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Securities registered or to be registered pursuant to Section 12(g) of
the Act.
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act:
Indicate the number of outstanding shares of each of the Issuer's
classes of capital or common stock (ordinary shares) as of the close of the period covered by the annual report. Ordinary
shares without par value – 16,944,783
as at August 1, 2022
Indicate by check mark if the registrant is a well-known seasoned issuer,
defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 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 report) 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, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule
12b-2 of the Exchange Act.
If an emerging growth company that prepares its financial statements in
accordance with U.S. GAAP, 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 which basis of accounting the registrant has used
to prepare the financial statements included in this filing:
If "Other" has been checked in response to the previous question,
indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
This annual report includes "forward looking statements.” All
statements, other than statements of historical facts, included herein or incorporated by reference herein, including without limitation,
statements regarding our business strategy, plans and objectives of management for future operations and those statements preceded by,
followed by or that otherwise include the words "believe," "expects," "anticipates," "intends,"
"estimates" or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances
that such forward-looking statements will prove to be correct.
Each forward-looking statement reflects our current view of future events
and is subject to risks, uncertainties and other factors that could cause actual results to differ materially from any results expressed
or implied by our forward-looking statements.
These statements are based on assumptions and analyses made by us in light
of our experience and our perception of historical trends, current conditions and expected future developments based on the focus of our
business activities on biotechnology, as well as other factors we believe are appropriate in particular circumstances. However, whether
actual results and developments will meet our expectations and predictions depends on a number of risks and uncertainties, which could
cause actual results to differ materially from our expectations, including the risks set forth in "Item 3 - Key Information-Risk
Factors."
Our business focus is that of being primarily a pharmaceutical development
business subject to all of the risks of a pharmaceutical development business. We do not anticipate directly engaging in the post pharmaceutical
development endeavors of manufacturing, marketing and distribution of our development products.
Consequently, all of the forward-looking statements made in this annual
report are qualified by these cautionary statements. We cannot assure you that the actual results or developments anticipated by us will
be realized or, even if substantially realized, that they will have the expected effect on us or our business or operations.
Unless the context indicates otherwise the terms “Portage Biotech
Inc.,” “the Company,” “our Company,” “Portage,” “we,” “us” or “our”
are used interchangeably in this Annual Report and mean Portage Biotech Inc. and its subsidiaries.
Portage Biotech Inc. is a British Virgin Islands (“BVI”) business
company pursuant to the Certificate of Continuance issued by the Registrar of Corporate Affairs of the BVI on July 5, 2013. More than
50% of our ordinary shares were held by non-United States citizens and residents as of the last measurement date. A majority of our assets
are located outside the United States. As a result, we believe that we qualify as a "foreign private issuer" for continuing
to report regarding the registration of our ordinary shares using this Form 20-F annual report format.
The financial information presented in this Annual Report is expressed
in United States dollars ("US $") and the financial data in this Annual Report is presented in accordance with the International
Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations
of the International Financial Reporting Interpretations Committee.
All dollar amounts set forth in this report are in U.S. dollars, except
where otherwise indicated.
PART I
ITEM 1 – IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not required since this is an annual report.
ITEM 2 – OFFER STATISTICS AND EXPECTED TIMETABLE
Not required since this is an annual report.
ITEM 3 – KEY INFORMATION
(A) |
SELECTED FINANCIAL DATA |
The selected financial data set forth below should be read in conjunction
with our Consolidated Financial Statements and Notes thereto appearing elsewhere in this Annual Report. The selected Operations Data for
each of the three fiscal years ended March 31, 2022, 2021 and 2020, and the Balance Sheet data as of March 31, 2022 and 2021 are derived
from our audited Consolidated Financial Statements appearing elsewhere in this Annual Report. The selected Operations Data for the years
ended March 31, 2019 and 2018 and the Balance Sheet data as of March 31, 2020, 2019 and 2018 are derived from our audited Consolidated
Financial Statements, which are not included in this Annual Report.
SUMMARY OF FINANCIAL INFORMATION IN THE COMPANY’S FINANCIAL STATEMENTS
(U.S. DOLLARS)
Operating Data
Year ended March 31, | |
2022 | |
2021 | |
2020 | |
2019 | |
2018 |
| |
All amounts in 000'$ (except for per share amounts) |
Net (loss) income before non-controlling interests | |
| (19,169 | ) | |
| (17,189 | ) | |
| (7,249 | ) | |
| (3,594 | ) | |
| 123,741 | |
Net (loss) income attributable to owners of the Company | |
| (16,870 | ) | |
| (15,833 | ) | |
| (5,333 | ) | |
| (2,635 | ) | |
| 123,741 | |
Working capital | |
| 24,049 | | |
| 1,738 | | |
| 1,226 | | |
| 4,757 | | |
| 7,489 | |
Total assets | |
| 194,662 | | |
| 174,860 | | |
| 173,174 | | |
| 173,715 | | |
| 10,003 | |
Capital stock | |
| 158,324 | | |
| 130,649 | | |
| 117,817 | | |
| 116,237 | | |
| 23,654 | |
Warrants | |
| 33 | | |
| 1,120 | | |
| – | | |
| – | | |
| – | |
Stock option reserves | |
| 16,928 | | |
| 7,977 | | |
| 58 | | |
| 324 | | |
| 267 | |
Equity attributable to owners of the Company | |
| 121,205 | | |
| 101,449 | | |
| 96,531 | | |
| 99,674 | | |
| 9,619 | |
Weighted average number of shares outstanding - Basic | |
| 13,060 | | |
| 11,733 | | |
| 10,952 | | |
| 4,820 | | |
| 2,678 | |
Weighted average number of shares outstanding - Diluted | |
| 13,060 | | |
| 11,733 | | |
| 10,952 | | |
| 4,820 | | |
| 2,696 | |
Net (loss) income per share - Basic | |
$ | (1.29 | ) | |
$ | (1.35 | ) | |
$ | (0.49 | ) | |
$ | (0.55 | ) | |
$ | 46.21 | |
Net (loss) income per share - Diluted | |
$ | (1.29 | ) | |
$ | (1.35 | ) | |
$ | (0.49 | ) | |
$ | (0.55 | ) | |
$ | 45.90 | |
| 1. | The effect of potential share issuances pursuant to the exercise of options and warrants would be anti-dilutive and, therefore, basic
and diluted loss per share are the same for the fiscal years 2022, 2021, 2020 and 2019. |
| 2. | The per share data has been adjusted to reflect the reverse split of the ordinary shares effective June 5, 2020. |
On January 8, 2019, the Company completed an acquisition of SalvaRx Limited,
which has been accounted for using the acquisition method as explained elsewhere in this report. Fiscal 2019 amounts include the effect
of acquisition accounting.
The Company has not declared or paid any dividends in any of the reporting
periods presented herein except for fiscal 2018, when the Company distributed a property dividend consisting of shares of common stock
of our former partially owned subsidiary, Biohaven Pharmaceuticals Holding Company Ltd. (“Biohaven”).
Exchange Rates
In this Annual Report on Form 20-F, unless otherwise specified, all monetary
amounts are expressed in United States dollars. The Company's subsidiaries have transactions in Canadian dollars, British pounds sterling
and the European Union (“EU”) euros. Currencies other than the United States dollar have been translated into United States
dollars using rates available on Bank of Canada and the Bank of England websites.
On June 30, 2022, the exchange rate, based on the noon buying rates, for
the conversion of Canadian dollars into United States dollars (the "Noon Rate of Exchange") was approximately US$1 = CDN$1.29,
for the conversion of British pounds sterling into United States dollars was approximately US$1 = £0.82 and for the conversion of
EU euros into United States dollars was approximately US$1 = €0.96.
The following table sets out the high and low exchange rates in Canadian
dollar, British pounds and EU euros for one United States dollar for each of the last six months of the fiscal year.
Fiscal year 2022 | |
October | |
November | |
December | |
January | |
February | |
March |
Canadian Dollar | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
High | |
| 1.27 | | |
| 1.28 | | |
| 1.29 | | |
| 1.28 | | |
| 1.28 | | |
| 1.28 | |
Low | |
| 1.23 | | |
| 1.24 | | |
| 1.26 | | |
| 1.25 | | |
| 1.27 | | |
| 1.25 | |
British Pounds | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
High | |
| 0.74 | | |
| 0.75 | | |
| 0.76 | | |
| 0.75 | | |
| 0.75 | | |
| 0.77 | |
Low | |
| 0.72 | | |
| 0.73 | | |
| 0.74 | | |
| 0.73 | | |
| 0.73 | | |
| 0.75 | |
EU Euros | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
High | |
| 0.87 | | |
| 0.89 | | |
| 0.89 | | |
| 0.90 | | |
| 0.89 | | |
| 0.92 | |
Low | |
| 0.86 | | |
| 0.86 | | |
| 0.88 | | |
| 0.87 | | |
| 0.87 | | |
| 0.90 | |
The following table sets out the average exchange rates in Canadian dollar,
British pounds and EU euros for one United States dollar for the five most recent financial years.
Year ended March 31, | |
2022 | |
2021 | |
2020 | |
2019 | |
2018 |
Average for the Fiscal Year | |
| | | |
| | | |
| | | |
| | | |
| | |
Canadian Dollar | |
| 1.25 | | |
| 1.32 | | |
| 1.33 | | |
| 1.31 | | |
| 1.28 | |
British Pounds | |
| 0.73 | | |
| 0.77 | | |
| 0.79 | | |
| 0.76 | | |
| 0.75 | |
EU Euros | |
| 0.86 | | |
| 0.86 | | |
| 0.90 | | |
| 0.86 | | |
| 0.86 | |
(B) |
CAPITALIZATION AND INDEBTEDNESS |
Not applicable.
(C) |
REASONS FOR THE OFFER AND USE OF PROCEEDS |
Not applicable.
The following is a brief discussion of those distinctive or special characteristics
of the Company's operations and industry that may have a material impact on, or constitute risk factors in respect of, the Company's future
financial performance.
COVID-19, Ukraine and Inflation Risks Related to our Business
Government efforts to control the effect and spread of the COVID-19 virus have had and
will have a disruptive effect on different aspects of our business.
The jurisdictions in which we conduct our business have imposed mandates
and regulations or suggested measures to counter the spread of the COVID-19 virus and control the level of the pandemic within its population
and the economic activities of their respective economies. These collectively have changed over the course of the pandemic and are expected
to continue to evolve in response to the changing nature of the pandemic and the population and economic response to the virus and the
many different measures prompted by the pandemic. The Company has been affected in a number of ways, such as the way in which it
operates its headquarters operations, it deals with its scientists and their activities, and planning for and carrying out clinical trials,
all of which have experienced some short-term disruption and may suffer long-term changes in the way we will do business. Actions
such as government lock downs have slowed or, in some cases, temporarily stopped research and development activities and clinical trials.
Various safety protocols for personal interactions may hamper research and development activities. To date, since we are mostly
focused on the activities related to research and development, we have not experienced the larger adverse economics of a slowed economy;
however, we do expect that time lines for our research and development, clinical trials, regulatory approvals and bringing our products
to market will cause our operational costs to be greater than anticipated in this current fiscal year and going forward. The financial
effect will be that our development expenses will increase and we will have to obtain additional capital funding. Any required additional
equity funding will be dilutive to the equity of our investors and debt financing will have restrictive covenants that could adversely
affect our business plans and operational objectives. Any further funding that we may need may not be available or even if available
it may not be on terms that are acceptable to the Company.
In addition to government efforts relating to the COVID-19 pandemic, the institutions
that we work with have their own limits and procedures that will influence or limit our ability to conduct research and development and
the conduct of clinical trials.
In addition to the government mandates for controlling the many different
health and economic effects of the COVID-19 virus and pandemic, individual institutions with which we work, such as hospitals, laboratories
and educational institutions have taken actions that will disrupt the progress of our business plans for the Company and our individual
subsidiaries. For example, as hospitals cope with the need to care for COVID-19 virus patients, they have limited access or put in abeyance
access for many of their other non-emergency activities such as research and continuing or commencing clinical trials. Most educational
institutions and many laboratories curtailed or limited access to their facilities in the first half of the 2020 year and are still working
out how they will operate going forward; we are expecting that going forward there will be strict limitations on access to these institutions
and facilities for our researchers and research partners. Overall, changes in the way our development activities can be conducted
will result in delays in our conducting research activities, carrying out clinical trials and making regulatory submissions. As a consequence,
we anticipate our costs will increase. In some instances, we may have to shelve or even terminate activities, losing the value of a potential
valuable asset, not recovering our investment, breaching our licenses and research related agreements, and suffering a diminution of corporate
value and investor interest. In many respects, there is great uncertainty in the general effects resulting from the governmental
and private response to the pandemic, and only the passage of time will reveal its full effects.
The Company expects that the COVID-19 pandemic will have general economic consequences
that will have an effect on the Company.
The response of the governments imposing a lock down, the high unemployment,
certain industries being especially hard hit and the public response as the economy opens up will undoubtedly have wide reaching effects
on the economy. It is possible that the ultimate effect could be a recession or even greater economic dislocation. A reduced
economy may result in a limitation on companies such as ours in raising capital when necessary, in the amounts of capital needed and available,
and the terms that are offered that will be acceptable to the Company. Also, there may be a decline in the overall value of the
securities market that could reduce the value of the Company or limit the ability of our investors to sell their ordinary shares.
Investors should consider general economic trends and issues resulting or may result from the pandemic when they decide to transact in
our securities.
The Company expects any impact of Ukrainian conflict to be general and not specific in
terms of its operations.
Currently, we believe that the conflict between Ukraine and Russia does
not have any direct impact on our operations, financial condition or financial reporting. We believe the conflict will have only a general
impact on our operations in the same manner as it is having a general impact on all businesses that have their operations in North America
and Western Europe resulting from international sanction and embargo regulations, possible shortages of goods and goods incorporating
parts that may be supplied from the Ukraine or Russia, supply chain challenges, and the international and US domestic inflationary results
of the conflict and government spending for and funding of our country’s response. As our operations are related only to drug development,
we do not believe we will be targeted for cyber-attacks. We have no operations in the countries directly involved in the conflict or are
specifically impacted by any of the sanctions and embargoes. We do not believe that the conflict will have any impact on our internal
control over financial reporting or any of our other disclosure obligations. Other than general securities market trends, we do not have
reason to believe that investors will evaluate the Company as having special risks or exposures related to the Ukrainian conflict.
The impact of changing economic conditions, including the effects of inflation, may adversely
affect our business, financial condition, and results of operations.
The Company believes that inflation will have a general impact on the
business in line with overall price increases, increases in the cost of borrowing, and operating in an inflationary economy. We expect
that the government efforts to control the rate of inflation will have an impact on the Company through increased costs of operations
and financing our business. A weakening of the economy in the United States, Canada, or Europe or of the global economy, including the
more limited availability of credit, economic uncertainty, inflation, financial turmoil affecting the banking system or financial markets,
increased unemployment rates, and other adverse economic or market conditions may adversely impact our business and operating results.
We cannot predict the timing, strength, or duration of any inflationary period or economic slowdown or its ultimate impact on the Company.
If the conditions in the general economy significantly deviate from present levels and continue to deteriorate, our business, financial
condition, and results of operations could be adversely affected.
Risks Related to our Business
We have a history of operating losses and may never achieve profitability in the future.
Historically, we have generated only a limited amount of business income,
notwithstanding a highly valued asset distribution to our shareholders of the Company share ownership of Biohaven.
Our objective is to enable research and development so as to create early-
to mid-stage, first- and best-in-class therapies for a variety of cancers, by providing funding, strategic business and clinical counsel,
and shared services, with the goal of creating viable products that may be monetized through licensing, manufacturing and distribution
or outright sale. Our principal activities are engaging in research and development to identify and validate new drug targets that could
become marketed drugs in the future. For this, we will require significant financial resources without any income, and we expect to continue
incurring operating losses for the foreseeable future.
Our ability to generate revenue in the future or achieve profitable operations
is largely dependent upon our ability to attract and maintain experienced management and know-how to develop new drug candidates and to
partner with major pharmaceutical companies to successfully commercialize any successful drug candidates. It takes many years and significant
financial resources to successfully develop pre-clinical or early clinical drug candidates into marketable drugs, and we cannot assure
you that we will be able to achieve these objectives. Although, we were successful in achieving significant value growth in an investment
made in Biohaven, which resulted in the distribution of Biohaven shares as an asset dividend to our shareholders with a then market value
of approximately $153 million in fiscal 2018, we cannot say that we will be able to achieve any similar success in our future business
activities.
We are in the pharmaceutical development business and will be subject to all of the risks
of a pharmaceutical development business.
Our business must be evaluated in light of the problems, delays, uncertainties
and complications encountered in connection with establishing and carrying on a pharmaceutical research and development business.
There is a possibility that only a few or none of our drug candidates
that are currently and may be under development in future will be found to be safe and effective, will be able to receive necessary regulatory
approvals in order to commercialized, or will be commercially viable. Any failure to successfully develop and obtain regulatory approval
for products would have a material adverse effect on our business, financial condition and results of operations.
