 
	Government grant received (Note 11)	 	 	3,539,465	 	 	 	3,242,073	 
	Issuance of share capital, net of issuance costs (Note 8(a))	 	 	38,375,045	 	 	 	3,579,910	 
	Warrant and option exercises (Note 9)	 	 	2,372,820	 	 	 	-	 
	 	 	 	44,283,937	 	 	 	6,821,983	 
	Effect of foreign exchange on cash	 	 	(2,857	)	 	 	31,722	 
	Net increase (decrease) in cash	 	 	20,326,678	 	 	 	(1,567,758	)
	Cash, beginning of year	 	 	2,370,976	 	 	 	3,938,734	 
	Cash, end of year	 	 	22,697,654	 	 	 	2,370,976	 
	 	 	 	 	 	 	 	 	 
	Other non-cash transactions	 	 	 	 	 	 	 	 
	Broker warrants issued	 	$	561,406	 	 	$	91,000	 
	Warrants issued	 	$	705,218	 	 	$	1,042,861	 
	Share issuance costs accrued through	 	 	 	 	 	 	 	 
	accounts payable and accrued liabilities	 	$	257,141	 	 	$	102,596	 



 


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




 






    5


     


    

 


Medicenna Therapeutics Corp.


Consolidated Statements of Changes in Shareholders' Equity


(Expressed
in Canadian Dollars)


 


	 	 	Common shares issued and	 	 	Contributed	 	 	Accumulated other	 	 	Deficit	 	 	Total	 
	 	 	outstanding	 	 	Surplus	 	 	comprehensive	 	 	 	 	 	shareholders'	 
	 	 	 	 	 	 	 	 	 	 	 	income	 	 	 	 	 	equity	 
	 	 	Number	 	 	Amount	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	Balance, March 31, 2018	 	 	24,578,137	 	 	 	14,302,195	 	 	 	5,790,341	 	 	 	150,909	 	 	 	(18,081,620	)	 	 	2,161,825	 
	Stock based compensation	 	 	-	 	 	 	-	 	 	 	998,619	 	 	 	-	 	 	 	-	 	 	 	998,619	 
	Research and development warrant amortization	 	 	-	 	 	 	-	 	 	 	710,574	 	 	 	-	 	 	 	-	 	 	 	710,574	 
	Issued on December 2018 financing (Notes 8, 9)	 	 	4,000,000	 	 	 	2,313,453	 	 	 	1,133,861	 	 	 	-	 	 	 	-	 	 	 	3,447,314	 
	Net loss and comprehensive loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	6,256	 	 	 	(4,708,031	)	 	 	(4,701,775	)
	Balance, March 31, 2019	 	 	28,578,137	 	 	 	16,615,648	 	 	 	8,633,395	 	 	 	157,165	 	 	 	(22,789,651	)	 	 	2,616,557	 
	Stock based compensation	 	 	-	 	 	 	-	 	 	 	1,124,977	 	 	 	-	 	 	 	-	 	 	 	1,124,977	 
	Warrant and option exercises	 	 	1,623,675	 	 	 	3,007,890	 	 	 	(635,070	)	 	 	-	 	 	 	-	 	 	 	2,372,820	 
	Issued on October 2019 financing  (Notes 8, 9)	 	 	5,307,693	 	 	 	5,319,361	 	 	 	810,608	 	 	 	-	 	 	 	-	 	 	 	6,129,969	 
	Issued on March 2020 financing (Notes 8, 9)	 	 	11,290,323	 	 	 	31,634,515	 	 	 	456,016	 	 	 	-	 	 	 	-	 	 	 	32,090,531	 
	Net loss and comprehensive loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	91,287	 	 	 	(8,277,069	)	 	 	(8,185,782	)
	Balance, March 31, 2020	 	 	46,799,828	 	 	 	56,577,414	 	 	 	10,389,926	 	 	 	248,452	 	 	 	(31,066,720	)	 	 	36,149,072	 



 


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





 






    6


     


    

 


Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian
Dollars)


 


	1.	Nature of business



 


Medicenna Therapeutics Corp.
(“Medicenna” or the "Company") was incorporated as A2 Acquisition Corp. (“A2”) under the Alberta
Business Corporations Act on February 2, 2015 and was classified as a Capital Pool Corporation ("CPC") as defined
in Policy 2.4 of the TSX Venture Exchange Inc. (the "Exchange") Corporate Finance Manual. On March 1, 2017, the
Company completed a qualifying transaction with Medicenna Therapeutics Inc. (“MTI.”) and the name of the Company was
changed to Medicenna Therapeutics Corp. (the “Transaction”). MTI has been identified for accounting purposes as the
acquirer, and accordingly the entity is considered to be a continuation of MTI and the net assets of A2 at the date of the Transaction
are deemed to have been acquired by MTI. These consolidated financial statements include the results of operations of Medicenna
from March 1, 2017. On August 2, 2017 Medicenna graduated to the main board of the Toronto Stock Exchange. On November 13,
2017, Medicenna continued under the Canadian Business Corporations Act.


 


Medicenna has three wholly owned
subsidiaries, Medicenna Therapeutics Inc. (“MTI”) (British Columbia), Medicenna Biopharma Inc. (“MBI”)
(Delaware) and Medicenna Biopharma Inc. (“MBIBC”). (British Columbia).


 


The
Company's principal business activity is the development and commercialization of Empowered CytokinesÔ
and SuperkinesÔ
for the treatment of cancer.


 


As at March 31, 2020, the
head and registered office is located at 2 Bloor St W, 7th Floor, Toronto, Ontario, Canada.


 


	2.	Significant accounting policies



 


		a)	Basis of Measurement and statement of compliance



 


These consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”) and the Interpretations of the International Financial Reporting
and Interpretations Committee (“IFRIC”).


 


The consolidated financial statements
have been prepared on a historical cost basis except for certain financial assets measured at fair value. In addition, these consolidated
financial statements have been prepared using the accrual basis of accounting, except for cash flow information.