Rapidly changing medical technology within
the life sciences could make the product candidates that we are developing obsolete or less attractive to pursue.
The medical industry is characterized by rapid and significant medical
technological and therapy changes, frequent new product candidates and product introductions and enhancements and evolving industry standards.
Our future success will depend on our ability to continually develop and then improve the product candidates that we design and to develop
and introduce new product candidates that address the evolving needs of the physicians and patients on a timely and cost-effective basis.
Any new product candidates and products developed by us may not be accepted in the intended markets. Our inability to gain market acceptance
of new products could harm our future operating results.
Clinical trials for our potential product candidates will be expensive and will take a
considerable amount of time, and the outcome of clinical trials are by their nature uncertain.
Before we can obtain regulatory approval for the commercial sale of any
product candidate or attract major pharmaceutical companies to collaborate with the Company, we will be required to complete extensive
clinical trials to demonstrate safety and efficacy. Clinical trials are very expensive and are difficult to design and implement. The
clinical trial process also takes a long time and can often be subject to unexpected delays and unexpected results.
The timing of the commencement, continuation and completion of clinical
trials have been, and may continue to be subject to significant delays relating to various causes, including:
● |
our inability to manufacture or obtain sufficient quantities of materials for use in clinical trials; |
● |
delays due to the measures for COVID-19 pandemic containment and conduct of business; |
● |
delays arising from our collaborative partnerships; |
● |
delays in obtaining regulatory approvals to commence a study, or government intervention to suspend or terminate a study; |
● |
delays, suspension, or termination of the clinical trials due to the institutional review board or independent ethics board responsible for overseeing the study to protect research subjects at a particular study site; |
● |
delays in identifying and reaching agreement on acceptable terms with prospective clinical trial sites; |
● |
slower than expected rates of patient recruitment and enrollment; |
● |
uncertain dosing issues; |
● |
inability or unwillingness of medical investigators to follow our clinical protocols; |
● |
variability in the number and types of subjects available for each study and resulting difficulties in identifying and enrolling subjects who meet trial eligibility criteria; |
● |
scheduling conflicts with participating clinicians and clinical institutions; |
● |
difficulty in maintaining contact with subjects after treatment, which results in incomplete data; |
● |
unforeseen safety issues or side effects; |
● |
lack of efficacy during the clinical trials; |
● |
our reliance on clinical research organizations to conduct clinical trials, which may not conduct those trials with good clinical or laboratory practices; or |
● |
other regulatory delays. |
We rely on third parties to manufacture our preclinical and clinical drug supplies, and
we intend to rely on third parties to produce commercial supplies of any approved product candidate.
We have limited personnel with experience in manufacturing, and we do
not own facilities for manufacturing our products and product candidates for the potential pivotal clinical studies and/or commercial
manufacturing of our products and product candidates. We will depend on our collaboration partners and other third parties to manufacture
and provide analytical services with respect to our most advanced product candidates.
If our product candidates are approved, then in order to produce the quantities
necessary to meet anticipated market demand, we and our collaboration partners will need to secure sufficient manufacturing capacity with
third-party manufacturers. If we and our collaboration partners are unable to produce our product candidates in sufficient quantities
to meet the requirements for the launch of the product or to meet future demand, our revenues and gross margins could be adversely affected.
To be successful, our product candidates must be manufactured in commercial quantities in compliance with regulatory requirements and
at acceptable costs. We and our collaboration partners will regularly need to secure access to facilities to manufacture some of our product
candidates commercially. All of this will require additional funds and inspection and approval by the Competent Authorities of the Member
States of the European Economic Area (EEA), the United States Food and Drug Administration (FDA) and other regulatory authorities. If
we and our collaboration partners are unable to establish and maintain a manufacturing capacity within our planned time and cost parameters,
the development and sales of our products and product candidates as well as our business, results of operations and prospects, and the
value of our shares could be adversely affected.
We and our collaboration partners may encounter problems with aspects
of manufacturing our collaboration products and product candidates, including the following:
● |
production yields; |
|
|
● |
quality control and assurance; |
|
|
● |
shortages of qualified personnel; |
|
|
● |
compliance with FDA and EEA regulations; |
|
|
● |
production costs; and |
|
|
● |
development of advanced manufacturing techniques and process controls. |
We evaluate our options for clinical study supplies and commercial production
of our product candidates on a regular basis, which may include use of third-party manufacturers, or entering into a manufacturing joint
venture relationship with a third party. We are aware of only a limited number of companies on a worldwide basis that operate manufacturing
facilities in which our product candidates can be manufactured under cGMP regulations, a requirement for all pharmaceutical products.
We cannot be certain that we and our collaboration partners will be able to contract with any of these companies on acceptable terms,
if at all, all of which could harm our business, results of operations and prospects, and the value of our shares.
In addition, we and our collaboration partners, as well as any third-party
manufacturer, will be required to register such manufacturing facilities with the FDA (and have a U.S. agent for the facility, if outside
the United States), the Competent Authorities of the Member States of the EEA, and other regulatory authorities. The facilities will be
subject to inspections confirming compliance with the FDA, the Competent Authorities of the Member States of the EEAs, or other regulatory
authority cGMPs requirements. We do not control the manufacturing process of our product candidates, and, other than with respect to our
collaboration product candidates, we are dependent on our contract manufacturing partners for compliance with cGMP's regulations for manufacture
of both active drug substances and finished drug products. If we or our collaboration partners or any third-party manufacturer fails to
maintain regulatory compliance, our business, financial condition and results of operations may be harmed, and the FDA, the Competent
Authorities of the Member States of the EEA, or other regulatory authorities can impose regulatory sanctions that range from a warning
letter to withdrawal of approval to seeking product seizures, injunctions and, where appropriate, criminal prosecution.
The results of pre-clinical studies and initial clinical trials may not be predictive
of future results, and our potential product candidates may not have favorable results in later trials or in the commercial setting.
Pre-clinical tests and Phase 1 and Phase 2 clinical trials are primarily
designed to test safety, to study pharmacokinetics and pharmacodynamics and to understand the side effects of product candidates and explore
efficacy at various doses and schedules. Success in pre-clinical or animal studies and early clinical trials does not ensure that later
large-scale efficacy trials will be successful, nor does it predict final results; favorable results in early trials may not be repeated
in later trials.
A number of companies in the life sciences industry have suffered significant
setbacks in advanced clinical trials, even after positive results in earlier trials. Clinical results are frequently susceptible to varying
interpretations that may delay, limit or prevent regulatory approvals. Negative or inconclusive results or adverse medical events during
a clinical trial could cause a clinical trial to be delayed, repeated or terminated. In addition, failure to construct appropriate clinical
trial protocols could result in the test or control group experiencing a disproportionate number of adverse events and could cause a clinical
trial to be repeated or terminated.
There is typically an extremely high rate of attrition from the failure
of product candidates proceeding through clinical and post-approval trials.
We may face difficulty in enrolling patients in our clinical
trials.
We may find it difficult to enroll patients in
our clinical trials. The timing of our current and future clinical trials depends on the speed at which we can recruit patients to participate
in testing our therapeutic candidates. If patients are unwilling to participate in our trial(s) because of negative publicity from adverse
reactions or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients,
conducting trials and obtaining regulatory approval of potential products may be delayed or prevented. These delays could result in increased
costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical
trials altogether. We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired
characteristics to achieve sufficient diversity in a given trial in order to complete our clinical trials in a timely manner. If we have
difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate
ongoing or planned clinical trials, any of which would have an adverse effect on our business.
The outcome of clinical trials is uncertain and our clinical
trials may fail to demonstrate adequately the safety and efficacy of a particular therapeutic candidates, which would prevent or delay
regulatory approval and commercialization.
There is a risk in any clinical trial that side
effects from our therapeutic candidates will require a hold on, or termination of, our clinical program(s) or further adjustments to our
clinical program(s) in order to progress our therapeutic candidates. We will need to demonstrate that the therapeutic candidates are safe,
pure and potent for use in each target indication. The therapeutic candidate must demonstrate an acceptable risk versus benefit profile
in its intended patient population and for its intended use. The risk/benefit profile required for product licensure will vary depending
on these factors.
Our success will be dependent upon our corporate collaborations with third parties in
connection with services we will need for the development, marketing and commercialization of our products.
The success of our business will be largely dependent on our ability to
enter into corporate collaborations regarding the development, clinical testing, regulatory approval and commercialization of our potential
product candidates. We may not be able to find collaborative partners to support the future development, marketing and commercialization
of our products, which may require us to undertake research and development and/or commercialization activities ourselves and may result
in a material adverse effect on our business, financial condition, prospects and results of operations.
Even if we are able to find new collaborative partners, our success is
highly dependent upon the performance of these new corporate collaborators. The amount and timing of resources to be devoted to activities
by future corporate collaborators, if any, are not within our direct control and, as a result, we cannot assure you that any future corporate
collaborators will commit sufficient resources to our research and development projects or the commercialization of our potential product
candidates. Any future corporate collaborators might not perform its obligations as expected and might pursue existing or other development-stage
products or alternative technologies in preference to those being developed in collaboration with us, or may terminate particular development
programs, or the agreement governing such development programs.
In addition, if any future collaborators fail to comply with applicable
regulatory requirements, the FDA, the European Medicines Agency ("EMA"), the Therapeutic Products Directorate of Canada ("TPD")
or other authorities could take enforcement action that could jeopardize our ability to develop and commercialize our potential product
candidates. Despite our best efforts to limit them, disputes may arise with respect to ownership of technology developed under any such
corporate collaboration.
We will rely on proprietary technology, the protection of which can be unpredictable and
costly.
Our success will depend in part upon our ability to obtain patent protection
or patent licenses for our future technology and products. Obtaining patent protection or patent licenses can be costly and the outcome
of any application for patent protection and patent licenses can be unpredictable. In addition, any breach of confidentiality by a third
party by premature disclosure may preclude us from obtaining appropriate patent protection, thereby affecting the development and commercial
value of our technology and products.
Some of our future products may rely on licenses of proprietary technology owned by third
parties and we may not be able to maintain these licenses on favorable terms.
The manufacture and sale of some of the products we hope to develop may
involve the use of processes, products, or information, the rights to which are owned by third parties. Such licenses frequently provide
for limited periods of exclusivity that may be extended only with the consent of the licensor. If licenses or other rights related to
the use of such processes, products or information are crucial for marketing purposes, and we are not able to obtain them on favorable
terms, or at all, the commercial value of our products will be significantly impaired. If we experience delays in developing our products
and extensions are not granted on any or all of such licenses, our ability to realize the benefits of our efforts may be limited.
We will have future capital needs, and there are uncertainties as to our ability to raise
additional funding.
Our current cash resources will not cover all of our operational costs
and the needs of our subsidiaries to progress towards clinical trials. Additional capital will be needed to test product candidate
in human trials, obtain regulatory approvals and ultimately to commercialize such product candidates.
In addition, our future cash requirements may vary materially from those
now expected. For example, our future capital requirements may increase if:
● |
we experience scientific progress sooner than expected in our future discovery, research and development projects, if we expand the magnitude and scope of these activities, or if we modify our focus as a result of our discoveries; |
● |
we experience setbacks in our progress with pre-clinical studies and clinical trials are delayed; |
● |
we experience delays or unexpected increased costs in connection with obtaining regulatory approvals, particularly in light of the current inflationary environment; |
● |
we are required to perform additional pre-clinical studies and clinical trials; |
● |
we experience unexpected or increased costs relating to preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; or |
● |
we elect to develop, acquire or license new technologies and products. |
If sufficient capital is not available, we may be required to delay, reduce
the scope of, eliminate or divest of one or more of our research or development projects, any of which could have a material adverse effect
on our business, financial condition, prospects or results of operations.
One of our subsidiaries, iOx Therapeutics Ltd, which is shortly going
to start clinical stage trials, has an agreement with University of Oxford under which some clinical trial costs are to be undertaken
by the University of Oxford. This will reduce some of our related immediate cash requirements. iOx Therapeutics is also party to a Horizon
2020 grant consortium in which the EU partially funds the development work including human testing of a second product. The Company
will need a license and additional funding if it wishes to pursue this product further.
We may not be able to successfully identify, consummate or integrate acquisitions or to
successfully manage the impacts of such transactions on our operations.
Part of our business strategy includes pursuing synergistic acquisitions.
We have expanded, and plan to continue to expand, our business by making strategic acquisitions and regularly seeking suitable acquisition
targets to enhance our growth. Material acquisitions, dispositions and other strategic transactions involve a number of risks, including:
(i) the potential disruption of our ongoing business; (ii) the distraction of management away from the ongoing oversight of our existing
business activities; (iii) finding equity funding and incurring additional indebtedness; (iv) issuing additional equity which may have
a dilutive effect on the capital of the Company, (v) the anticipated benefits and cost savings of those transactions not being realized
fully, or at all, or taking longer to realize than anticipated; (vi) an increase in the scope and complexity of our operations; and (vii)
the loss or reduction of control over certain of our assets.
The pursuit of acquisitions may pose certain risks to us. We may not be
able to identify acquisition candidates that fit our criteria for growth and profitability. Even if we are able to identify such candidates,
we may not be able to acquire them on terms or financing satisfactory to us. We will incur expenses and dedicate attention and resources
associated with the review of acquisition opportunities, whether or not we consummate such acquisitions.
We will be subject to risks associated with doing business globally.
As a pharmaceutical research and development company, our operations are
likely to expand in the European Union and many other developed countries worldwide, we will be subject to political, economic, operational,
legal, regulatory and other risks that are inherent in conducting business globally. These risks include foreign exchange fluctuations,
exchange controls, capital controls, new laws or regulations or changes in the interpretation or enforcement of existing laws or regulations,
political instability, macroeconomic changes, including recessions and inflationary or deflationary pressures, increases in prevailing
interest rates by central banks or financial services companies, economic uncertainty, which may adversely affect our research and development,
reduce the demand for our potential products and reduce the prices that our potential customers will be willing to pay for our products,
import or export restrictions, tariff increases, price controls, nationalization and expropriation, changes in taxation, diminished or
insufficient protection of intellectual property, lack of access to impartial court systems, violations of law, including the U.S. Foreign
Corrupt Practices Act and the United Kingdom (“U.K.”) Bribery Act, disruption or destruction of operations or changes to the
Company's business position, regardless of cause, including pandemic, war, terrorism, riot, civil insurrection, social unrest, strikes
and natural or man-made disasters, including famine, flood, fire, earthquake, storm or disease. The impact of any of these developments
or events, either individually or cumulatively, could have a material adverse effect on our business, financial condition and results
of operations.
We may face exposure to adverse movements in foreign currency exchange rates while completing
international clinical trials and when our products will be commercialized.
We intend to generate revenue and expenses internationally that are likely
to be primarily denominated in U.S., Euros and U.K. pounds sterling. Our intended international business will be subject to risks typical
of an international business including, but not limited to, differing tax structures, a myriad of regulations and restrictions, and general
foreign exchange rate volatility. A decrease in the value of such foreign currencies relative to the United States dollar could result
in losses in revenues from currency exchange rate fluctuations. Conversely, an increase in the value of such foreign currencies relative
to the United States dollar could negatively impact our operating expenses. To date, we have not hedged against risks associated with
foreign exchange rate exposure. We cannot be sure that any hedging techniques we may implement in the future will be successful or that
our business, results of operations, financial condition and cash flows will not be materially adversely affected by exchange rate fluctuations.
The loss of key personnel could have an adverse effect on our business.
We are highly dependent upon the efforts of our senior management. The
loss of the services of one or more members of senior management and directors could have a material adverse effect on us as a small company
with a streamlined management structure, the departure of any key person could have a significant impact and would be potentially disruptive
to our business until such time as a suitable replacement is hired. We do not carry any key person insurance on our senior management.
The U.K.’s withdrawal from the EU, commonly referred to as Brexit, may have a negative
effect on global economic conditions, financial markets and our business.
Brexit has created significant uncertainty concerning the future relationship
between the U.K. and the EU. From a regulatory perspective, there is uncertainty about which laws and regulations will apply. A significant
portion of the regulatory framework in the U.K. is derived from EU laws. However, it is unclear which EU laws the U.K. will decide to
replace or replicate in connection with its withdrawal from the EU. In particular, the regulatory regime applicable to our operations,
including with respect to the approval of our product candidates, may change, potentially significantly, and the impact on the process
for obtaining or maintaining marketing authorization for pharmaceutical products manufactured or sold in the U.K. is otherwise unknown.
A basic requirement related to the grant of a marketing authorization
for a medicinal product in the EU is the requirement that the applicant be established in the EU. Following withdrawal of the U.K. from
the EU, marketing authorizations previously granted to applicants established in the U.K. through the centralized, mutual recognition
or decentralized procedures may no longer be valid. Moreover, there is a risk that the scope of a marketing authorization for a medicinal
product granted by the EU pursuant to the centralized procedure, or by the competent authorities of other EU member states through the
decentralized or mutual recognition procedures, would not encompass the U.K. In that circumstance, a separate authorization granted by
the U.K. competent authorities would be required to place medicinal products on the U.K. market.