 


The consolidated financial statements
were approved by the Company’s Board of Directors and authorized for issue on May 14, 2020.


 


		b)	Principles of Consolidation



 


These consolidated financial
statements include the accounts of the Company and its wholly-owned Subsidiaries MTI, MBI and MBIBC (British Columbia, Inactive).
Subsidiaries are fully consolidated from the date at which control is determined to have occurred and are deconsolidated from the
date that the Company no longer controls the entity. The financial statements of the subsidiaries are prepared for the same reporting
period as the Company using consistent accounting policies. Intercompany transactions, balances, and gains and losses on transactions
between subsidiaries are eliminated.


 


		c)	Foreign currency



 


The functional currency of an
entity is the currency of the primary economic environment in which the entity operates. The functional currency of the Company,
MTI and MBIBC is the Canadian dollar. The functional currency of MBI is the US dollar. The functional currency determinations were
conducted through an analysis of the consideration factors identified in IAS 21 – The Effects of Changes in Foreign Exchange
Rates.


 






    7


     


    

 



 





Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars)







 





		2.	Significant accounting
policies cont’d



 


		d)	Foreign currency



 


Transactions in foreign currencies
are translated to the functional currency at the rate on the date of the transactions. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the spot rate of exchange as at the reporting date. All differences are taken to profit
or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated
using the exchange rate at the date when the fair value was determined.


 


On translation of the entities
whose functional currency is other than the Canadian dollar, revenues and expense are translated at the exchange rates approximating
those in effect on the date of the transactions. Assets and liabilities are translated at the spot rate of exchange as at the reporting
date. Exchange gains and losses, including results of retranslation, are recorded in other comprehensive income.


 


		e)	Cash and cash equivalents, marketable securities



 


Cash and cash equivalents


 


Cash equivalents include guaranteed
investment certificates (March 31, 2020 - $20,004,153, March 31, 2019 - $nil) with a maturity of 90 days or less. The
Company has classified its cash and cash equivalents at fair value through profit or loss.


 


Marketable securities


 


Marketable securities consist
of guaranteed investment certificates with a maturity of greater than 90 days and less than one year. The Company has classified
its marketable securities at fair value through profit or loss.


 


		f)	Research and development costs



 


Expenditures on research and
development activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized
in profit or loss as incurred. Investment tax credits related to current expenditures are included in the determination of net
income as the expenditures are incurred when there is reasonable assurance they will be realized.


 


Development activities involve
a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized
only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic
benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset.
These criteria will be deemed by the Company to have been met when revenue is received by the Company and a determination that
it has sufficient resources to market and sell its product offerings. Upon a determination that the criteria to capitalize development
expenditures have been met, the expenditures capitalized will include the cost of materials, direct labour and overhead costs that
are directly attributable to preparing the asset for its intended use. Other development expenditures will be expensed as incurred.


 


Capitalized development
expenditures will be measured at cost less accumulated amortization and accumulated impairment losses. No development costs
have been capitalized to date.


 


		g)	Government assistance



 


Government grants, including
grants from similar bodies, consisting of investment tax credits are recorded as a reduction of the related expense or cost of
the asset acquired. Government grants are recognized when there is reasonable assurance that the Company has met the requirements
of the approved grant program and there is reasonable assurance that the grant will be received.


 


Research grants that compensate
the Company for expenses incurred are recognized in profit, or loss in reduction thereof on a systematic basis in the same years
in which the expenses are recognized.


 






    6


     


    

 





Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars)







 











		2.	Significant accounting
policies cont’d



 


Grants that compensate the Company
for the cost of an asset are recognized in profit or loss on a systematic basis over the useful life of the asset.


 


		h)	Intangible assets



 


The Company owns certain patents,
intellectual property licenses and options to acquire intellectual property. The Company expenses patent costs, including license
fees and other maintenance costs, until such time as the Company has certainty over the future recoverability of the intellectual
property at which time it capitalizes the costs incurred. The Company capitalizes costs directly related to the acquisition of
existing license patents.


 


The Company does not hold any
intangible asset with an indefinite life.


 


Intangible assets with
finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortization method and amortization period of an intangible asset with a finite life
is reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are
treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in
general and administrative expenses.


 


Amortization is recognized in
profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for
use to August 31, 2035.


 


		i)	Income taxes



 


Current tax and deferred tax
are recognized in the Company’s profit and loss, except to the extent that it relates to a business combination or items
recognized directly in equity or in net loss and comprehensive loss.


 


Current income taxes are recognized
for the estimated taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes
payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or
substantively enacted by the period end date.


 


Deferred tax assets and liabilities
are recognized where the carrying amount of an asset or liability differs from its tax base, except for taxable temporary differences
arising on the initial recognition of goodwill and temporary differences arising on the initial recognition of an asset or liability
in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable
profit or loss.


 


Recognition of deferred tax assets
for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that
future taxable profit will be available against which the deferred tax assets can be utilized. At the end of each reporting period,
the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to
the extent that it has been probable that future taxable profit will allow the deferred tax asset to be recovered.


 


		j)	Basic and diluted loss per common share



 


Basic loss per share is
computed by dividing the loss available to common shareholders by the weighted average number of common shares outstanding
during the year. The computation of diluted earnings per share assumes the conversion, exercise or contingent issuance of
securities only when such conversion, exercise or issuance would have a dilutive effect on earnings per share. The dilutive
effect of convertible securities is reflected in diluted earnings per share by application of the “if converted”
method. The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted earnings per
share. Since the Company has losses, the exercise of outstanding options and warrants has not been included in this
calculation as it would be anti-dilutive.


 






    7


     


    

 





Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars)







 








		2.	Significant accounting
policies cont’d






 


		k)	Equipment



 


The Company’s
fixed assets comprise of computer equipment for use in general and administrative and research activities.