In addition, the laws and regulations that will apply after the U.K. withdrawal
from the EU may have implications for manufacturing sites that hold certifications issued by the U.K. competent authorities. Our ability
to rely on these manufacturing sites for products intended for the EU market will depend on the post-withdrawal terms of the authorizing
bodies and, potentially, on the ability to obtain relevant exemptions under EU law to supply the EU market with products manufactured
at U.K. certified sites. There is also the risk that if batch release and quality control testing sites for our products are located only
in the U.K., manufacturers will need to use sites in other EU member states. All of these changes, if they occur, could increase our costs
and otherwise adversely affect our business.
Brexit has also given rise to calls for the governments of other EU member
states to consider withdrawal from the EU. These developments, or the perception that they could occur, have had and may continue to have
a material adverse effect on global economic conditions and the stability of global financial markets, including by significantly reducing
global market liquidity or restricting the ability of key market participants to operate in certain financial markets. In addition, currency
exchange rates for the British pound and the Euro with respect to each other and to the U.S. dollar have already been negatively affected
by Brexit. Should this foreign exchange volatility continue or be exacerbated by U.K.’s withdrawal from the EU, it could cause volatility
in our quarterly financial results.
We have an office in Oxford, England which is focused on developing our
products outside of the U.S. We do not know to what extent, or when, the U.K.’s withdrawal from the EU or any other future changes
to membership in the EU will impact our business, particularly our ability to conduct international business from a base of operations
in the U.K. The U.K. could lose the benefits of global trade agreements negotiated by the EU on behalf of its members, possibly resulting
in increased trade barriers, which could make doing business in Europe more difficult and/or costly. Moreover, in the U.S., tariffs on
certain U.S. imports have recently been imposed, and the EU and other countries have responded with retaliatory tariffs on certain U.S.
exports. We cannot predict what effects these and potential additional tariffs will have on our business, including in the context of
escalating global trade and political tensions. However, these tariffs and other trade restrictions, whether resulting from the U.K.’s
withdrawal from the EU or otherwise, could increase our cost of doing business, reduce our gross margins or otherwise negatively impact
our financial results.
Risks Related to Ownership of our Shares
The issuance of Ordinary Shares upon the exercise of our outstanding options will dilute
the ownership interest of existing shareholders and increase the number of shares eligible for future resale.
As of March 31, 2022, we have 378,740 vested restricted stock units outstanding,
which are subject to certain restrictions and 33,888 warrants, which expire in October 2022 if unexercised. Additionally, as of March
31, 2022, we have an aggregate of 1,151,400 options to acquire ordinary shares outstanding. Since that date, we have granted an additional
50,000 options to acquire ordinary shares and issued 2,425,999 ordinary shares in connection with the acquisition of Tarus Therapeutics
and in connection with the Tarus Therapeutics acquisition we may issue additional ordinary shares. Additionally, we issued 94,508 ordinary
shares to Lincoln Park Capital Fund L.L.C. in consideration for entering into the $30 million committed share purchase agreement, described
more fully below, and 4,222 ordinary shares to a service provider for services rendered. On July 18, 2022, we completed the iOx Share
Exchange Agreement under which we exchanged 1,070,000 ordinary shares for the remaining minority interest of 21.68% of iOx. We intend
to use our capital stock to reward and encourage our employees through the use of options and similar equity grants and to pursue acquisitions.
Each of these issuances will have a dilutive effect on the ownership interest of the company held by existing shareholders. The additional
shares that may be or are outstanding may have an adverse effect on the share price of our ordinary shares, especially if the market perceives
that the shares are issued at less than their current or anticipated fair value.
Our principal shareholders and senior management own a significant percentage of our shares
and are able to exert significant control over matters subject to shareholder approval.
As of August 1, 2022, our senior management, board members, holders
of 5% or more of our share capital and their respective affiliates beneficially own approximately 45.5% of our outstanding voting
securities. As a result, these security holders have the ability either alone or voting together as a group to determine and/or
significantly influence the outcome of matters submitted to our shareholders for approval, including the election and removal of
board members, payment of dividends, amendments to our articles of association, including changes to our share capital or any
mergers, demergers, liquidations and similar transactions. This may prevent or discourage unsolicited acquisition proposals or
offers for our ordinary shares that our shareholders may feel are in their best interest as a shareholder. In addition, this group
of shareholders generally has the ability to control our management and business affairs and direction of the Company. Such control
and concentration of ownership may affect the market price of our shares and may discourage certain types of transactions, including
those involving actual or potential change of control of us (whether through merger, consolidation, take-over or other business
combination), which might otherwise have a positive effect on the market price of the shares.
We are currently a foreign private issuer, which may limit information about the Company
and legal rights that you as an investor may desire and are different from those of a United States domestic reporting company.
We currently are a "foreign private issuer," as such term is
defined in Rule 405 under the U.S. Securities Act 1933, and, therefore, we are not required to file quarterly reports on Form 10-Q or
current reports on Form 8-K with the United States Securities and Exchange Commission (“SEC”). In addition, the proxy rules
and Section 16 reporting and short-swing profit recapture rules are not applicable to us. If we lose our status as a foreign private issuer
by our election or otherwise and we become subject to the full reporting regime of the United States securities laws, we will be subject
to additional reporting obligations and proxy solicitation obligations under the Exchange Act and our officers, directors and 10% shareholders
would become subject to the short-swing profit rules. The imposition of these reporting rules would increase our costs and the obligations
of those affected by the short-swing rules.
Complex United States taxation rules apply to holders of our ordinary shares if we have
too much passive income compared to ordinary income and we are considered a PFIC.
Generally, if, for any taxable year, at least 75% of our gross income
is passive income or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the
production of passive income, including cash, we will be classified as a passive foreign investment company, or PFIC, for U.S. federal
income tax purposes. For purposes of these tests, passive income includes dividends, interest, and gains from the sale or exchange of
investment property and rents and royalties other than certain rents and royalties which are received from unrelated parties in connection
with the active conduct of a trade or business. We believe that we were a PFIC for our fiscal year ended March 31, 2018. In addition,
we may have been a PFIC in prior years and may be a PFIC in the future. However, we do not believe we will be classified as PFIC for the
fiscal year ended March 31, 2022 as a result of the acquisition of several immune-oncology related businesses as explained elsewhere in
this report.
If we are classified as a PFIC, our U.S. tax-resident shareholders could
be liable for additional taxes and interest charges upon certain distributions by us and any gain recognized on a sale, exchange or other
disposition, including a pledge, of our ordinary shares (and such gain would generally be treated as ordinary income, rather than capital
gain, for U.S. federal income tax purposes), whether or not we continue to be a PFIC. In addition, U.S. tax residents who own an interest
in a PFIC are required to comply with certain reporting requirements.
A U.S. tax-resident shareholder may in certain circumstances be able to
mitigate some of the adverse U.S. federal income tax consequences of us being classified as a PFIC if our ordinary shares qualify as "marketable
stock" under the PFIC rules and the shareholder is eligible to make, and successfully makes, a "mark-to-market" election.
A U.S. tax-resident shareholder could also mitigate some of the adverse U.S. federal income tax consequences by making a "qualified
electing fund," or QEF, election, provided that we provide the information necessary for our U.S. tax-resident shareholders to make
such an election, but we are not required to make this information available. However, we made the information available for the fiscal
years 2018 and 2019 to those shareholders who requested it, but we have not yet determined whether we can or will do so for our fiscal
years ending March 31, 2020, 2021 and 2022 or for any other fiscal year.
U.S. tax-resident shareholders are strongly urged to consult their tax
advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making
a QEF or mark-to-market election with respect to our ordinary shares if we should be classified as a PFIC.
U.S. shareholders may not be able to enforce civil liabilities against us.
We are a company incorporated under the laws of the British Virgin Islands.
Many of our directors and executive officers are non-residents of the United States. Because a substantial portion of their assets and
currently most of our assets are located outside the United States, it may be difficult for investors to effect service of process within
the United States upon us or those persons.
Our corporate affairs will be governed by our Memorandum and Articles
of Association, the BVI Business Companies Act (Revised Edition 2020, as amended) (the "BVI Act"), and the common law
of the British Virgin Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the
fiduciary responsibilities of our directors to us under British Virgin Islands law are to a large extent governed by the BVI Act
and common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in part from comparatively limited
judicial precedent in the British Virgin Islands and from English common law, the decisions of whose courts are considered persuasive
authority but are not binding on a court in the British Virgin Islands. The rights of our shareholders and the fiduciary responsibilities
of our directors under British Virgin Islands law may not be as clearly established as they would be under statutes or judicial precedent
in jurisdictions in the United States or Canada. In particular, the British Virgin Islands has a less developed body of securities laws
as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate
law. In addition, British Virgin Islands companies may or may not have standing to initiate a shareholder derivative action in a federal
court of the United States.
The British Virgin Islands courts are also unlikely:
| · | to recognize or enforce against us judgments of U.S. courts based on certain civil liability provisions of U.S. securities laws; and |
| · | to impose liabilities against us, in original actions brought in the British Virgin Islands, based on certain civil liability provisions
of U.S. securities laws that are penal in nature. |
There is no statutory recognition in the British Virgin Islands of judgments
obtained in the United States.
We have been advised by counsel as to British Virgin Islands law, that
(i) they are unaware of any proceedings that have been brought in the British Virgin Islands to enforce judgments of the U.S. courts or
to impose liabilities based on the civil liability provisions of the U.S. federal or state securities laws; (ii) a final and conclusive
judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect
of taxes, fines, penalties or similar charges, may be subject to enforcement proceedings as a debt in the courts of the British Virgin
Islands under the common law doctrine of obligation; and (iii) because it is uncertain whether a British Virgin Islands court would determine
that a judgment of a U.S. court based on the civil liability provisions of the U.S. federal or state securities laws is in the nature
of a penalty, it is uncertain whether such a liability judgment would be enforceable in the British Virgin Islands.
As a foreign private issuer and as permitted by the listing requirements of Nasdaq, we
will rely on certain home country governance practices rather than the corporate governance requirements of Nasdaq.
We are a foreign private issuer, and in accordance with Nasdaq Listing
Rule 5615(a)(3), we will comply with home country governance requirements and certain exemptions thereunder rather than complying with
certain of the corporate governance requirements of Nasdaq.
British Virgin Islands law does not require that a majority of our board
of directors consist of independent directors or that our board committees consist of entirely independent directors. Our board of directors
and board committees, therefore, may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule
5605(b)(1). In addition, we will not be subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors must regularly
have scheduled meetings at which only independent directors are present. Also, British Virgin Islands law does not require the board of
directors to have a nominating committee or compensation committee, and we do not plan on having such committees.
We also are exempt from the Nasdaq listing rules so as to follow the quorum
rules for shareholder meetings under British Virgin Islands law. We also are exempt from the Nasdaq listing rules so as to not be required
to obtain shareholder approval for certain issuance of securities, shareholder approval of share option plans and change of control transactions
under the Nasdaq Listing Rule 5635.
We may lose our foreign private issuer status, which would then require us to comply with
the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.
We are a foreign private issuer. In order to maintain our current status
as a foreign private issuer, a majority of our outstanding ordinary shares must continue to be either directly or indirectly owned of
record by non-residents of the United States. If a majority of our outstanding ordinary shares are instead held by U.S. residents, then
in order to continue to maintain our foreign private issuer status, (i) a majority of our executive officers or directors must not be
U.S. citizens or residents, (ii) more than 50% of our assets must not be located in the United States, and (iii) our business must be
administered principally outside the United States.
Losing our status as a foreign private issuer would require us to comply
with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We also
will be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory
and compliance costs to us under U.S. securities laws, if we are required to comply with the reporting requirements applicable to a U.S.
domestic issuer, may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we would expect that
a loss of foreign private issuer status will increase our legal and financial compliance costs and will make some activities highly time
consuming and costly. We also expect that if we will be required to comply with the rules and regulations applicable to U.S. domestic
issuers, it will make it more difficult and expensive for us to obtain director and officer liability insurance; we may therefore be required
to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more
difficult for us to attract and retain qualified members of our board of directors.
ITEM 4 – INFORMATION ON THE COMPANY
(A) HISTORY AND DEVELOPMENT OF THE COMPANY
The Company was originally incorporated in Ontario, Canada in 1973. It
was inactive until 1985. Between 1986 and 2009, it was engaged in variety of businesses including development of a new technology for
the marine propulsion business, distribution and manufacture of a snack food, emerging technology-based businesses and natural resources
involving diamond mining and oil & gas exploration. In 2010, the Company acquired an indirect interest in two drilling licenses in
Israel, which were subsequently disposed of in June 2012. During the period 1986 to 2012, the Company went through several name changes
ending with Bontan Corporation Inc. (“Bontan”).
In December 2012, the Company decided to change the focus of its business
activities from oil and gas to biotechnology mainly due to the increasing difficulty of getting access to viable oil & gas projects
and also due to the potentially more profitable business opportunities which existed in the biotechnology sector. On March 21, 2013, the
Company signed a letter of intent with Portage Pharma Ltd, a biotech private limited company formed under the laws of the British Virgin
Islands, to acquire Portage Pharma Ltd. through an exchange of shares. The transaction was completed on June 4, 2013.
On July 5, 2013, the Company changed its name to Portage Biotech Inc.
and moved its jurisdiction to the British Virgin Islands under a certificate of continuance issued by the Registrar of Corporate Affairs
of BVI.
The Company now continues as a BVI business company incorporated under
the BVI Act with its registered office located at Clarence Thomas Building, P.O. Box 4649, Road Town, Tortola, BVI. Its USA agent, Portage
Development Services, is located at 61 Wilton Road, Westport, CT 06880.
The Company currently is a foreign private issuer under the United States
Securities and Exchange Commission (“SEC”) rules. It is also a reporting issuer under the securities legislation of the provinces
of Ontario and British Columbia. Its ordinary shares were listed on the Canadian Securities Exchange (“CSE”) under the symbol
"PBT.U". On February 25, 2021, the ordinary shares of the Company began trading on the NASDAQ Capital Market (“NASDAQ”)
under the symbol “PRTG”. As the principal market for the Company’s ordinary shares is NASDAQ, the Company voluntarily
delisted from the CSE on April 23, 2021.
During August 2018, the Company reached a definitive agreement to acquire
100% of SalvaRx Limited in exchange for 805,070,067 common shares of the Company. The selling shareholders were SalvaRx Group plc (94.2%),
James Mellon (2.9%) and Gregory Bailey (2.9%), the latter two persons being directors of the Company. The acquisition of SalvaRx is a
"related party transaction" within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders
in Special Transactions (“MI 61-101”). As a consequence, MI 61-101 required us to seek the approval of a majority of the
disinterested shareholders to make this acquisition. On January 8, 2019, the majority of our minority shareholders approved the SalvaRx
acquisition on the terms as set out in the signed definitive agreement. At the same time, the SalvaRx Group plc shareholders approved
the definitive agreement, all required regulatory approvals were also obtained. The SalvaRx acquisition was completed on January 8, 2019,
and the Company acquired 100% of the equity of SalvaRx Limited, which has full and partial ownership of six immune-oncology companies
that are developing nine products.
On June 5, 2020, the Company completed a reverse-split of its ordinary
shares at the rate of 100 old shares for one new share. The consolidation of shares proposal was approved by our shareholders at the annual
general and special meeting of shareholders of the Company held on January 8, 2020 in which the proposal to the Board of Directors was
authorized, in its sole discretion and by means of a resolution, to proceed with the proposed consolidation of the ordinary shares by
a ratio of up to 120-for-1 basis, without further approval of shareholders. The then issued and outstanding 1,098,770,697 ordinary
shares were exchanged for 10,987,707 ordinary shares.
On June 16, 2020, the Company closed a non-brokered private placement
(the "Offering") for gross proceeds of US$6.98 million through the issuance of 698,145 ordinary shares (the "Ordinary Shares")
at a price of US$10.00 per Ordinary Share. The proceeds from the offering have supported our product pipeline development/execution while
enabling new opportunistic value creation.
Portage filed a registration statement and prospectus with the Securities
and Exchange Commission (“SEC”) under which it may sell ordinary shares, debt securities, warrants and units in one or more
offerings from time to time, which became effective on March 8, 2021 (“Registration Statement” or “Prospectus”).
The Registration Statement includes:
| · | a base prospectus, which covers the offering, issuance and sales by us of up to $200,000,000 in the aggregate of the securities identified
above from time to time in one or more offerings; and |
| · | a sales agreement prospectus covering the offer, issuance and sale by us in an “at the market” offering of up to a maximum
aggregate offering price of $50,000,000 of our ordinary shares that may be issued and sold from time to time under sales agreement, or
sales agreement, with Cantor Fitzgerald & Co., or Cantor Fitzgerald, the sales agent. |
The specific terms of any securities to be offered pursuant to the base
prospectus are specified in the sales agreement prospectus. The $50,000,000 of ordinary shares that may be offered, issued and sold under
the sales agreement prospectus is included in the $200,000,000 of securities that may be offered, issued and sold by us under the base
prospectus. The sales under the prospectus will be deemed to be made pursuant to an “at the market offering” as defined in
Rule 415(a)(4) promulgated under the Securities Act of 1933 (the Securities Act). Upon termination of the sales agreement, any portion
of the $50,000,000 included in the sales agreement prospectus that is not sold pursuant to the sales agreement will be available for sale
in other offerings pursuant to the base prospectus, and if no shares are sold under the sales agreement, the full $50,000,000 of securities
may be sold in other offerings pursuant to the base prospectus. The offering was declared effective by the SEC on March 8, 2021.
In April 2021, the Company commenced its “at the market” offering
and through June 7, 2021, it had sold 90,888 ordinary shares, generating net proceeds of approximately $2.6 million, net of 3% commissions.
The Company will use any proceeds raised in the “at the market” offering to fund its research and development activities and
support operations. Upon termination of the sales agreement, any portion of the $50,000,000 included in the sales agreement prospectus
that is not sold pursuant to the sales agreement will be available for sale in other offerings pursuant to the base prospectus.
On June 24, 2021, the Company completed a firm commitment underwritten
public offering of 1,150,000 ordinary shares at a price of $23.00 per share. This offering was pursuant to the shelf Registration Statement
and was a portion of the total $200,000,000 of securities registered. The Company incurred offering expenses of approximately $1.8 million,
including approximately $1.6 million of management, underwriting and selling expenses. The Company will use any proceeds raised to fund
its research and development activities and support operations.
On July 6, 2022, the Company acquired Tarus Therapeutics, a private company,
developing adenosine receptor antagonists, in exchange for 2,425,999 ordinary shares and the assumption of $3 million of liabilities.
Additionally, payments of up to $32,000,000 in ordinary shares or cash will be triggered upon achievement of future development and sales
milestones. As a result of the transaction, Portage acquired four best-in-class assets targeting different aspects of the adenosine pathway,
and the Company believes it is now in a unique position to evaluate the role of adenosine in cancer and other diseases.
Also, on July 6, 2022, the Company entered into a committed share purchase
agreement for up to $30 million with Lincoln Park Capital Fund, LLC (“LPC”), a Chicago-based institutional investor, providing
financing flexibility to the Company. Under the terms of the purchase agreement, Portage will have the right at its sole discretion, but
not the obligation, to sell to LPC up to $30 million worth of its ordinary shares over the 36-month term of the agreement based on the
market prices prevailing at the time of each sale to LPC, subject to certain conditions. In consideration for entering into the agreement,
LPC was issued 94,508 ordinary shares on July 6, 2022 valued at $0.9 million. This commitment helps support the incremental development
costs for the adenosine programs, and also provides significant financial flexibility for advancement of the Company’s existing
pipeline of immunotherapy treatments.
(B) BUSINESS OVERVIEW
Nature of Operations and Overview
Portage is a clinical stage immune-oncology company focused on overcoming
immune resistance. Including the Tarus Therapeutics acquisition, it currently manages 14 immuno-oncology assets at various development
stages. We source, nurture and develop the creation of early- to mid-stage, first- and best-in-class therapies for a variety of cancers,
by funding, implementing viable, cost effective product development strategies, clinical counsel/trial design, shared services, financial
and project management to enable efficient, turnkey execution of commercially informed development plans. Our drug development pipeline
portfolio encompasses products or technologies based on biology addressing known resistance pathways/mechanisms of current check point
inhibitors with established scientific rationales, including intratumoral delivery, nanoparticles, liposomes, aptamers, and virus-like
particles.
The Portage Approach
Our mission is to advance and grow a portfolio
of innovative, early-stage oncology assets based on the latest scientific breakthroughs focused on overcoming immune resistance. Given
these foundations, we manage capital allocation and risk as much as we oversee drug development. By focusing our efforts on translational
medicine and pipeline diversification, we seek to mitigate overall exposure to many of the inherent risks of drug development. Our approach
is guided by the following core elements:
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Portfolio diversification to mitigate risk and maximize optionality; |
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Capital allocation based on risk-adjusted potential, including staged funding to pre-specified scientific and clinical results; |
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Virtual infrastructure and key external relationships to maintain a lean operating base; |
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Internal development capabilities complemented by external business development; |
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Rigorous asset selection with disciplined ongoing evaluation; and |
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Focus on translational medicine and therapeutic candidates with in vivo single agent activity. |
We believe that our corporate structure
results in enhanced operational efficiency and maintains an optimal cost structure by centralizing strategic/tactical support, shared
services, including all research and development operations, capital allocation/ contribution, human resources, administrative
services, and business development, as well as other services to each of our immuno-oncology platforms and assets currently in various
development stages. Our execution is achieved, in part, through our internal core team and utilizing our large network of experts,
contract labs, and academic partners.
Our Science Strategy
Our goal is to develop immuno-oncology therapeutics
that will dramatically improve the standard-of-care for patients with cancer. The key elements of our scientific strategy are to:
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Build a pipeline of differentiated oncology therapeutic candidates that are diversified by mechanism, therapeutic approach, modality, stage of development, leading to a variety of deal types that can be executed with partners; |
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Expand our pipeline through research collaborations, business development, and internally designed programs; |
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Continue to advance and evolve our pipeline with a goal of advancing one therapeutic candidate into the clinic and one program into IND-enabling studies each year; and |
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Evaluate strategic opportunities to accelerate development timelines and maximize the value of our portfolio. |
Our Pipeline
We have built a pipeline of targeted oncology
and immuno-oncology therapeutic candidates and programs that are diversified by mechanism, therapeutic approach, modality, and stage of
development. On an ongoing basis, we rigorously assess each of our programs using internally defined success criteria to justify continued
investment and determine proper capital allocation. When certain programs do not meet our de-risking criteria for advancement, we look
to monetize or terminate those programs and preserve our capital and resources to invest in programs with greater potential. As a result,
our pipeline will continue to be dynamic.
The charts below sets forth, only as of July
1, 2022, the current state of our immuno-oncology therapeutic candidates and programs. The chart contains forward looking information
and projections based on management’s current estimates. The chart information is based on and subject to many assumptions, as determined
by management and not verified by any independent third party, which may change or may not occur as modeled. We undertake no obligation
to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Before you
make an investment decision regarding the company, you should make your own analysis of forward-looking statements and our projections
about candidate and program development and results.
Our Programs and Technology – Recent Developments
Invariant Natural Killer T-cells (iNKT cells) Platform
iNKT cells play an important role in anti-tumour immune responses and
are a distinct class of T lymphocyte displaying a limited diversity of T-cell receptors. They recognize lipid antigens on the surface
of tumour cells and produce large amounts of cytokines within hours of stimulation without the need for clonal expansion. Furthermore,
iNKT cells activate multiple immune system components, including dendritic cells, T-cells and B-cells and stimulate an antigen-specific
expansion of these cells. An operating subsidiary holds an exclusive license (with the right to sub-license) from the Ludwig Institute
to use, research, develop and commercialize iNKT cell agonists, for the treatment of various forms of human disease, including cancer,
under the Ludwig Institute’s intellectual property and know-how.
PORT-2 (IMM60)
PORT-2 is an iNKT cell activator/agonist formulated in a liposome with
a 6-member carbon head structure that has been shown to activate both human and murine iNKT cells, resulting in dendritic cell (DC) maturation
and the priming of Ag-specific T and B cells. In August 2021, we dosed the first patient in the IMP-MEL PORT-2 clinical trial, a Phase
½ dose escalation and randomized expansion trial. We have completed the first dose escalating cohort and currently anticipate completing
the second cohort before the end of Fiscal 2022. Initial data suggests PORT-2 demonstrates strong safety when administered as a monotherapy
and the Company is moving toward enrollment in the combination safety evaluation with Keytruda. The Company received regulatory approval
from the Medicines and Healthcare products Regulatory Agency in the United Kingdom and Research Ethics Board at Oxford University in December
2020. The PORT-2 study has 6 arms and is expected to enroll up to 100 patients with melanoma or non-small cell lung carcinoma (NSCLC)
in order to evaluate safety and efficacy.
In animal models, PORT-2 enhanced the frequency of tumour specific immune
responses (Jukes 2016). iNKT cells are unique lymphocytes defined by their co-expression of surface markers associated with NK cells along
with a T-cell antigen receptor (Schmieg 2005). They recognise amphipathic ligands such as glycolipids or phospholipids presented in the
context of the non-polymorphic, MHC class I-like molecule CD1d. Activated iNKT cells rapidly produce IFN-gamma and IL-4 and induce dendritic
cell (DC) maturation and IL-12 production (Cerundolo 2009, Salio 2009, Speak 2008, Fujii 2013).
Preliminary Phase 1 data received to date suggests PORT-2 was well tolerated
when administered as a monotherapy, with no severe or serious related adverse events. All possibly related adverse events were mild to
moderate and did not limit dosing. This has enabled a plan to accelerate opening of the combination safety cohort with Keytruda, in parallel
with the ongoing high dose monotherapy cohort. Biomarker data presented at the ASCO meeting in 2022 confirmed the mechanism of action,
i.e., both activation of the innate and adaptive arms of the immune system. One of the 2 patients treated at the 3mg/m2 dose had a mixed
response with several tumors showing >50% reduction in diameter indicating single agent activity. Detailed data will be submitted to
congresses later this year.
With the enhanced management team, efficient organization, and financial
resources obtained in 2021, Portage has decided to expand the PORT-2 study beyond the U.K. to accelerate clinical studies while addressing
COVID-19 headwinds. The Company has hired a global clinical research organization (CRO-Parexel) and is preparing for regulatory submissions
in other countries. By expanding the regions and sites contributing to the study, Portage will be enabled to accelerate enrollment in
the planned Phase 2 portions of this trial.
PORT-3 (IMM65)
PORT-3 is a PLGA-nanoparticle formulation of IMM60 combined with a NY-ESO-1
peptide vaccine. The first patient was dosed in 2021 and is continuing to enroll patients in the PRECIOUS Phase 1 study of PORT-3 in patients
with solid tumors. The Phase 1 portion of the trial is expected to enroll 15 patients while the randomized Phase 2 portion is expected
to enroll an additional 42 patients. The trial was having difficulty identifying tumors that expressed NY-ESO-1, so it was amended to
include all solid tumors regardless of expressing to facilitate assessment of safety. The Horizon 2020 grant support ended in April 2022.
This platform is designed to demonstrate proof of concept. The combination product has the ability to prime and boost an anti-tumor immune
response. Our patent position extends to other known tumor antigens, and we are prepared to rapidly launch other assets into the clinic
if we see strong activity of this formulation. Notably, Portage received additional grant support from the Horizon 2020 program to explore
next generation targeted nanoparticles. Preliminary safety data for repeat dosing of PORT-3, a nanoparticle co-formulation of PORT-2 and
NY-ESO-1 immunogenic peptides developed for the treatment of NY-ESO-1 positive solid tumors, is also favorable.
Biodegradable PLGA-nanoparticles function as a delivery platform for immunomodulators
and tumor antigens to induce a specific anti-tumor immune response. PLGA has minimal (systemic) toxicity and is used in various drug-carrying
platforms as an encapsulating agent. Furthermore, co-formulating an iNKT inhibitor with a peptide vaccine in a particle has shown to be
approximately 5 times more potent in killing cancer cells and generating an antigen specific CD8 T-cell response than giving the 2 agents
individually (ref Dolen et al Oncoimmunology paper).
NY-ESO-1 is a cancer-testis antigen expressed during embryogenesis and
in the testis, an immune privileged site. Furthermore, NY-ESO-1 expression is observed in several advanced cancers: lung (2-32%), melanoma
(40%), bladder (32-35%), prostate (38%), ovarian (30%), esophageal (24-33%), and gastric cancers (8-12%). Clinical trials have shown the
safety and tolerability of Good Manufacturing Practices (GMP)-grade NY-ESO-1 peptides in patients with cancer.
There is substantial opportunity for potential expansion in the PD-1 market
with PORT-2 and PORT-3. 70-80% of patients do not respond or have a limited response to existing monotherapies, such as PD-1 checkpoint
inhibitors. Combinations can improve this but often come at the cost of significant additional toxicity. The market is saturated with
14 approved PD-1 antibodies, and every major pharma company competes in this space. With iNKT agonists upregulating expression of PD-L1,
patient populations who are typically not good candidates for PD-1 antibodies due to their lack of or low expression of PD-L1 may be able
to utilize PORT 2 or PORT-3 to sensitize tumors to PD-1 agents. Extending the use of PD-1 antibodies represents a significant upside for
one of these companies competing for market share, should they choose to partner with Portage.
Adenosine Receptor Antagonist Platform
A critical mechanism of cancer immune evasion is the generation of high
levels of immunosuppressive adenosine within the tumor microenvironment (TME). Research suggests that the TME has significantly elevated
concentrations (100-500 fold) of extracellular adenosine. Engagement with adenosine receptors A2A and A2B triggers a dampening effect
on the immune response, suppressing effector cell function and stabilizing immunosuppressive regulatory cells. Over-expression of the
A2A and A2B receptors leads to poor prognosis in multiple cancers, including prostate cancer, colorectal cancer and lung adenocarcinoma,
driven by a reduced ability to generate an immune response against the tumor.
These findings have made A2A and A2B high-priority targets for immunotherapeutic
intervention. Portage is advancing four first-in-class adenosine inhibitors, which together represent a broad suite of adenosine-targeting
approaches and will enable a comprehensive exploration of how targeting the adenosine pathway could improve response in multiple cancer
and non-cancer indications:
PORT-6 (TT-10)
Adenosine receptor type 2A (A2A) inhibitor to treat A2A expressing solid
tumors; PORT-6 is more potent, more durable and more selective than other clinical stage A2A agents.
PORT-7 (TT-4)
Adenosine receptor type 2B (A2B) inhibitor to treat solid tumors; PORT-7
has a very selective profile that focuses on A2B.
PORT-8 (TT-53)
Dual inhibitor of adenosine receptors 2A and 2B (A2A/A2B) to treat solid
tumors; Portage has the ability to combine these 2 individually to titrate the levels of A2A and A2B or has the ability to give the dual
inhibitor (PORT-08).
PORT-9 (TT-3)
An A2B inhibitor to treat colorectal and gastrointestinal cancers.
In preparation for entering clinical trials for the adenosine programs,
Portage will conduct an examination of which solid tumor types have a high expression of receptors A2A and A2B and enrich for patients
that have high expression and therefore have potential to benefit most from treatment. Portage has designed the TOAST-01 trial to evaluate
the activity and safety of PORT-6 and PORT-7 alone and in combination. This trial will adapt over time and also include safety cohorts
for these two agents with other immune activating agents including others from the Portage internal pipeline. Depending on the data, it
can be expanded to evaluate either agent as monotherapy or a randomized comparison of either agent plus standard of care versus standard
of care alone.
Other Programs in Development
Amphiphilic platform
DfuseRx SM, identifies combinations of anti cancer agents with amphiphilic
diffuse enhancers that can passively enter into cancer cells. These novel formulations with unique IP can be directly injected into
any solid tumours, and the payloads will diffuse across the membrane and disperse throughout the tumor, while sparing healthy cells. Once
inside the cells, the technology is diluted away and the payloads are stuck inside the cell. The payloads are able to disperse to areas
of the tumor that do not have blood supply and hence oral or IV drugs will not reach.
PORT-1 (INT230-6)
Intensity is developing INT230-6 (we refer to as PORT-1) as a fixed dose
formulation of cisplatin, vinblastine and a penetration enhancer being developed by our affiliate, Intensity Therapeutics, Inc.
In animal models, the drug is able to cure the majority of the animals, by a combination of direct killing of the cancer, and also a CD4
and CD8 T-cell response (Bloom et al). Newly released interim safety and survival data from the Phase ½ IT-01 study presented
at ASCO 2021 demonstrated that both INT230-6 (PORT-1) monotherapy and combination therapy with immune checkpoint drugs are well-tolerated.
The proven mechanism of action includes direct tumor-killing effects, as well as responses generated in non-injected tumors (abscopal
responses) resulting from antigen presentation and immune activation. PORT-1 is the first of Portage’s assets that entered the clinic
and has demonstrated proof-of-concept in humans. The specific rapid local killing in the normal 3-dimensional environment inside the body
we believe is critical for robust antigen presentation and immune activation. Animal studies also showed synergy when combined with
checkpoint inhibition (Bender et al, Bloom et al). The product has been dosed into 80 subjects in a Phase 1 and Phase 2 trial. This has
shown proof of concept that the vast majority of the drug stays in the tumor, and a dose equivalent to 3x the approved dose of the cytotoxic
agent was very well tolerated without the typical chemo side effects. The most common adverse event related to the treatment was
pain at the injection site. As a result, PORT-1 has launched 9 phase 2 studies including 7 clinical collaborations with the two
largest immuno-oncology drug manufacturers, BMS and Merck in combination with their respective checkpoints in high unmet need medical
types (pancreatic, gall bladder, sarcoma, non-microsatellite unstable colorectal, etc.). Intensity has also launched a randomized
Phase 2 study of INT230-6 vs no treatment in early stage breast cancer (the INVINCIBLE Trial) and has expanded its collaboration efforts
with the INVINCIBLE study, conducted by the Ottawa Hospital and the Ontario Institute for Cancer Research. Intensity made three presentations
on INT230-6 at the American Society of Clinical Oncology Annual Meeting (ASCO) in June 2022 with clinical data suggesting INT230-6 has
potential to prolong survival when compared to historical results. An innovative window of opportunity trial in pre-surgical early
stage breast cancer confirmed that one treatment with PORT-1, can result in near complete necrosis of breast tumors with an influx of
key immune cells to process the dying tumor. It was remarkably safe and well tolerated. As a result of exciting preliminary data, Intensity
has secured fast track regulatory status from the FDA for triple negative breast cancer.