 


Depreciation is recognized using
the straight-line method based on an expected life of the assets


 


	 	 
	Computer equipment	2 years
	Right-of-use-assets	Over the lease term
	 	 


 


Impairment of long-lived assets:


 


The Company’s long-lived
assets are reviewed for indications of impairment at the date of preparing each statement of financial position. If indication
of impairment exists, the asset’s recoverable amount is estimated.


 


An impairment loss is recognized
when the carrying value of an asset, or its cash-generating unit, exceeds its recoverable amount. A cash-generating unit is the
smallest identifiable group of assets that generates cash inflows that are largely independent of cash inflows from other assets
or groups of assets. For the purpose of impairment testing, the Company determined it has one cash-generating unit. The recoverable
amount is the greater of the asset’s fair value less cost to sell and value in use.


 


		l)	Stock-based compensation



 


The Company has a stock-based
compensation plan (the "Plan") available to officers, directors, employees and consultants with grants under the Plan
approved by the Company's Board of Directors. Under the Plan, the exercise price of each option equals the closing trading price
of the Company's stock on the day prior to the grant or a higher price as determined by the Board of Directors. Vesting is provided
for at the discretion of the Board of Directors and the expiration of options is to be not greater than 10 years from the date
of grant. The Company uses the fair value-based method of accounting for employee awards granted under the Plan. The Company calculates
the fair value of each stock option grant using the Black Scholes option pricing model at the grant date. The stock-based compensation
cost of the options is recognized as stock-based compensation expense over the relevant vesting period of the stock options using
an estimate of the number of options that will eventually vest.


 


Stock options awarded to non-employees
are accounted for at the fair value of the goods received or the services rendered. The fair value is measured at the date the
Company obtains the goods or the date the counterparty renders the service. If the fair value of the goods or services cannot be
reliably measured, the fair value of the options granted will be used.


 


		m)	Share Capital



 


Common shares are classified
as equity. Incremental costs directly attributable to the issue of common shares are recognized as a reduction of equity.


 


The Corporation has
adopted a relative fair value method with respect to the measurement of shares and warrants issued as private placement
units. The relative fair value method allocates value to each component on a pro-rata basis, based on the fair value of the
components calculated independently of one another. The Company measures
the fair value of the warrant component of the unit using the Black-Scholes option pricing model. The unit value is then allocated,
pro-rata, between the two components, with the fair value attributed to the warrants being recorded to contributed surplus.


 






    8


     


    

 





Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars)







 





		2.	Significant accounting
policies cont’d






 


		n)	Financial Instruments



 


Financial assets and liabilities
are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized
when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially
all risks and rewards of ownership.


 


Financial assets and liabilities
are offset and the net amount is reported in the consolidated statement of financial position when there is a legally enforceable
right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the
liability simultaneously.


 


The Company recognizes financial
instruments based on their classification. Depending on the financial instruments’ classification, changes in subsequent
measurements are recognized in net loss and comprehensive loss.


 


The Company has implemented the
following classifications:


 


		·	Cash, cash equivalents and marketable
securities are classified at fair value through profit or loss.



 


		·	Government grant receivable and amounts
receivable are classified as amortized cost. After their initial fair value measurement, they are measured at amortized cost using
the effective interest method; and



 


		·	Accounts payable and accrued liabilities
are classified as other amortized cost. After their initial fair value measurement, they are measured at amortized cost using the
effective interest method.



 


Impairment of financial assets


 


The Company applies the simplified
method of the expected credit loss model required under IFRS 9. Under this method, the Company estimates a lifetime expected loss
allowance for all receivables. Receivables are written off when there is no reasonable expectation of recovery.


 


If there is objective evidence
that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted
at the financial asset’s original effective interest rate.


 


		o)	Employee benefits



 


Short-term employee benefit obligations
are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount
expected to be paid in short-term cash bonuses if the Company expects to pay these amounts as approved by the Board of Directors
as a result of past services provided by the employee and the obligation can be estimated reliably.


 


		p)	Provisions



 


A provision is recognized if,
as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are assessed by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money


 






    9


     


    

 





Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars)







 


 


		2.	Significant accounting
policies cont’d



 


and the risks specific to the
liability. The unwinding of the discount on provisions is recognized in finance costs. A provision for onerous contracts is recognized
when the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under
it. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected
net cost of continuing with the contract.


 


		3.	Key sources of estimation uncertainty



 


The preparation
of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are accounted for prospectively.


 


The key
sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets
and liabilities are discussed below:


 


Deferred taxes


 


The determination
of deferred income tax assets or liabilities requires subjective assumptions regarding future income tax rates and the likelihood
of utilizing tax carry-forwards. Changes in these assumptions could materially affect the recorded amounts, and therefore do not
necessarily provide certainty as to their recorded values.


 


Valuation of stock-based
compensation and warrants


 


Management
measures the costs for stock-based compensation and warrants using market-based option valuation techniques. Assumptions are made
and estimates are used in applying the valuation techniques. These include estimating the future volatility of the share price,
expected dividend yield, expected risk-free interest rate, future employee turnover rates, future exercise behaviours and corporate
performance. Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates
of stock-based compensation and warrants.


 


Intangible assets


 


The Company
estimates the useful lives of intangible assets from the date they are available for use in the manner intended by management and
periodically reviews the useful lives to reflect management’s intent about developing and commercializing the assets.


 


Functional currency


 


Management
considers the determination of the functional currency of the Company a significant judgment. Management has used its judgment
to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events
and conditions and considered various factors including the currency of historical and future expenditures and the currency in
which funds from financing activities are generated. A Company’s functional currency is only changed when there is a material
change in the underlying transactions, events and conditions.


 


		4.	Accounting standards



 


The following IFRS pronouncement
has been adopted during fiscal 2020:


 


The Company has adopted new accounting
standard IFRS 16 - Leases, effective for the Company’s annual period beginning April 1, 2019.