PORT-4, Nanolipogel (NLG) co-formulation Platform
Scientists are interested in novel ways to deliver multiple signals to
the immune system in order to better activate an anti-tumor response. We have been impressed with a platform from Yale University
that allows different types of agents to be packaged together and will concentrate them in tumors. We have licensed the platform
for delivery of DNA aptamers and certain aptamer-small molecule-based combination products. In order to have multiple proprietary agents
with known mechanisms of action, we have licensed rights to create DNA aptamers for immune-oncology targets and the first one developed
is a proprietary PD1 aptamer, which has been placed in the NLG formulation. Early testing has shown the formulation properly modulates
PD1 signaling in vitro similar to a PD1 antibody I. In non-clinical, in vivo experiments, the NLG-PD1 performed favorably compared
to a mouse PD1 antibody. The current level of funding is expected to support exploration of multiple PD1 based co-formulations with
small molecules and other DNA aptamers. The Company has conducted further research with the technology licensed from Yale University to
co-deliver a PD1 blocking signal with a small molecule vascular endothelial growth factor inhibitor. We are looking to accelerate preclinical
development of our PORT-4 platform, which may potentially increase the potency and improve the safety of numerous anti-cancer drugs through
co-delivery of combination treatments to the tumor.
PORT-5, STING Agonist Platform
Proprietary immune priming and boosting technology (using a STING agonist
delivered in a virus-like particle) have shown proof of concept in animal models and are beginning to progress the lead asset towards
the clinic. This platform offers multiple ways to target immune stimulation towards the cancer, as well as to co-deliver multiple
signals in a single product. Our researchers have developed a way to administer the product systemically and does not require direct
tumor injections. PORT-5 STING platform provides distinct advantages over chemical intratumoral approaches by offering a potent
immune priming and boosting pathway within a virus-like particle (VLP) to enable convenient systemic administration and traffic to the
correct targets. This technology preferentially targets dendritic cells, which is differentiated from other chemical STING approaches.
The Company is progressing this project towards clinical trials as well as developing next generation compounds. Given that this
is a simple way to boost the immune response to any target, we are also pursuing a project to boost immune response to COVID and other
pathogens. To that end, the team has received grant funding to study this technology with any COVID-19 vaccine to evaluate if it is possible
to boost the immune response for immunocompromised or elderly patients. During April 2022, AACR show-cased PORT-5 preclinical data at
a late-breaking session that shows that one or more targeted immunotherapy agents could be packaged within a virus-like particle to increase
potency, while enabling a selective immune activation. Given the progress to date, the Company is preparing the product to be able to
file an IND.
Other Early-Stage R&D
We continue to evaluate and test new antibody targets. Our interest
here lies in the suppressive tumor micro-environment, and how we can down regulate or remove MDSC, TAMs, Tregs and other signals that
impede the immune response from clearing cancer cells. One new effort that we have initiated is collaborations with two leading
artificial intelligence/machine learning companies in order to screen for agents with specific attributes in this area. This may
allow us a fast track an asset to the clinic with a re-purposed product.
| · | Portage is also initiating a collaboration with Dr. Robert Negrin and his team at Stanford University to evaluate the use of PORT-2
with iNKT cell therapies in animals. This work will evaluate if an agonist co-administered with expanded or transformed iNKT cells can
further activate the transplanted and endogenous cells inside the patient. The Stanford collaboration will also study the impact iNKT
agonists have on driving an adaptive immune response and correcting the suppressive tumor microenvironment. |
| · | Portage entered into a Cooperative Research and Development Agreement (“CRADA”) with the U.S. National Cancer Institute
(“NCI”). Collaboration will advance preclinical and potential clinical development of STING agonists and anti-RAGE agents
for cancer vaccines. The Company and NCI will develop agents to enhance the efficacy of proprietary cancer vaccines and mouse model cancer
vaccines developed by the NCI. After the Tarus acquisition, the company has amended the CRADA to include exploration of the different
adenosine compounds. |
Our Business Model
Portage is a development organization that is
structured to facilitate flexibility in financing and ease of partnering, licensing, and merger/acquisition of individual assets and or
technology platforms. The structure consists of a holding company, Portage Biotech Inc. (Portage) and an operating company, Portage Development
Services Inc. (“PDS”), which provide human resources and other services to each operating entity via shared services agreements.
We believe that by centralizing these shared services, including all research and development operations, administrative services, and
business development, and allocating employees and resources to each operating entity, we can (i) enhance operational efficiency, (ii)
maintain an optimal cost structure, (iii) attract leading collaborators, and (iv) promote asset flexibility, as further described below.
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Enhance operational efficiency: We centralize all employees and services at our hub and allocate resources to spokes as needed. We empower managers to access these resources and make program-level decisions in order to increase productivity and speed. We believe this model enables a flexible organizational structure that can achieve scale through the addition of programs without increasing burdensome bureaucracy or redundant infrastructure. |
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Maintain an optimal cost structure: We have a relatively small number of employees and have built a network of trusted external service providers, choosing to leverage their infrastructure and expertise as needed instead of embarking on capital-intensive lab, manufacturing, and equipment expenditures. By reducing overhead costs, we believe we can increase the likelihood that we can generate a return on invested capital. |
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Attract leading collaborators and licensors: Each of our subsidiaries has its own capitalization and governance, enabling us to keep licensors economically incentivized at the program level. We believe that the experienced leadership team and shared services at our hub differentiate us from other potential licensees. |
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Promote asset flexibility: Each operating subsidiary is a separate legal entity that holds the relevant intellectual property of its therapeutic candidates or programs and has none of its own employees, fixed assets, or overhead costs. This allows us to efficiently pursue various subsidiary-level transactions, such as stock or asset sales, licensing transactions, strategic partnerships, co-development arrangements, or spin-outs. It also provides us with the flexibility to terminate programs with minimal costs if results do not meet our de-risking criteria for advancement. |
We incubate internal programs in our hub, leveraging
PDS’s internal resources and network of service providers as needed to support our discovery, lead optimization, and IND-enabling
efforts. When we decide to license from or collaborate with external parties, we establish distinct operating entities, to hold and advance
those programs. This structure enables us to keep licensors economically incentivized at the program level through our ability to offer
equity and access to potential cash milestones and royalty payments.
Competition
Like all companies operating in the pharmaceutical or biotherapeutic development
sector, we face competition from well-established large pharmaceutical companies as well as innovative new entrants. Due to the
prevalence of cancer there are many companies that operate in this space. There are many companies that are focusing their efforts
in this space. Some of the smaller entrants in this space with which we may compete with over time include Cullinan Oncology, LLC, which
develops high value therapeutics geared towards dramatically improving the standard of care for those living with cancer, and PureTech
Health, which develops medicines for diseases including intractable cancers, lymphatic and GI diseases, and immunotherapy companies such
as Black Diamond Therapeutics, Repare Therapeutics, Nuvation Bio, Shattuck Labs, Jounce Therapeutics Company, Syndax Pharmaceuticals Inc.
and Iteos Therapeutics S.A., among others.
Nevertheless, we believe our strategic intent is sufficiently
differentiated in that we are focusing on multiple aspects of resistance to current immunotherapies based on our experience at BMS
developing Opdivo and Yervoy. The way we target certain pathways is first in class or best in class. We believe one of our
strengths beyond the experience of our officers and directors is our keen ability to understand what good looks like from the
eyes of a pharma partner. We have a broad understanding of the landscape that will come to market by the time our products are
commercialized, what the needs are of our potential acquirers, how to package up our programs, who to speak to and when in respect
to licensing. We pair that with a gated and focus execution plans that is laser focused on value added experiments, the nature
of which are pre-vetted with our potential partners. We also believe that our extensive collaborations within the research
facilities of leading, world class universities and institutes, such as the Department of Investigative Medicine at University of
Oxford, Stanford University, The National Cancer Institute, the Institut Curie, the Institut National de la Santé et de la
Recherche Médicale, Yale University, Radboud University, and the Ludwig Institute for Cancer Research, Inc., among others,
gives us an advantage in our research capabilities, as well as enable us to access and develop innovative technologies.
On top of that our relationships in academia, the private sector and network of talent is what makes this engine turn.
(C) ORGANIZATIONAL STRUCTURE
We currently have six diverse oncology technology platforms, the products
of which have established scientific rationales, including intra-tumoral, nanoparticles, liposomes, aptamers, cell penetrating peptides,
and virus-like particles.
At March 31, 2022, we had six members on the Board of Directors –
Dr. Gregory Bailey, Mr. Steven Mintz, Dr. Ian Walters, Mr. James Mellon, Ms. Linda Kozick and Mr. Mark Simon. In connection with the acquisition
of Tarus Therapeutics, Dr. Robert Glassman joined our Board of Directors on July 1, 2022. Dr. Bailey is our Chairman of the Board of Directors,
Dr. Walters is Chief Executive Officer (CEO), and Mr. Allan Shaw is Chief Financial Officer (CFO).
A brief biodata of the key people in our organization is provided below.
Ian B. Walters, MD, MBA – Director and CEO
Ian B. Walters, M.D., M.B.A., is the Chief Executive Officer of Portage
Biotech Inc. Over his 24-year career, he has demonstrated both leadership and expertise in drug development, including the advancement
of multiple cancer compounds from research stages through approval.
Ian specializes in the evaluation, prioritization, and the innovative
development of new therapies for the treatment of severe diseases. He has worked at PDL Biopharma, Inc., Millenium Pharmaceuticals, Inc.,
and Sorrento Therapeutics, Inc., leading corporate development, translational medicine, clinical development and medical affairs.
Ian spent seven years at Bristol-Myers Squibb, where he managed physicians
overseeing the international development of more than eight oncology compounds (including Nivolimab (anti-PD-1), Ipilimumab (anti-CTLA-4),
brivanib (anti VEGF/FGF), anti-IGF/IR, VEGFR2 biologic, Elotuzimab (antiCS1), as well as biomarker and companion diagnostic work. He was
a core member of Bristol- Myers Squibb’s Strategic Transactions Group evaluating and executing licensing agreements, mergers and
acquisitions, clinical collaborations, and the company’s immuno-oncology strategy.
Before entering the private sector, Ian was a lead investigator at the
Rockefeller University and initiated advanced immunology research to understand the mechanism of action of several compounds. Ian received
his MD from the Albert Einstein College of Medicine and an MBA from the Wharton School of The University of Pennsylvania. Ian is also
a member of the board of directors of Enzo Biochem, Inc., a NASDAQ listed company, and BoKo Therapeutics. Ian is also the part-time CMO
of Intensity Therapeutics, Inc.
Gregory Bailey MD – Chairman of the Board of Directors
Mr. Bailey is the Chair of the Company. Gregory Bailey is a co-founder
and managing partner of MediqVentures. Previously he was a managing partner of Palantir Group, Inc., a merchant bank involved in a number
of biotech company startups and financings. Palantir was also involved in acquiring intellectual property assets and founding companies
around the IP.
Greg was the co-founder of Ascent Healthcare Solutions, VirnetX Inc. (VHC:
AMEX), Portage Biotech Inc. (PTGEF: OTCBB) and DuraMedic Inc. He was the initial financier and an independent director of Medivation,
Inc. (MDVN: NASDAQ), from 2005 to December 2012. Dr. Bailey served as the Managing Director and co-Head of Life Sciences at MDB Capital
Group LLC from May 2004 to December 2006. Greg has served on the board of directors of multiple public companies. Current board positions
include Biohaven, Agex, Manx Financial, and Portage. He is also the CEO of Juvanescence. Mr. Bailey is also a Member of the Compensation
Committee.
Greg practiced emergency medicine for 10 years before entering finance.
He received his medical degree from the University of Western Ontario.
Steven Mintz – Director
Steven Mintz C.A. graduated from University of Toronto in 1989 and went
into public accounting, working at a large accounting firm from 1989 until 1992. He obtained his C.A. designation in June of 1992. In
June 1992 he became employed by a boutique bankruptcy and insolvency firm where he was employed until January 1997. He obtained his Trustee
in Bankruptcy license in 1995.
Since January 1997, he has been a self-employed financial consultant serving
both private individuals and companies, as well as public companies in a variety of industries including mining, oil and gas, real estate
and investment strategies. He is currently President of St. Germain Capital Corp., a private consulting and investment firm. He is also
a principal and CFO of the Minkids Group, a family investment, and development company. Steven is currently a director of Pool Safe, Inc.
(since December 2009), Everton Resources, Inc. (since May 2023) IM Cannabis (since April 2018, formerly Navasota Resources). Mr. Mintz
is the Chair of the Audit Committee and a Member of the Compensation Committee.
Mr. James Mellon – Director
Jim Mellon is an author, entrepreneur and investor. He was one of the
founders of Portage Biotech and is the co-author of five books, all written with a view toward identifying emerging thematic trends leading
to investment opportunities. He is a founder and Executive Director of Agronomics Limited (LSE:ANIC), an investment vehicle for cellular
agriculture and cultivated meat. He has a particular interest in longevity research and is currently the co-founder and chairman of anti-aging
biopharma company Juvenescence. He is also a non-executive director of Condor Gold plc, the Executive Chairman of the Board of Manx Financial
Group plc, Co-founder and Non-Executive Director of Bradda Head Lithium (LSE:BHL.L). He is also Co-founder and Chairman of Endurance RP.
Mr. Mellon is a Member of the Audit and Nominating Committees.
Jim studied Philosophy, Politics & Economics at Oxford University.
Ms. Linda Kozick – Director
Linda M. Kozick has more than 25 years of experience in the biopharmaceutical
industry, including 15 years of strategic commercial leadership in oncology with a focus in immuno-oncology. Prior to retiring she held
leadership positions at Bristol Myers Squibb and was instrumental to Obdivo and Yervoy product management and portfolio strategy. In addition
to Portage, she currently serves on the Board of Directors for RAPT Therapeutics, Inc. and Artiva Biotherapeutics. Ms. Kozick is the Chair
of the Compensation Committee and a Member of the Nominating Committee.
Linda received her B.S. in Medical Technology and M.S. in Molecular Immunology
from SUNY Upstate Medical Center, and her MBA from Chapman University.
Mr. Mark Simon – Director
Mark Simon has over 30 years advising experience for biotech and pharma
companies as an investment banker and research analyst. He is the Co-founder and an advisor of Torreya Capital, LLC, a global investment
bank serving companies in the life sciences industry. Before co-founding Torreya Capital, LLC, he was a Managing Director and the head
of life sciences investment banking at Citigroup, where he covered global biopharmaceutical companies, and also served as a Managing Director
and Senior Biotechnology Research Analyst at Robertson Stephens. Mark serves on the boards of Cabaletta Bio and several disease advocacy
and philanthropic foundations. Mr. Simon is the Chair of the Nominating Committee and a Member of the Audit Committee.
Mark holds a B.A. in History from Columbia College and an MBA from Harvard
Business School.
Robert Glassman, MD, PhD – Director
Dr. Robert Glassman brings more than 25 years of healthcare banking, venture
investing and advisory experience, including as vice chair of Credit Suisse, Global Healthcare Banking and Venture Partner of Public Equity
at OrbiMed. He previously served as clinical assistant professor at Weill Cornell Medicine and has also held academic positions at the
Hospital University of Pennsylvania, Cornell and Rockefeller University. Robert holds an M.D. from Harvard Medical School and is a Board-certified
hematologist-oncologist.
Allan L. Shaw – CFO
Allan brings more than two decades of public company financial, operational,
and strategic global business leadership. Allan Shaw serves as our Chief Financial Officer and is a five-time public company Chief Financial
Officer with proven skills across multiple finance disciplines: corporate finance, capital markets and strategic transactions as well
as a broad base of expertise in corporate governance and risk management. He structured, directed, negotiated and closed over $4 billion
in public and private financings for several companies. Mr. Shaw has served on five public boards including chairing two audit committees,
two compensation committees, and is currently involved with a portfolio of healthcare activities. Mr. Shaw is the founder and since 2005,
has served as senior managing director, of Shaw Strategic Capital LLC, an international financial advisory firm focused on providing strategic
financial counsel on a wide variety of issues such as general corporate finance, mergers and acquisitions, capital structuring, licensing
and capital markets, and serving as financial consultant to private and public companies. Mr. Shaw was the Chief Financial Officer and
Treasurer of Syndax Pharmaceuticals, Inc. from January 2016 to February 2017 and from December 2011 to September 2015 was Managing Director
of Alvarez & Marsal LLC, a global professional services firm, where he led their biopharmaceutical consulting practice. Additional
prior experience includes serving as the Chief Financial Officer of Serono S.A. from November 2002 to May 2004, NewLead Holdings Ltd from
October 2009 to July 2011 and Viatel, Inc. from November 1994 to June 2002. He currently serves on the board of directors of Edith &
Carl Marks JCH of Bensonhurst, a non-profit organization, and chairs their finance committee. Mr. Shaw is a certified public accountant
in the State of New York as well as a Chartered Global Management Accountant (CGMA). Mr. Shaw received a B.S. from the State University
of New York at Oswego College.