 


IFRS 16 sets out the principles
for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a
single on-balance sheet model, with certain exemptions. The standard includes two recognition exemptions for lessees – leases
of “low-value” assets and short-term leases with a lease term of 12 months or less. At the commencement date of a lease,
a lessee will recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease
term. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense
on the right-of-use asset. Lessees are also required to remeasure the lease liability upon the occurrence of certain events such
as a change in lease term. The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment
to the right-of-use asset.


 






    10


     


    

 





Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars)







 








		4.	Accounting standards cont’d






 


At the time of adoption, the
Company did not have any leases which fell under IFRS 16 as all leases had a term of twelve months or less.


 


In March 2020, the Company
entered into an office lease with a term of two years for which it has applied IFRS16.


 


The Company recognized a right-of-use
asset based on the amount equal to the lease liability, adjusted for any related prepaid and accrued lease payments previously
recognized. The lease liability was recognized based on the present value of remaining lease payments, discounted using the incremental
borrowing rate at the date of initial application. The lease payments include fixed payments less any lease incentives receivable,
variable lease payments that depend on an index or rate, and amounts expected to be paid under residual value guarantees. The variable
lease payments that do not depend on an index or a rate are recognized as expense in the period as incurred.


 


The carrying amounts of the Company’s
right-of-use assets and lease liabilities and movements during 2020 were as follows:


 


	 	 	Right of Use Asset	 	 	Lease Liability	 
	 	 	$	 	 	$	 
	Balance March 31, 2019	 	 	-	 	 	 	-	 
	Additions	 	 	70,706	 	 	 	70,706	 
	Depreciation	 	 	(2,946	)	 	 	-	 
	Lease payments	 	 	-	 	 	 	(3,455	)
	Lease interest	 	 	-	 	 	 	62	 
	Balance, March 31, 2020	 	 	67,760	 	 	 	67,313	 
	 	 	 	 	 	 	 	 	 
	Classification:	 	 	 	 	 	 	 	 
	Current portion of lease liabilities	 	 	-	 	 	 	35,344	 
	Long-term portion of lease liabilities	 	 	-	 	 	 	31,969	 
	 	 	 	-	 	 	 	67,313	 



 


		5.	Capital disclosures



 


The Company’s objectives,
when managing capital, are to safeguard cash and cash equivalents as well as maintain financial liquidity and flexibility in order
to preserve its ability to meet financial obligations and deploy capital to grow its businesses.


 


The Company’s financial
strategy is designed to maintain a flexible capital structure consistent with the objectives stated above and to respond to business
growth opportunities and changes in economic conditions. In order to maintain or adjust its capital structure, the Company may
issue shares or issue debt (secured, unsecured, convertible and/or other types of available debt instruments).


 


There were
no changes to the Company’s capital management policy during the year. The Company is not subject to any externally imposed
capital requirements.


 






    11


     


    

 





Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars)







 











		6.	Financial risk management



 


		(a)	Fair value



 


The Company’s financial
instruments recognized on the consolidated statements of financial position consist of cash and cash equivalents, marketable securities,
government grant receivable, other receivables, and accounts payable and accrued liabilities. The fair value of these instruments,
approximate their carrying values due to their short-term maturity.


 


Classification of financial
instruments


 


Financial instruments measured
at fair value on the statement of financial position are summarized into the following fair value hierarchy levels:


 


Level 1:
quoted prices (unadjusted) in active markets for identical assets or liabilities.


 


Level 2: inputs other than quoted
prices included within Level 1 that are observable for the asset or liability


 


Level 3: inputs for the asset or
liability that are not based on observable market data (unobservable inputs).


 


The Company classifies its financial
assets and liabilities depending on the purpose for which the financial instruments were acquired, their characteristics, and management
intent as outlined below:


 


Cash and cash equivalents and
marketable securities are measured using Level 1 inputs and changes in fair value are recognized through profit or loss, with changes
in fair value being recorded in net earnings at each period end.


 


Other receivables and government
grant receivable are measured at amortized cost less impairments.


 


Accounts payable and accrued
liabilities, deferred government grants and license fee payable are measured at amortized cost.


 


The Company has exposure to
the following risks from its use of financial instruments: credit, interest rate, currency and liquidity risk. The Company reviews
its risk management framework on a quarterly basis and makes adjustments as necessary.


 


		(b)	Credit risk



 


Credit risk arises from the potential
that a counterparty will fail to perform its obligations. The financial instruments that are exposed to concentrations of
credit risk consist of cash and cash equivalents and marketable securities.


 


The Company manages credit risk
associated with its cash and cash equivalents and marketable securities by maintaining minimum standards of R1-med or A-high investments
and the Company invests only in highly rated Canadian corporations which are capable of prompt liquidation.


 


		(c)	Interest rate risk



 


Interest rate risk is the risk
that the fair values and future cash flows of the Company will fluctuate because of changes in market interest rates. The Company
believes that its exposure to interest rate risk is not significant.


 


		(d)	Liquidity risk



 


Liquidity risk is the risk that
the Company will not be able to meet its financial obligations as they fall due. The Company currently settles all of its financial
obligations out of cash and cash equivalents. The ability to do so relies on the Company maintaining sufficient cash in excess
of anticipated needs. As at March 31, 2020, the Company’s liabilities consist of accounts payable and accrued liabilities
that have contracted maturities of less than one year.


 






    12


     


    

 





Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars)







 





		6.	Financial risk management cont’d



 


		(e)	Currency risk



 


Currency risk is the risk that
future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is exposed
to currency risk from employee costs as well as the purchase of goods and services primarily in the United States and cash and
cash equivalent balances held in foreign currencies. Fluctuations in the US dollar exchange rate could have a significant impact
on the Company’s results. Assuming all other variables remain constant, a 10% depreciation or appreciation of the Canadian
dollar against the US dollar would result in an increase or decrease in loss and comprehensive loss for the year ended March 31,
2020 of $108,423 (March 31, 2019 - $69,305).


 


Balances in US dollars are as
follows:


 


	 	 	March 31, 2020	 	 	March 31, 2019	 
	 	 	$	 	 	$	 
	Cash and cash equivalents	 	 	134,835	 	 	 	118,440	 
	Accounts payable and accrued liabilities	 	 	(899,992	)	 	 	(1,430,518	)
	Deferred government grant receivable (note 11)	 	 	-	 	 	 	1,831,337	 
	 	 	 	(765,157	)	 	 	519,259	 



 


		7.	Accounts payable and
accrued liabilities



 


	 	 	March 31, 2020	 	 	March 31, 2019	 
	 	 	$	 	 	$	 
	 Trade payables	 	 	456,241	 	 	 	802,025	 
	 Accrued liabilities	 	 	1,323,642	 	 	 	1,594,414	 
	 	 	 	1,779,883	 	 	 	2,396,439	 



 


		8.	Share capital



 


		Authorized

                                   

                                   
	



 


Unlimited common shares


 


		a)	Equity Issuances



 


Year ended March 31, 2020


 


On March 17, 2020, the Company
completed a public offering raising total gross proceeds of $35,000,001. The Company issued 11,290,323 common shares at $3.10 per
share. The Company paid commission to the agents totaling $2,450,000, share issuance costs of $459,470 and issued 790,323 warrants
to the agents exercisable into one common share of the Company at an exercise price of $3.10 for a period of twenty-four months.
The fair value of the warrants issued was determined to be $456,016.


 


On October 17, 2019, the
Company completed a public offering raising total gross proceeds of $6,900,000. The Company issued 5,307,693 units at $1.30, consisting
of 1 common share and 1⁄2 common share purchase warrant. Each whole warrant is exercisable at $1.75 until October 17,
2022. The Company paid commission to the agents totaling $455,175, share issuance costs of $314,856 and issued 350,134 warrants
to the agents exercisable into one common share of the Company at an exercise price of $1.30 for a period of twenty-four months.
The fair value of the warrants issued was determined to be $105,390. The Company has allocated the net proceeds of the offering
to the common shares and the common
share purchase warrants based on their estimated relative fair values. Based on relative fair values, $5,319,361 of the net proceeds
were allocated to the common shares and $705,218 to the common share purchase warrants.


 






    13


     


    

 





Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars)







 


 





		8.	Share capital cont’d



 


Year ended March 31, 2019


 


On December 21, 2018, the
Company closed a short-form prospectus offering of 4,000,000 units for gross proceeds of $4,000,000. Each unit consisted of one
common share of the Company and one-half common share purchase warrant of the Company. Each full warrant entitles the holder to
purchase one common share, for five years after the closing of the offering, at an exercise price of $1.20 per common share. The
Company issued 4,000,000 common shares, 2,000,000 warrants and 280,000 broker warrants in connection with this transaction.


 


The total costs associated with
the transaction were approximately $643,686, including the $91,000 which represented the fair value of the brokers' services provided
as part of the offering and compensated by warrants. Each such broker warrant is exercisable for one common share at a price of
$1.20 per share for a period of 24 months following the closing of the Offering. The Company has allocated the net proceeds of
the offering to the common shares and the common share purchase warrants based on their estimated relative fair values. Based on
relative fair values, $2,313,453 of the net proceeds were allocated to the common shares and $1,042,861 to the common share purchase
warrants.


 


		b)	Calculation of loss per share



 


Loss per common share is calculated using the weighted
average number of common shares outstanding. For the years ended March 31, 2020 and 2019 the calculation was as follows:


 


	 	 	2020	 	 	2019	 
	Common shares issued and outstanding, beginning of year	 	 	28,578,137	 	 	 	24,578,137	 
	Effect of warrants and options exercised	 	 	482,319	 	 	 	-	 
	Shares issued in December 2018 financing	 	 	-	 	 	 	1,095,890	 
	Shares issued in October 2019 financing	 	 	2,407,314	 	 	 	-	 
	Shares issued in March 2020 financing	 	 	431,870	 	 	 	-	 
	Weighted average shares outstanding, end of year	 	 	31,899,640	 	 	 	25,674,027	 
	Common shares issued and outstanding, end of year	 	 	46,799,828	 	 	 	28,578,137	 



 


The effect
of any potential exercise of the Company's stock options and warrants outstanding during the period has been excluded from the
calculation of diluted loss per common share as it would be anti-dilutive.


 


		9.	Warrants



 


Year ended March 31,
2020


 


As part of the public offering
closed on March 17, 2020, 790,323 broker warrants were issued, exercisable at $3.10 per share at any time up to March 17,
2022 and with a fair value of $456,016.


 


As part of the public offering
closed on October 17, 2019, 2,653,846 warrants and 350,134 broker warrants were issued, exercisable at $1.75 and $1.30 per
share respectively at any time up to October 17, 2022 and 2021 with a fair value of $705,218 and $105,390 respectively.


 






    14


     


    

 


Medicenna Therapeutics
Corp.


Notes to the consolidated
financial statements


For the Years Ended
March 31, 2020 and 2019


(Expressed in Canadian
Dollars)





 



 


		9.	Warrants cont’d



 


Year ended March 31,
2019


 


As part of the short-form prospectus
offering closed on December 21, 2018, 2,000,000 warrants and 280,000 broker warrants were issued, exercisable at $1.20 per
share at any time up to December 21, 2023 and with a fair value of $1,042,861 and $91,000 respectively.