Robert Kramer, PhD – Chief Scientific Officer
Robert has 24 years of experience in the pharmaceutical
industry and is the former Head of Oncology Discovery Research at both Bristol Myers Squibb and Janssen Pharmaceuticals, part of the Johnson
& Johnson group of companies. He has been responsible for enabling the transition of 35 drugs from initial discovery into the clinic.
Robert championed immunotherapy at Bristol Myers Squibb, which led, in 2009 to the acquisition of Medarex, Inc. and its portfolio of immune
therapeutics that included Ipilimumab and Nivolumab. He received his PhD in pharmacology from the University of Vermont and undertook
his post doctorate studies at the U.S. National Cancer Institute. Robert has also held an Assistant Professorship at the Harvard Medical
School.
Steven Innaimo – Vice President of Project Management
& Operations
Steven Innaimo is a seasoned research and development
expert who brings more than 25 years of experience in drug development from the large pharma, biotech and contract research organization
sectors. Prior to joining Portage in 2018, Steve spent two years at Covance as Executive Director and Head of the Global Project Management
Office for Covance Clinical Development Services. He previously spent 23 years at Bristol Myers Squibb including as Senior Director of
Oncology Project Management and Clinical Operations. During his time at Bristol Myers Squibb, Steve directly managed or provided development
oversight for a number of immune-oncology assets, including Yervoy and Opdivo. He has driven multiple therapies to initial and post-marketing
registrations globally. Steve began his research and development career as a molecular biologist for Targetech Inc. Steve holds a B.S.
in Molecular Biology, an M.S. in Endocrinology from the University of Connecticut and a Project Management Certificate from Boston University.
Brian Wiley – Chief Business Officer
Brian Wiley has nearly 30 years of experience
in the biopharmaceutical industry, with over 25 years dedicated to oncology. His experience includes licensing deals, collaborations,
M&A, both public and private financings and multiple product launches in oncology. He founded Boston BioConsulting, LLC, a consulting
firm that specializes in corporate strategy, business development and pre-commercial planning for the biopharmaceutical industry. Additionally,
he served as Chief Commercial Officer and Head of Business Development at NewLink Genetics and also served in various leadership and management
roles at Celgene, Gloucester Pharmaceuticals, Millennium and Aventis.
Brian has a B.A. in Marketing from Pennsylvania
State University.
(D) PROPERTY, PLANT AND EQUIPMENT
The company currently does not have any lease commitments.
ITEM 4A – UNRESOLVED STAFF COMMENTS
None.
ITEM 5 – OPERATING AND FINANCIAL REVIEW AND PROSPECTS
| (B) | OPERATING RESULTS (All Amounts in 000’$) |
The following discussion should be read in conjunction with the Audited
Financial Statements of the Company and notes thereto for the year ended March 31, 2022, contained elsewhere in this report.
Results of Operations
Year ended March 31, | |
2022 | |
2021 | |
2020 |
| |
in 000’$ | |
in 000’$ | |
in 000’$ |
Operating expenses | |
$ | (15,588 | ) | |
$ | (12,440 | ) | |
$ | (5,978 | ) |
Change in fair value of warrant liability | |
| 852 | | |
| (790 | ) | |
| 24 | |
Share of (loss) income in associate accounted for using equity method | |
| (62 | ) | |
| (490 | ) | |
| 18 | |
(Loss) on equity issued at a discount | |
| – | | |
| (1,256 | ) | |
| – | |
(Loss) on extinguishment of notes payable | |
| – | | |
| (223 | ) | |
| (33 | ) |
Gain on sale of marketable equity securities | |
| – | | |
| 72 | | |
| – | |
Gain on disposition of subsidiaries | |
| – | | |
| 412 | | |
| – | |
Foreign exchange transaction gain | |
| 24 | | |
| – | | |
| 6 | |
Interest (expense), net | |
| (43 | ) | |
| (177 | ) | |
| (546 | ) |
Loss before provision for income taxes | |
| (14,817 | ) | |
| (14,892 | ) | |
| (6,509 | ) |
Income tax expense | |
| (4,352 | ) | |
| (2,297 | ) | |
| (740 | ) |
Net loss | |
| (19,169 | ) | |
| (17,189 | ) | |
| (7,249 | ) |
Other comprehensive income (loss) | |
| | | |
| | | |
| | |
Net unrealized gain on investments | |
| – | | |
| – | | |
| 876 | |
Total comprehensive loss for year | |
$ | (19,169 | ) | |
$ | (17,189 | ) | |
$ | (6,373 | ) |
| |
| | | |
| | | |
| | |
Comprehensive loss attributable to: | |
| | | |
| | | |
| | |
Owners of the Company | |
$ | (16,870 | ) | |
$ | (15,833 | ) | |
$ | (4,457 | ) |
Non-controlling interest | |
| (2,299 | ) | |
| (1,356 | ) | |
| (1,916 | ) |
Total comprehensive loss for year | |
$ | (19,169 | ) | |
$ | (17,189 | ) | |
$ | (6,373 | ) |
Overview
Portage is a clinical stage immune-oncology company focused on overcoming
immune resistance. Including the Tarus Therapeutics acquisition, it currently manages 14 immuno-oncology assets at various development
stages. We source, nurture and develop the creation of early- to mid-stage, first- and best-in-class therapies for a variety of cancers,
by funding, implementing viable, cost effective product development strategies, clinical counsel/trial design, shared services, financial
and project management to enable efficient, turnkey execution of commercially informed development plans. Our drug development pipeline
portfolio encompasses products or technologies based on biology addressing known resistance pathways/mechanisms of current check point
inhibitors with established scientific rationales, including intratumoral delivery, nanoparticles, liposomes, aptamers, and virus-like
particles.
The Portage Approach
Our mission is to advance and grow a portfolio
of innovative, early-stage oncology assets based on the latest scientific breakthroughs focused on overcoming immune resistance. Given
these foundations, we manage capital allocation and risk as much as we oversee drug development. By focusing our efforts on translational
medicine and pipeline diversification, we seek to mitigate overall exposure to many of the inherent risks of drug development.
Our approach is guided by the following core
elements:
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Portfolio diversification to mitigate risk and maximize optionality; |
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Capital allocation based on risk-adjusted potential, including staged funding to pre-specified scientific and clinical results; |
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Virtual infrastructure and key external relationships to maintain a lean operating base; |
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Internal development capabilities complemented by external business development; |
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Rigorous asset selection with disciplined ongoing evaluation; and |
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Focus on translational medicine and therapeutic candidates with in vivo single agent activity. |
We believe that our corporate structure
results in enhanced operational efficiency and maintains an optimal cost structure by centralizing strategic/tactical support, shared
services, including all research and development operations, capital allocation/ contribution, human resources, administrative
services, and business development, as well as other services to each of our immuno-oncology platforms and assets currently in various
development stages. Our execution is achieved, in part, through our internal core team and utilizing our large network of experts,
contract labs, and academic partners.
The Company generally operates through wholly owned, partially owned and
controlled subsidiary and affiliated companies, and believes it is not subject to the regulation of the Investment Company Act of 1940,
as amended (“40 Act”), based on the definition of investment companies. Notwithstanding that, as the Company primarily operates
within the biomedical industry as a research and development business, the Company believes that it is also able to take advantage of
the non-exclusive safe harbor of Rule 3a-8 promulgated under the 40 Act so as not to be characterized as an investment company. The Company
has adopted a capital preservation policy referenced in that rule.
Results of Operations for Fiscal 2022 Compared to Fiscal 2021
The Company generated a net loss and comprehensive loss of approximately
$19.2 million during the year ended March 31, 2022 (“Fiscal 2022”), compared to a net loss and comprehensive loss of approximately
$17.2 million during the year ended March 31, 2021 (“Fiscal 2021”), an increase in loss of $2.0 million year over year. Operating
expenses, which include research and development and general and administrative expenses, were $15.6 million in Fiscal 2022, compared
to $12.4 million in Fiscal 2021, an increase of $3.2 million, which is discussed more fully below. Operating expenses included $9.1 million
of non-cash share-based compensation expense in Fiscal 2022, compared to $8.8 million in Fiscal 2021.
The Company’s other items of income and expense were substantially
non-cash in nature and were approximately $0.8 million net income in Fiscal 2022, compared to approximately $2.5 million net loss in Fiscal
2021, a change in other items of income and expense of approximately $3.3 million, year over year. The primary reasons for the year over
year difference in other items of income and expense was:
| · | the change in the fair value of outstanding warrants of $1.6 million, from a loss of $0.8 million in Fiscal 2021 to income of $0.8
million in Fiscal 2022, as calculated under the Black-Scholes model; |
| · | the change in the Company’s share of an associate accounted for under the equity method of $0.4 million, from a loss of $0.5
million in Fiscal 2021 to a loss of $0.1 million in Fiscal 2022; |
| · | the loss on equity issued at a discount with respect to the settlement of the SalvaRx notes of $1.3 million representing the difference
between the fair value of the shares in Fiscal 2021 and the warrant exercise price; |
| · | the loss on the extinguishment of the SalvaRx notes of $0.2 million in Fiscal 2021; |
| · | a non-cash gain relating to the settlement of related liabilities on the disposition of Portage Pharmaceuticals Ltd. (“PPL”)
of $0.4 million, of which $0.2 million was recorded in operations in Fiscal 2021; and |
| · | the decrease in interest expense of $0.2 million due to the settlement of the SalvaRx Notes in the prior year period, which were not
outstanding in the current year period. |
Additionally, the Company reflected a net deferred income tax
expense of $4.4 million in Fiscal 2022, compared to a net deferred income tax expense of $2.3 million in Fiscal 2021. The principal
reason for the change was a $5.5 million increase attributable to an increase in the U.K. income tax rate, net of the recognition of
deferred tax assets previously unrecognized. This was further offset by a $1.1 million benefit due to the foreign currency effect on
deferred tax liability balance settleable in Great British pounds. The Fiscal 2021 net deferred income tax expense was attributable
to the foreign currency effect on the deferred tax liability balance settleable in Great British pounds, which was partially offset
by recoverable research and development tax credits.
Other comprehensive loss was $17.7 million in Fiscal 2022, compared to
$17.2 million in Fiscal 2021.
Results of Operations for Fiscal 2021 Compared to Fiscal 2020
The Company generated a net loss and comprehensive loss of $17.2 million
in Fiscal 2021, compared to a net loss of $7.2 million and comprehensive loss of $6.4 million during the year ended March 31, 2020 (“Fiscal
2020”), an increase in loss of $10.0 million and $10.8 million, respectively, year over year. Operating expenses, which include
research and development and general and administrative expenses, were $12.4 million in Fiscal 2021, compared to $6.0 million in Fiscal
2020, an increase of $6.4 million, which is discussed more fully below. Operating expenses included $8.8 million of non-cash share-based
compensation expense in Fiscal 2021, compared to $2.1 million in Fiscal 2020.
The Company’s other items of income and expense were substantially
non-operating in nature, and were $2.5 million net expense in Fiscal 2021, compared to $0.5 million net expense in Fiscal 2020. $2.0 million
of the net expense in Fiscal 2021 was non-cash. Other items of income and expense included:
| · | a loss on equity issued at a discount of $1.3 million in Fiscal 2021, representing the difference between the market price and the
contractual exercise price, relating to the settlement of the SalvaRx Notes and warrants; |
| · | a loss from an associate accounted for under the equity method of $0.5 million, compared to a small gain in Fiscal 2020; |
| · | a loss of $0.8 million representing the change in the fair value of the warrants issued with respect to the SalvaRx settlement; |
| · | a non-cash gain relating to the settlement of related liabilities on the disposition of Portage Pharmaceuticals Ltd. (“PPL”)
of $0.4 million, of which $0.2 million was recorded in operations in Fiscal 2021; and |
| · | interest expense of $0.2 million is Fiscal 2021, compared to $0.6 million in Fiscal 2020 due to the settlement of the SalvaRx Notes.
The Company also recorded a loss of $0.2 million on the early extinguishment of the SalvaRx Notes in Fiscal 2021. |
Additionally, the Company reflected a net income tax provision of $2.3
million in Fiscal 2021, primarily due to the foreign currency effect on deferred tax liability, which was partially offset by recoverable
research and development tax credits, compared to a net income tax provision of $0.7 million in Fiscal 2020, primarily attributable to
a change in corporation tax rates in the U.K., which was partially offset by the foreign currency effect on deferred tax liability and
recoverable research and development tax credits.
Other comprehensive loss was $17.2 million in Fiscal 2021, compared to
$6.4 million in Fiscal 2020. Fiscal 2020 was positively impacted by net unrealized gain on investments of $0.8 million.
Operating Expenses
The overall analysis of the operating expenses (in 000’$) is as
follows:
Years ended March 31, | |
2022 | |
2021 | |
2020 |
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Research and development | |
$ | 6,769 | | |
$ | 7,312 | | |
$ | 4,108 | |
General and administrative expenses | |
| 8,819 | | |
| 5,128 | | |
| 1,870 | |
Total operating expenses | |
$ | 15,588 | | |
$ | 12,440 | | |
$ | 5,978 | |
Research and Development Costs
Fiscal 2022
Research & development (“R&D”) costs decreased by
approximately $0.5 million, or approximately 7%, from approximately $7.3 million in Fiscal 2021, to approximately $6.8 million in Fiscal
2022. Fiscal 2021 R&D costs were reduced by the receipt of a $0.6 million legal settlement in respect of some product development
costs; accordingly, normalized expenses decreased $1.1 million year over year. The decrease was primarily attributable to non-cash share-based
compensation expense associated with grants made under the Amended and Restated 2021 Equity Incentive Plan of $0.7 million and a decrease
in iOx related share-based compensation expense of $0.5 million, a decrease of $0.5 million in other R&D costs relating to outside
services and a decrease of $0.4 million in other R&D costs relating to services and storage, partially offset by a year over year
increase in compensation of $1.0 million for employees / consultants involved in research and development activities.
Fiscal 2021
R&D costs increased by $3.2 million, or approximately 78%, from $4.1
million in Fiscal 2020, to $7.3 million in Fiscal 2021. The increase was attributable to non-cash share-based compensation expense associated
with grants made under the 2021 Equity Incentive Plan of $5.1 million, partially offset by a decrease in iOx related share-based compensation
expense of $0.8 million. Additionally, Fiscal 2021 was impacted by the receipt of a $0.6 million cash settlement for a legal dispute the
Company had with a vendor while developing one of its products, as well as a general slow down in expenditures resulting from the pandemic.
Fiscal 2020
R&D costs more than doubled relative to Fiscal 2019, increasing by
approximately $2.2 million to $4.1 million from Fiscal 2019 to Fiscal 2020. This increase is primarily attributable to iOx developmental
activities associated with completing its IND enabling studies and regulatory preparations with the objective of IMM60 and IMM65 entering
the clinic before the end of the calendar year, despite COVID-19 interruptions. Additional resources were also spent on achieving initial
proof of concept with its NLG platform for delivering DNA aptamers and certain aptamer-based combination products by leveraging the Saugatuck/Oncommer
technology platforms.
General and Administrative Expenses
Fiscal 2022
General and administrative (“G&A”) expenses increased
by approximately $3.7 million, or approximately 73%, from approximately $5.1 million in Fiscal 2021, to approximately $8.8 million in
Fiscal 2022. The principal reason for the increase was the $1.6 million of non-cash share-based compensation expense associated with the
Company’s Amended and Restated 2021 Equity Incentive Plan, of which $2.4 million is associated with Directors’ compensation
and $0.8 million is associated with the new grants issued in January and February 2022, which was partially offset by a decrease of $1.6
million associated with management compensation; and a decrease in iOx related share-based compensation expense of $0.1 million. Additionally,
the Company incurred an increase of $1.0 million in professional fees relating to initiatives associated with a corporate restructuring
and public relations / business development. Finally, D&O insurance premiums increased $1.4 million in the current year period due
to market rate increases in the cost of coverage, partially offset by a decrease in office and general expenses of $0.2 million, attributable
to investor related expense.
Fiscal 2021
General and administrative (“G&A”) expenses increased
by $3.2 million, from $1.9 million in Fiscal 2020, to $5.1 million in Fiscal 2021. The principal reason for the increase was the $2.8
million of non-cash share-based compensation expense associated with the Company’s 2021 Equity Incentive Plan in Fiscal 2021. No
share-based compensation expense under the 2021 Equity Incentive Plan was incurred in Fiscal 2020. Additionally, the Company incurred
approximately $0.2 million relating to initiatives associated with a corporate restructuring and public relations / business development.