 


Warrant continuity:


 


	 	 	Number of 
 Warrants	 	 	Weighted average
 exercise price	 
	Balance outstanding at March 31, 2018	 	 	3,074,042	 	 	$	2.00	 
	Warrants expired during the year	 	 	(208,959	)	 	 	2.00	 
	Common share purchase warrants issued in the Dec. 2018 financing	 	 	2,000,000	 	 	 	1.20	 
	Broker warrants issued in the Dec. 2018 financing	 	 	280,000	 	 	 	1.20	 
	Balance outstanding at March 31, 2019	 	 	5,145,083	 	 	$	1.65	 
	Common share purchase warrants issued in the October 2019 financing	 	 	2,653,846	 	 	 	1.75	 
	Broker warrants issued in the financing October 2019 financing	 	 	350,134	 	 	 	1.30	 
	Broker warrants issued in the March 2020 financing	 	 	790,323	 	 	 	3.10	 
	Warrants exercised during the year	 	 	(1,623,675	)	 	 	1.46	 
	Warrants outstanding at March 31, 2020	 	 	7,315,711	 	 	$	1.86	 


 


The following
warrants were exercised during the year ended March 31, 2020:


 


	Number of
 Warrants	 	 	Exercise 
 Price	 	 	 
Proceeds
	 	 	Expiry Date
	 	 	 	$	 	 	$	 	 	 
	 	695,544	 	 	 	1.75	 	 	 	1,217,202	 	 	October 17, 2022
	 	138,631	 	 	 	1.30	 	 	 	180,220	 	 	October 17, 2021
	 	35,000	 	 	 	2.00	 	 	 	70,000	 	 	April 5, 2021
	 	222,500	 	 	 	1.20	 	 	 	267,000	 	 	December 21, 2020
	 	532,000	 	 	 	1.20	 	 	 	638,400	 	 	December 21, 2023
	 	1,623,675	 	 	 	 	 	 	 	2,372,822	 	 	 



 


The fair values of warrants are
estimated using the Black-Scholes option-pricing model. The following assumptions were used to determine the fair value of warrants
issued in the following years:


 


	 	 	March 31, 2020	 	 	March 31, 2019	 
	Risk free interest rate	 	 	1.5	%	 	 	3.0	%
	Expected life of options	 	 	1-1.5 years 	 	 	 	2.0-2.5 years 	 
	Expected volatility	 	 	70-78%	 	 	 	85	%
	Expected dividend yield	 	 	-	 	 	 	-	 
	Weighted average fair value of options granted during the year	 	$	0.33	 	 	$	0.37	 



 






    15


     


    

 


Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian Dollars) 


 






 


		9.	Warrants cont’d



 


At March 31,
2020, warrants were outstanding and exercisable, enabling holders to acquire common shares as follows:


 


	Number of 
 Warrants	 	 	Exercise
 Price	 	 	Expiry Date
	 	 	 	$	 	 	 
	 	57,500	 	 	 	1.20	 	 	December 21, 2020
	 	1,379,083	 	 	 	2.00	 	 	January 1, 2021
	 	1,288,000	 	 	 	2.00	 	 	March 1, 2021
	 	163,000	 	 	 	2.00	 	 	April 5, 2021
	 	211,503	 	 	 	1.30	 	 	October 17, 2021
	 	790,323	 	 	 	3.10	 	 	March 17, 2022
	 	1,958,302	 	 	 	1.75	 	 	October 17, 2022
	 	1,468,000	 	 	 	1.20	 	 	December 21, 2023
	 	7,315,711	 	 	 	 	 	 	 



 


		10.	Stock options



 


Year ended March 31,
2020


 


During
the year ended March 31, 2020 the Company granted 1,030,000 stock options exercisable at $1.30 per share. Of these options,
300,000 vest 50% upon issuance and 50% after one year and have a five year life. 730,000 options vest 50% after one year, 25% after
2 years and 25% after 3 years and have a ten year life.


 


200,000 options were also issued,
exercisable at $1.38 per share. 50,000 of the options granted vest 50% after one year, 25% after two years and 25% after three
years, 150,000 of the options vest 50% on September 1, 2019 and 50% on December 1, 2019 and have a ten-year life.


 


Year ended March 31,
2019


 


During the year ended
March 31, 2019 the Company granted 200,000 stock options exercisable at $1.09 per share, with a 5-year life. The options
vested 25% on issue on September 1, 2018, 25% on December 1, 2018, 25% on March 1, 2019 and 25% on
June 1, 2019. The Company granted an additional 1,175,000 options on February 14, 2019 at an exercise price of
$1.00. 200,000 of these options vested 50% immediately and 50% will vest on February 14, 2020. These options have a
5-year life. The remaining 975,000 options vest 50% after one year, 25% after two years and 25% after three years and have a
ten-year life.


 


Stock option
transactions for the years ended March 31, 2020 are set forth below:


 


	 	 	Number of 
 options	 	 	Weighted
 average
 exercise
 price	 
	Balance outstanding at March 31, 2018	 	 	2,175,000	 	 	$	2.11	 
	Forfeited	 	 	(275,000	)	 	 	2.40	 
	Granted	 	 	1,375,000	 	 	$	1.00	 
	Balance outstanding at March 31, 2019	 	 	3,275,000	 	 	$	1.67	 
	Granted	 	 	1,230,000	 	 	$	1.38	 
	Forfeited	 	 	(375,000	)	 	 	1.09	 
	Balance outstanding at March 31, 2020	 	 	4,130,000	 	 	$	1.56	 


 






    16


     


    

 


Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian
Dollars)





 



  


		10.	Stock options – cont’d


 


The following
table summarizes information about stock options outstanding at March 31, 2020:


 


	 	 	 	Options Outstanding	 	 	Options Exercisable	 
	Exercise
 Prices	 	 	Options	 	 	Weighted average
 remaining
 contractual life	 	 	Weighted
 average 
 exercise price	 	 	Options	 	 	Weighted 
 average
 exercise price	 
	$	 	 	 	 	 	Years	 	 	$	 	 	 	 	 	$	 
	 	0.00-1.00	 	 	 	1,150,000	 	 	 	8.12	 	 	 	1.00	 	 	 	662,500	 	 	 	1.00	 
	 	1.01-1.50	 	 	 	1,230,000	 	 	 	8.32	 	 	 	1.31	 	 	 	300,000	 	 	 	1.34	 
	 	1.51-2.00	 	 	 	950,000	 	 	 	6.88	 	 	 	2.00	 	 	 	712,500	 	 	 	2.00	 
	 	2.01-2.88	 	 	 	800,000	 	 	 	6.26	 	 	 	2.23	 	 	 	650,000	 	 	 	2.28	 
	 	 	 	 	 	4,130,000	 	 	 	7.54	 	 	 	1.56	 	 	 	2,325,000	 	 	 	1.71	 