Fiscal 2020
G&A expenses increased by approximately $1.0 million to $1.87 million
in Fiscal 2020 relative to $857,000 in Fiscal 2019. The increase is attributable to the audit expenses as well as incurring a full
year of operating costs related to the SalvaRx acquisition.
(B) LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
Portage filed a shelf registration statement and prospectus with the Securities
and Exchange Commission (“SEC”) under which it may sell ordinary shares, debt securities, warrants and units in one or more
offerings from time to time, which became effective on March 8, 2021 (“Registration Statement” or “Prospectus”).
The specific terms of any securities to be offered pursuant to the base prospectus are specified in the sales agreement prospectus. The
Registration Statement currently includes:
| · | a base prospectus, which covers the offering, issuance and sales by us of up to $200,000,000 in the aggregate of the securities identified
above from time to time in one or more offerings; |
| · | a sales agreement supplemental prospectus covering the offer, issuance and sale by us in an “at the market” offering of
up to a maximum aggregate offering price of $50,000,000 of our ordinary shares that may be issued and sold from time to time under sales
agreement, or sales agreement, with Cantor Fitzgerald & Co., or Cantor Fitzgerald, the sales agent; and |
| · | a prospectus supplement dated June 24, 2021, for the offer, issuance and sale by us of 1,150,000 ordinary shares for gross proceeds
of approximately $26.5 million in a firm commitment underwriting with Cantor Fitzgerald. |
The sales agreement with Cantor Fitzgerald permits the Company to sell
in an at the market offering up to $50,000,000 of ordinary shares from time to time, the amount of which is included in the $200,000,000
of securities that may be offered, issued and sold by us under the base prospectus. The sales under the prospectus will be deemed to be
made pursuant to an “at the market” offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933 (the
Securities Act). Upon termination of the sales agreement, any portion of the $50,000,000 included in the sales agreement prospectus that
is not sold pursuant to the sales agreement will be available for sale in other offerings pursuant to the base prospectus, and if no shares
are sold under the sales agreement, the full $50,000,000 of securities may be sold in other offerings pursuant to the base prospectus.
During the quarter ended June 30, 2021, the Company commenced an “at
the market” offering, under which it sold 90,888 shares generating gross proceeds of approximately $2.6 million ($2.5 million, net
of commissions).
On June 24, 2021, the Company completed the sale of 1,150,000 ordinary
shares, including the underwriters’ overallotment, at a price of $23.00 per share, which generated gross proceeds of approximately
$26.5 million and net proceeds of approximately $25.0 million, and was settled June 28, 2021. Management believes the funds generated,
along with existing cash and cash equivalents, will be sufficient to fund the Company’s research and development activities, as
well as the expansion of its operating infrastructure and achievement of numerous developmental milestones.
On July 6, 2022 (the “Signing Date”), the Company entered
into a Purchase Agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln”), pursuant
to which the Company may require Lincoln to purchase ordinary shares having an aggregate value of up to $30 million over a period of 36
months. Pursuant to the Purchase Agreement, Lincoln will be obligated to purchase ordinary shares in three different scenarios as described
below.
| · | Regular Purchase – At any time after the Closing Date (as defined below) and provided that the closing sale price of the ordinary
shares is not less than $0.25 per share, from time to time on any business day selected by the Company (the “Purchase Date”),
the Company shall have the right, but not the obligation, to require Lincoln to purchase up to 30,000 ordinary shares (the “Regular
Purchase Amount”) at the Purchase Price (as defined below) per purchase notice (each such purchase, a “Regular Purchase”).
Lincoln’s committed obligation under each Regular Purchase shall not exceed $1,500,000; provided, that the parties may mutually
agree at any time to increase the dollar amount of any Regular Purchase on any Purchase Date above and beyond the forgoing amounts that
Lincoln is committed to purchase. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to the lesser
of: (i) the lowest sale price of the ordinary shares during the Purchase Date, and (ii) the average of the three (3) lowest closing sale
prices of the ordinary shares during the ten (10) business days prior to the Purchase Date. The Company shall have the right to submit
a Regular Purchase notice to Lincoln as often as every business day. “Closing Date” shall mean the date that customary conditions
to closing have been satisfied, including that the Company’s shelf registration statement for the ordinary shares to be issued pursuant
to the Purchase Agreement is effective and available for use and any listing application and/or exchange approvals, to the extent applicable,
have been approved. |
| · | Accelerated Purchase – In addition to Regular Purchases and provided that the Company has directed a Regular Purchase in full,
the Company in its sole discretion may require Lincoln on each Purchase Date to purchase on the following business day (“Accelerated
Purchase Date”) up to the lesser of (i) three (3) times the number of shares purchased pursuant to such Regular Purchase, and (ii)
25% of the trading volume on the Accelerated Purchase Date at a purchase price equal to the lesser of 97% of (i) the closing sale price
on the Accelerated Purchase Date, and (ii) the Accelerated Purchase Date’s volume weighted average price (the “Accelerate
Purchase Price”). The parties may mutually agree to increase the number of ordinary shares sold to Lincoln on any Accelerated Purchase
Date at the Accelerated Purchase Price. The Company shall have the right in its sole discretion to set a minimum price threshold for each
Accelerated Purchase in the notice provided with respect to such Accelerated Purchase and the Company may direct multiple Accelerated
Purchases in a day; provided, that delivery of ordinary shares has been completed with respect to any prior Regular and Accelerated Purchases
Lincoln has purchased. |
| · | Tranche Purchase – In addition to Regular Purchases and Accelerated Purchases and provided that the closing price of the ordinary
shares is not below $0.25, at any time beginning five (5) business days from the Closing Date, the Company shall have the option to require
Lincoln to purchase up to $3,000,000 in separate purchases of up to $1,000,000 for each purchase (the “Tranche Purchases”,
and with Regular Purchases and Accelerated Purchases, the “Committed Purchases”). The purchase price for each Tranche Purchase
shall be equal to 90% of the Purchase Price. The Company may deliver notice to Lincoln for a Tranche Purchase so long as at least twenty
(20) business days have passed since any Tranche Purchase was completed. |
Upon execution of the Purchase Agreement, The Company issued to Lincoln
94,508 ordinary shares, representing a 3% commitment fee. The Company has the right to terminate the Purchase Agreement for any reason,
effective upon one (1) business day prior written notice to Lincoln. Lincoln has no right to terminate the Purchase Agreement.
Committed Purchases shall be suspended if any of the following occur:
(i) the shelf registration statement is not available for the sale of all of the ordinary shares issued pursuant to the Purchase Agreement
for ten (10) consecutive trading days or for a total of thirty (30) trading days out of the preceding 365 days; (ii) the ordinary shares
cease to be DTC authorized and participating in the D.W.A.C./F.A.S.T. systems; (iii) suspension of the ordinary shares from trading for
one (1) trading day; (iv) any breach of the representations and warranties or covenants contained in any related agreements with Lincoln
which has or which could have a material adverse effect on the Company, Lincoln or the value of the ordinary shares, subject to reasonable
cure periods to be agreed upon for curable breaches of covenants; (v) if the Company is listed on a national exchange or market (excluding
the OTC Markets, OTC Bulletin Board or comparable market), at any time prior to shareholder approval of the Purchase Agreement more than
19.99% of the Company’s aggregate ordinary shares, determined as of the Signing Date, would be issuable to Lincoln in violation
of the principal securities exchange or market rules; (vi) if the Ordinary shares cease to be eligible for trading on the NASDAQ Capital
Market, the Company’s principal market, and is not immediately thereafter trading on the NASDAQ Global Select Market, the NASDAQ
Global Market, the NYSE, the NYSE American, or the OTC Markets; or (vii) the Company’s insolvency or the Company’s participation
or threatened participation in insolvency or bankruptcy proceedings by or against the Company. The Committed Purchases may resume following
the resolution of any of these events.
The Purchase Agreement does not impose any financial or business covenants
on the Company and there are no limitations on the use of proceeds received by the Company from Lincoln. The Company may raise capital
from other sources in its sole discretion; provided, however, that the Company shall not enter into any similar agreement for the issuance
of variable priced equity-like securities until the three (3) year anniversary of the Signing Date, excluding, however, an At-The-Market
(ATM) transaction with a registered broker-dealer.
In connection with the Purchase Agreement, the Company and Lincoln entered
into a Registration Rights Agreement (the “Registration Rights Agreement”), dated July 6, 2022. Pursuant to the Registration
Rights Agreement, the Company agreed, that within the time required under Rule 424(b) under the Securities Act, it will file with the
SEC the Initial Prospectus Supplement to the Company’s shelf registration statement pursuant to Rule 424(b) for the purpose of registering
for resale the ordinary shares to be issued to Lincoln under the Purchase Agreement. All reasonable expenses of the Company incurred through
the registration of the ordinary shares under the Purchase Agreement shall be paid by the Company.
Liquidity
The accompanying consolidated financial statements have been prepared
on a basis that assumes that the Company will continue as a going concern and that contemplates the continuity of operations, the realization
of assets and the satisfaction of liabilities and commitments in the normal course of business. Accordingly, the accompanying consolidated
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts
of liabilities that might result from the outcome of this uncertainty.
As of March 31, 2022, the Company had cash and cash equivalents of approximately
$23.4 million and total current liabilities of approximately $0.8 million (inclusive of approximately $0.03 million warrant liability
settleable on a non-cash basis). For the year ended March 31, 2022, the Company is reporting a net loss of approximately $19.2 million
and cash used in operating activities of approximately $6.8 million. As of June 30, 2022, the Company had approximately $21.0 million
of cash and cash equivalents on hand.
During the quarter ended June 30, 2021, the Company made an
“at the market” offering, under which it sold 90,888 shares generating gross proceeds of approximately $2.6 million
($2.5 million, net of commissions). On June 24, 2021, the Company completed a firm commitment underwritten public offering of
1,150,000 ordinary shares at a public offering price of $23.00 per share for gross proceeds of approximately $26.5 million and was
settled June 28, 2021. The Company incurred aggregate offering expenses for the public offering of approximately $1.8 million,
including approximately $1.6 million of management, underwriting and selling expenses. The Company believes it has working capital
funds sufficient to fund operations through at least August 2023.
The Company has incurred substantial operating losses since inception
and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. The losses result
primarily from its conduct of research and development activities.
The Company historically has funded its operations principally from proceeds
from issuances of equity and debt securities and would expect to enter the capital markets when additional funding is required.
Operating Cash Flow
During Fiscal 2022, the Company used cash of approximately $6.8 million
to fund operating activities, which was provided by the Company’s existing cash and the “at the market” offering and
public offering, described above.
During Fiscal 2021, the Company used cash of approximately $4.3 million
to fund operating activities, which was funded by the Company’s existing cash and net proceeds from a private placement that closed
in June 2020 of approximately $6.7 million.
During Fiscal 2020, the Company used cash of approximately $3.7 million
to fund operating activities, which was met from the Company’s existing cash.
The Company’s continuing operations are dependent upon any one of:
1. the development
and identification of economically recoverable medical solutions;
2. the ability of
the Company to obtain the necessary financing to complete the research; or
3. future profitable
production from or proceeds from the disposition of intellectual property.
The Company has incurred substantial operating losses since inception
due to significant research and development spending and corporate overhead and expects to continue to incur significant operating losses
for the foreseeable future and may never become profitable. As of March 31, 2022, the Company had cash of approximately $23.4 million,
working capital of approximately $24.0 million (approximately $24.1 million adjusted for the warrant liability settleable on a non-cash
basis) and an accumulated deficit of approximately $55.0 million. The Company has funded its operations from proceeds from the sale
of equity and debt securities. The Company will require significant additional capital to make the investments it needs to execute its
longer-term business plan. The Company’s ability to successfully raise sufficient funds through the sale of debt or equity securities
when needed is subject to many risks and uncertainties and, even if it were successful, future equity issuances would result in dilution
to its existing stockholders and any future debt securities may contain covenants that limit the Company’s operations or ability
to enter into certain transactions.
On July 1, 2022, the Company, its wholly-owned subsidiary, Tarus Acquisition
Inc., and Tarus Therapeutics, Inc., a Delaware Corporation advancing adenosine receptor agonists for the treatment of solid tumors, entered
into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). Under the structure of the Merger Agreement,
Tarus Therapeutics, Inc. was ultimately merged into a wholly-owned subsidiary of the Company with the surviving entity renamed Tarus Therapeutics,
LLC.
As consideration for Tarus, the Company issued to Tarus shareholders an
aggregate of 2,425,999 ordinary shares of Portage, calculated on the basis of $18M divided by the 60-day Volume Weighted Average Price
per share. The shares are unregistered and subject to lock-ups for terms ranging from six to twelve months. Additionally, payments of
up to $32 million in cash or Portage ordinary shares would be triggered upon achievement of future development and sales milestones. As
a result of the transaction:
| · | The Company also assumed $2M short-term debt held by Tarus and deferred license milestones obligations ($1M plus interest), for an
aggregate of $3M in liabilities. |
| · | Upon enrolling the first patient in a Phase 2 clinical trial, Portage will pay an additional one-time payment
of $15M. Payment will be in the form of cash or PRTG stock (at the discretion of Portage). |
On July 13, 2022, the Company entered into a commitment with Stimunity
to provide €600,000 under a Convertible Note with a maturity date of September 1, 2023 (the “Maturity Date”). The Convertible
Note provides for interest at 7% per annum. The Convertible Note is automatically converted upon Stimunity commencing a Series A subscription
round for €20 million. If such Subscription round is completed prior to the Maturity Date, the Company will be entitled to convert
the Convertible Note at the subscription share price less 15%. Additionally, if subscribers create a new category of shares with additional
rights of less than €5 million (the “Minimum Raise”), the Company will have the right to convert the Convertible Note
and historical shares owned into the new category of shares. In the event that Stimunity does not close a subscription prior to the Maturity
Date or raises less than the Minimum Raise, the Company will have the right to convert at €363.00 per share or the raise price less
15%, whichever is lower. The Convertible Note is expected to be funded by September 1, 2022.
It is anticipated that such Convertible Note will be
funded by existing cash and cash provided under the ELOC.
Investing Cash Flows
Fiscal 2022
During Fiscal 2022, the Company did not use any cash for investing activities.
Fiscal 2021
During Fiscal 2021, the Company used ($0.9 million) in investing activities.
The Company invested $1.0 million in Stimunity, based upon the achievement of certain agreed milestones, which increased the Company’s
interest in Stimunity to 44%, which was partially offset by $0.1 million proceeds from the sales of its remaining interest in Biohaven.
Fiscal 2020
During Fiscal 2020, there were no investing cash flow activities. Non-cash
investing activities included Portage paid $1.3 million consideration through the issuance of 129,806 common shares to acquire 288,458
shares of the private company, Intensity. This transaction increased Portage’s ownership to 1,288,458 shares of Intensity (approximately
10.0% of the then outstanding shares of Intensity).
Financing Cash Flows
Fiscal 2022
During Fiscal 2022, the Company generated net cash from financing activities
of $27.3 million, compared to $4.8 million during Fiscal 2021.
During the quarter ended June 30, 2021, the Company commenced an “at
the market” offering, under which it sold 90,888 shares generating gross proceeds of approximately $2.6 million ($2.5 million, net
of commissions). Further, the Company initiated an offering pursuant to the Prospectus. On June 24, 2021, the Company completed a firm
commitment underwritten public offering of 1,150,000 ordinary shares at a public offering price of $23.00 per share for gross proceeds
of approximately $26.5 million and was settled June 28, 2021. The Company incurred aggregate offering expenses for the public offering
of approximately $1.8 million, including approximately $1.6 million of management, underwriting and selling expenses.
On June 16, 2020, the Company completed
a private placement offering of 698,145 restricted ordinary shares at a price of $10 per share for gross proceeds of $6.98 million to
accredited investors. Directors of the Company subscribed for 215,000 shares for $2,150,000. The Company incurred offering costs of $248,000
in connection with the private placement.
Fiscal 2021
During Fiscal 2021, the Company generated cash from financing activities
of $4.8 million. The Company raised net proceeds from a private placement of stock of $6.7 million, which was offset by the repayment
of a $1.0 million advance from a related party and $1.0 million for the cash portion of the settlement of the SalvaRx notes.
Fiscal 2020
During Fiscal 2020, Portage redeemed $0.3 million of the SalvaRx notes
and received a short-term advance of $1.0 million from its Chairman (see Item 7 (B), “Related Party Transactions”).
(C) RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
From May 23, 2012 to date, the Company through its operating subsidiaries
is engaged in general research and development and clinical and pre-clinical studies as detailed under Item 4 (B) Business Overview of
this report. Research and development expenses analysis and details are provided under Item 5 (A) of this report. All research and development
expenses are expensed as they are incurred.
PPL's CPP platform is protected by two suits of intellectual property:
(a) an exclusive license for all patents on Antennapedia -based cell permeable peptides for non-oncology use; and (b) international patents
for proprietary human-derived cell penetrating peptide structures.