 


The
following assumptions were used in the Black-Scholes option-pricing model to determine the fair value of stock options
granted during the year:


 


	 	 	March 31, 2020	 	 	March 31, 2019	 
	Exercise price	 	 	$1.30-1.38 	 	 	 	$1.00-1.09 	 
	Grant date share price	 	 	$1.30-1.38	 	 	 	$0.80- 1.09 	 
	Risk free interest rate	 	 	1.5	%	 	 	1.5 - 3.0%  	 
	Expected life of options	 	 	2.5-5 years 	 	 	 	2.5-5 years 	 
	Expected volatility	 	 	100-114%	 	 	 	100-116%	 
	Expected dividend yield	 	 	-	 	 	 	-	 
	Forfeiture rate	 	 	 	 	 	 	0-15%	 
	Weighted average fair value of options granted during the period	 	$	0.94	 	 	$	0.61	 


 


		11.	Government assistance



 


CPRIT assistance


 


In February 2015, the Company
received notice that it had been awarded a grant by the Cancer Prevention Research Institute of Texas (“CPRIT”) whereby
the Company is eligible to receive up to US$14,100,000 on eligible expenditures over a three year period related to the development
of the Company’s phase 2b clinical program for MDNA55. In October 2017 the Company was granted a one year extension
to the grant allowing expenses to be claimed over a four year period ending February 28, 2019. On February 4, 2019 the
Company was approved for a further six month extension ending August 31, 2019, on July 25, 2019 an additional six month
extension was granted to February 28, 2020 and on January 6, 2020 an additional six month extension was granted to August 28,
2020.


 


Of the US$14.1 million grant
approved by CPRIT, Medicenna has received US$12.7 million from CPRIT as of March 31, 2020. The Company is eligible to receive
the remaining US$1.4 million upon the achievement of certain criteria as determined by CPRIT, from time to time. There can be no
assurances that the balance of such grants will be received from CPRIT.


 


Ongoing program funding from
CPRIT is subject to a number of conditions including the satisfactory achievement of milestones that must be met to release additional
CPRIT funding, proof the Company has raised 50% matching funds and maintaining substantial functions of the Company related to
the project grant in Texas as well as using Texas-based subcontractor and collaborators wherever possible. There can be no assurances
that the Company will continue to meet the necessary CPRIT criteria, satisfactorily achieve milestones, or that CPRIT will continue
to advance additional funds to the Company.


 






    17


     


    

 


Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian
Dollars)





 



  


		11.	Government assistance – cont’d


 


If the Company is found to have
used any grant proceeds for purposes other than intended, is in violation of the terms of the grant, or relocates its MDNA55 related
operations outside of the state of Texas, then the Company is required to repay any grant proceeds received.


 


Under the terms of the grant,
the Company is also required to pay a royalty to CPRIT, comprised of 3-5% of revenues on net sales of MDNA55 until aggregate royalty
payments equal 400% of the grant funds received at which time the ongoing royalty will be 0.5%.


 


During the year ended March 31,
2020, the Company received $3,539,465 from CPRIT (2019 - $3,242,073).


 


		12.	Commitments



 


Intellectual Property


 


On August 21, 2015,
the Company exercised its right to enter into two license agreements (the “Stanford License Agreements”) with the
Board of Trustees of the Leland Stanford Junior University (“Stanford”). In connection with this licensing
agreement the Company issued 649,999 common shares with a value of $98,930 to Stanford and affiliated inventors. The value of
these shares has been recorded as an intangible asset that is being amortized over the life of the underlying patents. As at
March 31, 2020, the Company’s intangible assets have a remaining capitalized netbook value of $76,259
(March 31, 2019 - $81,205).


 


The development milestones under
the Stanford License Agreements were updated during the year ended March 31, 2020 to reflect the current stage of development
of the Company’s programs. In connection with the amendment of the Stanford License Agreements, Medicenna paid a US$150,000
fee to Leland Stanford Junior University.


 


The Company has entered into
various license agreements with respect to accessing patented technology. In order to maintain these agreements, the Company is
obligated to pay certain costs based on timing or certain milestones within the agreements, the timing of which is uncertain. These
costs include ongoing license fees, patent prosecution and maintenance costs, royalty and other milestone payments. As at March 31,
2020, the Company is obligated to pay the following:


 


		•	Patent licensing costs
due within 12 months totaling $70,500.






		•	Patent licensing costs,
including the above, due within the next five years totaling $1,283,100.






		•	Given the current development plans and expected timelines of the Company it is assumed that a project milestones of US$50,000
and US$100,000 will be due in the next five years.






		•	Project milestone payments,
assuming continued success in the development programs, of uncertain timing
totaling US$2,650,000 and an additional US$2,000,000 in sales milestones.






		•	A liquidity payment of $370,375 is due to the National Institute of Health (“NIH”) which represents the remaining
payments resulting from the Company’s liquidity event in March 2017.



 


	Contractual obligations	 	Less than 
 1 year	 	 	1-3 years	 	 	3-5 years	 	 	Total	 
	Patent licensing costs, minimum annual royalties per license agreements	 	$	70,500	 	 	$	465,300	 	 	$	747,300	 	 	$	1,283,100	 
	Lease payments	 	$	41,460	 	 	$	38,005	 	 	$	0	 	 	$	79,465	 
	Liquidity event payment	 	$	370,375	 	 	$	0	 	 	$	0	 	 	$	370,375	 


 


As at March 31, 2020, the
Company had obligations to make future payments, representing significant research and development and manufacturing contracts
and other commitments that are known and committed in the amount of approximately $5,740,000. Most of these agreements are cancellable
by the Company with notice. These commitments include agreements for manufacturing and preclinical studies.


 






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Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian
Dollars)





 



  


		13.	Related party disclosures


 


		(a)	Key management personnel



 


Key management personnel, which
consists of the Company’s officers (President and Chief Executive Officer, Chief Financial Officer, and Chief Development
Officer) and directors, earned the following compensation for the following periods:


 


	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	Salaries and wages	 	 	891,747	 	 	 	891,748	 
	Board fees	 	 	142,264	 	 	 	141,466	 
	Stock option expense	 	 	872,585	 	 	 	786,121	 
	Related party rent and moving expenses	 	 	64,561	 	 	 	21,515	 
	 	 	 	1,977,157	 	 	 	1,840,850	 


 


During the year ended March 31,
2020, the Company paid $64,561 (2019: $21,515) in moving, storage and rent expenses to the CEO and CDO of the Company. These transactions
were in the normal course of business and have been measured at the exchange amount, which is the amount of consideration established
and agreed to by the related parties.


 


		(b)	Amounts payable to related parties



 


As at March 31, 2020, the
Company had trade and other payables in the normal course of business, owing to directors and officers of $247,696 (2019: $380,328)
related to board fees and accrued vacation.


 


		14.	Income taxes



 


a) Provision for Income Tax


 


A reconciliation of income taxes
at statutory rates with the reported taxes is as follows:


 


	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	Loss before income taxes	 	 	(8,277,069	)	 	 	(4,708,031	)
	Tax rate	 	 	27.0	%	 	 	27.0	%
	Expected tax recovery	 	 	(2,235,000	)	 	 	(1,271,000	)
	 	 	 	 	 	 	 	 	 
	Change in statutory rates and foreign exchange rates	 	 	35,000	 	 	 	(9,000	)
	Permanent differences	 	 	309,000	 	 	 	270,000	 
	Share issuance costs	 	 	(993,000	)	 	 	(149,000	)
	Change in unrecognized deductible temporary difference	 	 	2,884,000	 	 	 	1,159,000	 
	Total income tax expense (recovery)	 	 	-	 	 	 	-	 


 






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Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian
Dollars)





 



  


		14.	Income taxes cont’d


 


b) Deferred Income Tax


 


The significant components of the Company’s
deferred tax assets that have not been included on the consolidated statement of financial position are as follows:


 


	 	 	2020	 	 	2019	 
	 	 	 	$	 	 	 	$	 
	Non-capital losses carry-forward	 	 	6,287,000	 	 	 	4,299,000	 
	Property and equipment	 	 	50,000	 	 	 	50,000	 
	Share issuance costs	 	 	940,000	 	 	 	249,000	 
	 	 	 	7,277,000	 	 	 	4,393,000	 
	Unrecognized deferred tax asset	 	 	(7,277,000	)	 	 	(4,393,000	)
	Net deferred tax assets	 	 	-	 	 	 	-	 


 


The significant components of
the Company’s temporary differences, unused tax credits and unused tax losses that have not been included in the consolidated
statements of financial position are as follows:


 


	Type	 	Amount	 	 	Expiry
	Non-capital losses carry-forward	 	$	24,017,000	 	 	2034-2040
	Property and equipment	 	 	186,000	 	 	N/A
	Share issuance costs	 	 	3,480,000	 	 	2038-2041


 


		15.	Components of Expenses



 


	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	General and Administration Expenses	 	 	 	 	 	 	 	 
	   Depreciation expense	 	 	7,893	 	 	 	6,818	 
	   Stock based compensation	 	 	638,556	 	 	 	563,180	 
	   Facilities and operations	 	 	252,716	 	 	 	162,995	 
	   Legal, professional and finance	 	 	186,026	 	 	 	166,277	 
	   Salaries and benefits	 	 	595,588	 	 	 	676,952	 
	   Corporate communications	 	 	559,089	 	 	 	368,199	 
	   Other expenses	 	 	260,715	 	 	 	271,054	 
	   CPRIT grant claimed in eligible expenses (Note 11)	 	 	(125,372	)	 	 	(506,188	)
	 	 	 	2,375,211	 	 	 	1,709,286	 


 






    20


     


    

 


Medicenna Therapeutics Corp.


Notes to the consolidated financial statements


For the Years Ended March 31, 2020 and 2019


(Expressed in Canadian
Dollars)





 



  


		15.	Components of Expenses cont’d


 


	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	Research and Development Expenses	 	 	 	 	 	 	 	 
	   Chemistry, manufacturing and controls	 	 	342,578	 	 	 	399,994	 
	   Regulatory	 	 	432,948	 	 	 	48,105	 
	   Discovery and pre-clinical	 	 	1,898,191	 	 	 	805,477	 
	   Research and development warrant	 	 	-	 	 	 	710,574	 
	   Clinical	 	 	1,528,229	 	 	 	3,710,789	 
	   Salaries and benefits	 	 	1,095,118	 	 	 	1,190,142	 
	   Licensing, patent, legal fees and royalties	 	 	810,987	 	 	 	783,458	 
	   Stock based compensation	 	 	486,421	 	 	 	435,439	 
	   CPRIT grant claimed in eligible expenses (Note 11)	 	 	(951,166	)	 	 	(5,140,039	)
	   Other research and development expenses	 	 	226,282	 	 	 	74,058	 
	 	 	 	5,869,588	 	 	 	3,017,997	 


 


		16.	Subsequent Events



 


Subsequent
to the year end, the agents fully exercised their over-allotment option to purchase an additional 1,693,548 common shares of
the Company at a price of $3.10 per share, in connection with     the
previous public offering of common shares of Medicenna which was completed on March 17, 2020. As
a result of the exercise of this over-allotment option, Medicenna received additional gross proceeds of
$5,249,999.


 


In March 2020 the World
Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public
health developments may adversely affect workforces, economies, and financial markets globally, potentially leading to an economic
downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its
effects on the Company’s business or results of operations at this time.


 






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