(D) TREND INFORMATION
There are no other trends, commitments, events or uncertainties presently
known to management that are reasonably expected to have a material effect on the Company's business, financial condition or results of
operation other than as disclosed elsewhere in this report (refer to the heading entitled "Risk Factors").
(E) OFF-BALANCE SHEET ARRANGEMENTS
At March 31, 2022 and 2021, the Company did not have any off-balance sheet
arrangements, including any relationships with unconsolidated entities or financial partnership to enhance perceived liquidity.
(F) CONTRACTUAL OBLIGATIONS
None.
(G) SAFE HARBOUR
Not applicable.
(H) HOME COUNTRY PRACTICE LETTER DISCLOSURE
We are incorporated under the BVI Act. Our ordinary shares are registered
with the SEC and are listed on the Nasdaq Capital Market. As a result, our corporate governance framework is subject to laws of the British
Virgin Islands, or BVI, the securities laws and regulations of the United States and the listing requirements of the Nasdaq Marketplace
Rules.
Under Rule 5615 of the Nasdaq Marketplace Rules, a foreign private issuer
may follow its home country practice in lieu of the requirements of the Nasdaq Marketplace Rules. We follow the exemptions provide under
the Nasdaq Marketplace Rules as described below.
British Virgin Islands law does not require that a majority of our board
of directors consist of independent directors or that our board committees consist of entirely independent directors. Our board of directors
and board committees, therefore, may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule
5605(b)(1). In addition, we will not be subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors must regularly
have scheduled meetings at which only independent directors are present. Also, British Virgin Islands law does not require the board of
directors to have a nominating committee or compensation committee, but we do plan on having such committees.
We also are exempt from the Nasdaq listing rules so as to follow the quorum
rules for shareholder meetings under British Virgin Islands law. We also are exempt from the Nasdaq listing rules so as to not be required
to obtain shareholder approval for certain issuance of securities, shareholder approval of share option plans and change of control transactions
under the Nasdaq Listing Rule 5635.
As a foreign private issuer, the Company is exempt from the proxy rules
set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Securities Exchange Act of 1934. The Company solicits proxies in accordance
with applicable rules and regulations in British Virgin Islands.
ITEM 6 – DIRECTORS AND SENIOR MANAGEMENT
(A) DIRECTORS AND SENIOR MANAGEMENT
The following sets forth the names and province or state and country of
residence of our directors and executive officers, the offices held by them in the Company, as of the date of this report, and the month
and year in which they became directors or officers. The term of each director expires on the date of our next annual meeting.
Name, Province/State and Country of Residence and Present Position with Portage (1) |
Date became Director/Officer |
Principal Occupation Last five years |
Dr. Gregory Bailey (2)
London, U.K.
Chairman of the Board of Directors |
June 4, 2013 |
See section 4 (C) of this report |
Mr. Steven Mintz (3)
Ontario, Canada
Director |
April 6, 2016 |
See section 4 (C) of this report |
Mr. James Mellon (4)
Isle of Man
Director |
February 15, 2022 |
See section 4 (C) of this report |
Ms. Linda M. Kozick (6)
Florida, USA
Director |
February 15, 2022 |
See section 4 (C) of this report |
Mr. Mark Simon (5)
New Jersey, USA
Director |
February 15, 2022 |
See section 4 (C) of this report |
Dr. Declan Doogan (7)
Florida, USA
Former Director
Chief Executive Officer until April 30, 2019 |
June 4, 2013 |
See section 4 (C) of this report |
Mr. Kam Shah (7)
Ontario, Canada
Former Director
Chief Financial Officer until March 31, 2020 |
January 3, 1999 |
See section 4 (C) of this report |
Dr. Ian Walters
Connecticut, USA
Chief Executive Officer effective May 1, 2019 and Director |
August 1, 2016 |
See section 4 (C) of this report |
Mr. Allan Shaw
New York, USA
Chief Financial Officer |
May 12, 2020 |
See section 4 (C) of this report |
Mr. Robert Kramer (8)
Utah, USA
Chief Scientific Officer |
January 8, 2019 |
See section 4 (C) of this report |
Mr. Steven Innaimo (8)
Connecticut, USA
Vice President of Project Management & Operations |
January 8, 2019 |
See section 4 (C) of this report |
Mr. Brian Wiley
Massachusetts, USA
Chief Business Officer |
February 15, 2022 |
See section 4 (C) of this report |
Dr. Robert Glassman (9)
New Jersey, USA
Director |
July 1, 2022 |
See section 4 (C) of this report |
| (1) | Neither age nor date of birth of directors or executive officers is required to be reported in our home country nor otherwise publicly
disclosed. |
| (2) | Chair of the Company and Member of the Compensation Committee. |
| (3) | Chair of the Audit Committee and Member of the Compensation Committee. |
| (4) | Member of the Audit and Nominating Committees. |
| (5) | Chair of the Nominating Committee and Member of the Audit Committee. |
| (6) | Chair of the Compensation Committee and Member of the Nominating Committee. |
| (7) | Dr. Doogan and Mr. Shah resigned from the Board effective February 15, 2022. |
| (8) | Reflects the date of the SalvaRx acquisition by the Company. Prior to that, this individual was contracted by SalvaRx Limited. |
| (9) | Dr. Glassman joined the Board of Directors on July 1, 2022 in connection with the Tarus Therapeutics transaction. |
Family Relationships
There are no family relationships between or among the directors and executive
officers.
Other Relationships
There are no arrangements or understandings between or among any major
shareholder, customer, supplier or others, pursuant to which any of the above-named persons were selected as directors or as members of
senior management.
Board Diversity Matrix of Portage Biotech Inc.
The below chart is intended to disclose, to the extent legally permitted,
the board of director diversity of Portage Biotech Inc., pursuant to Rule 5606(f) of the NASDAQ listing rules.
Board Diversity Matrix (As of August 1, 2022) |
Country of Principal Executive Offices: |
British Virgin Islands |
Foreign Private Issuer |
Yes |
Disclosure Prohibited under Home Country Law |
Yes |
Total Number of Directors |
6 |
|
Female |
Male |
Non-Binary |
Did Not Disclose Gender |
Part I: Gender Identity |
|
Directors |
1 |
5 |
– |
– |
Part II: Demographic Background |
|
Under-represented person in Home Country |
– |
LGBTQ+ |
– |
Did not Disclose Demographic Background |
– |
(B) COMPENSATION DISCUSSION AND ANALYIS
The compensation payable to directors and officers of the Company and
its subsidiary is summarized below:
During Fiscal 2022, the Company engaged a third-party compensation consultant
to review the Company’s compensation structure and provide recommendations to make the Company competitive for the purpose of recruiting
and retaining board members, key management and staff. The review included benchmarking and other analytical tools.
As a result of the study and resulting recommendations, in November 2021,
the Board approved cash fees and options to purchase common shares of stock be provided to independent board members for both participation
as a member, as well as membership of board committees. Board remuneration commenced as of January 1, 2022.
The Company does not have any pension plans.
| 2. | Statement of Director and Executive Compensation |
Additionally, as part of the third-party review, the Company adopted a
compensation regime based upon targeted goals and other metrics.
The following table and accompanying notes set forth all compensation
paid by the Company to its directors, senior management and key consultants for the fiscal years ended March 31, 2022, 2021 and 2020:
Name & Principal Position |
|
Year |
|
Fee and Salary (3) |
|
Bonus |
|
Other |
|
Securities Under Options / SARs
Granted (1) |
|
Shares or Units Subject to Resale Restrictions |
|
LTIP
Payout (2) |
|
Other (11) |
|
Total Compensation |
|
|
|
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Declan Doogan - Former Independent Director and Audit Committee Member (CEO up to April 30, 2019) (12) |
|
|
|
2022 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
|
|
2021 |
|
– |
|
– |
|
– |
|
1,416,100 |
(8) |
– |
|
– |
|
– |
|
1,416,100 |
|
|
|
2020 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kam Shah - Former Director and Former CFO (12) |
|
|
|
2022 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
|
|
2021 |
|
45,000 |
|
– |
|
– |
|
1,582,700 |
(8) |
– |
|
– |
|
– |
|
1,627,700 |
|
|
|
2020 |
|
180,000 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
180,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Bailey - Chairman of the Board of Directors and Compensation Committee Member |
|
|
|
2022 |
|
21,667 |
|
– |
|
– |
|
57,063 |
(4) |
– |
|
– |
|
– |
|
78,730 |
|
|
|
2021 |
|
-- |
|
– |
|
– |
|
1,416,100 |
(8) |
– |
|
– |
|
– |
|
1,416,100 |
|
|
|
2020 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Mellon - Independent Director and Audit Committee Member and Nominating Committee Member |
|
|
|
2022 |
|
5,208 |
|
– |
|
– |
|
99,360 |
(5) |
– |
|
– |
|
– |
|
104,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven Mintz - Independent Director and Chairman of the Audit Committee and Compensation Committee Member |
|
|
|
2022 |
|
18,750 |
|
– |
|
– |
|
57,063 |
(4) |
– |
|
– |
|
– |
|
75,813 |
|
` |
|
2021 |
|
– |
|
– |
|
– |
|
1,416,100 |
(8) |
– |
|
– |
|
– |
|
1,416,100 |
|
|
|
2020 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linda Kozick - Independent Director and Chairperson of the Compensation Committee and Nominating Committee Member |
|
|
|
2022 |
|
5,000 |
|
– |
|
– |
|
99,360 |
(5) |
– |
|
– |
|
– |
|
104,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Simon - Independent Director and Chairman of the Nominating Committee and Audit Committee Member |
|
|
|
2022 |
|
5,208 |
|
– |
|
– |
|
99,360 |
(5) |
– |
|
– |
|
– |
|
104,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ian Walters - CEO effective May 1, 2019 and Director |
|
|
|
2022 |
|
459,195 |
|
375,000 |
|
– |
|
1,101,132 |
(6) |
879,942 |
(7) |
– |
|
13,952 |
|
2,829,221 |
|
|
|
2021 |
|
368,503 |
|
200,000 |
|
– |
|
2,583,610 |
(9) |
2,698,000 |
(10) |
– |
|
– |
|
5,850,113 |
|
|
|
2020 |
|
350,000 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allan Shaw - CFO |
|
|
|
2022 |
|
256,000 |
|
161,000 |
|
– |
|
294,336 |
(6) |
235,469 |
(7) |
– |
|
13,952 |
|
960,757 |
|
|
|
2021 |
|
186,290 |
|
– |
|
– |
|
2,241,410 |
(9) |
– |
|
– |
|
– |
|
2,427,700 |
|
|
|
2020 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Kramer - Chief Scientific Officer |
|
|
|
2022 |
|
195,501 |
|
83,000 |
|
– |
|
219,876 |
(6) |
175,784 |
(7) |
– |
|
– |
|
674,161 |
|
|
|
2021 |
|
147,500 |
|
– |
|
– |
|
1,043,710 |
(9) |
1,615,250 |
(10) |
– |
|
– |
|
2,806,460 |
|
|
|
2020 |
|
135,000 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
135,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven Innaimo - Vice President of Project Management & Operations |
|
|
|
2022 |
|
310,000 |
|
93,000 |
|
– |
|
120,888 |
(6) |
96,068 |
(7) |
– |
|
13,952 |
|
633,908 |
|
|
|
2021 |
|
298,000 |
|
– |
|
– |
|
2,994,250 |
(9) |
– |
|
– |
|
– |
|
3,292,250 |
|
|
|
2020 |
|
294,000 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
294,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian Wiley – Chief Business Officer effective December 1, 2021 |
|
|
|
2022 |
|
84,057 |
|
– |
|
– |
|
525,600 |
(6) |
– |
|
– |
|
– |
|
609,657 |
|
Notes:
| (1) | "SAR" means stock appreciation rights. The Company never issued any SARs. |
| (2) | "LTIP" means long term incentive plan. The Company does not have any such plan. |
| (3) | Represents fees for services and salaries, as applicable, earned and paid in Fiscal 2022. |
| (4) | Represents aggregate fair value of options to purchase common stock granted January 19, 2022, which vest on the first anniversary
of the date of grant. |
| (5) | Represents aggregate fair value of options to purchase common stock granted February 15, 2022, which vest monthly over the first three
years following the date of grant. |
| (6) | Represents aggregate fair value of options to purchase common stock granted January 19, 2022, which vest ratably on each of the first
four anniversaries of the date of grant. |
| (7) | Represents the aggregate fair value (market value) of restricted stock units granted January 19, 2022, which were vested on
grant date and are subject to certain restrictions. |
| (8) | Represents the aggregate grant date fair value of options to purchase common stock granted January 13, 2021, which vest 1/3 on January
13, 2021, and 1/3 each on the first and second anniversaries of the grant date. |
| (9) | Represents aggregate the grant date fair value of options to purchase common stock granted January 13, 2021, which vest ratably on
the first, second and third anniversaries of the grant date. |
| (10) | Represents the aggregate fair value (market value) of restricted stock units granted January 13, 2021, which were vested at
grant date and are subject to certain restrictions. |
| (11) | Represents employee benefits paid by the Company. |
| (12) | Dr. Declan Doogan and Kam Shah resigned from the Board effective February 15, 2022. |
Long Term Incentive Plan (LTIP) Awards
On January 19, 2022, the Board of Directors unanimously approved the Amended
and Restated 2021 Equity Incentive Plan. The Amended and Restated 2021 Equity Incentive Plan provides for:
| (1) | An increase of aggregate number of shares available for awards to 2,001,812, which is equal to 15% of the issued and outstanding common
shares in the capital of the Company as of January 19, 2022 subject to discretionary annual increases (on a cumulative basis) as may be
approved by the Board in future years by a number of shares not to exceed an additional five percent (5%) of the aggregate number of shares
then outstanding; |
| (2) | The authorization of incentive stock options (should shareholder approval be sought and obtained) under the Amended and Restated 2021
Equity Incentive Plan; and |
| (3) | The provision of dividend equivalent rights to be issued when authorized. |
In addition, one of our companies, iOx Therapeutics Ltd., also has an
option plan for acquiring equity in the subsidiaries for their management.
The objective of the Company's and our subsidiaries equity-based incentive
plans is to provide for and encourage ownership of our ordinary shares by our directors, officers, consultants and employees, if any and
those of any subsidiary companies so that such persons may increase their stake in our company and benefit from increases in the value
of the ordinary shares. The Plans are designed to be competitive with the benefit programs of other companies in the Biotechnology sector
and enable the Company and its subsidiaries to attract and retain directors, officers and employees of the Company and its subsidiaries
and to consultants and management company employees of exceptional skill. It is the view of management that the plans are a significant
incentive for the directors, officers, consultants and employees to continue and to increase their efforts in promoting our operations
to the mutual benefit of both our company and such individuals and also allows us to avail of the services of experienced persons with
minimum cash outlay.
Outstanding Equity Awards at Fiscal Year-End
The following table and related notes provides information regarding all
outstanding equity awards for our named executive officers (“NEOs”) as of March 31, 2022:
| |
| Option Awards (1) | |
| Stock Awards (4) (5) (6) (7) | |
Name | |
| Number of Securities Underlying Unexercised Options (#) Exercisable (1) | | |
| Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | | |
| Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | |
| Option Exercise Price ($) | | |
Option Expiration Date | |
| Number of Shares or Units of Stock That Have Not Vested (#) | | |
| Market Value of Shares or Units of Stock That Have Not Vested (#) | | |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | |
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) | |
Ian B. Walters | |
| 50,333 | (2) | |
| 100,667 | (2) | |
| 100,667 | (2) | |
$ | 17.75 | | |
January 13, 2031 | |
| – | | |
| – | | |
| – | | |
| – | |
Ian B. Walters | |
| – | | |
| 125,700 | (3) | |
| 125,700 | (3) | |
$ | 10.22 | | |
January 19, 2032 | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| | | |
| | |
Allan Shaw | |
| 43,667 | (2) | |
| 87,333 | (2) | |
| 87,333 | (2) | |
$ | 17.75 | | |
January 13, 2031 | |
| – | | |
| – | | |
| – | | |
| – | |
Allan Shaw | |
| – | | |
| 33,600 | (3) | |
| 33,600 | (3) | |
$ | 10.22 | | |
January 19, 2032 | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| | | |
| | |
Robert Kramer | |
| 20,333 | (2) | |
| 40,667 | (2) | |
| 40,667 | (2) | |
$ | 17.75 | | |
January 13, 2031 | |
| – | | |
| – | | |
| – | | |
| – | |
Robert Kramer | |
| – | | |
| 25,100 | (3) | |
| 25,100 | (3) | |
$ | 10.22 | | |
January 19, 2032 | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| | | |
| | |
Steve Innaimo | |
| 58,333 | (2) | |
| 116,667 | (2) | |
| 116,667 | (2) | |
$ | 17.75 | | |
January 13, 2031 | |
| – | | |
| – | | |
| – | | |
| – | |
Steve Innaimo | |
| – | | |
| 13,800 | (3) | |
| 13,800 | (3) | |
$ | 10.22 | | |
January 19, 2032 | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| | | |
| | |
Brian Wiley | |
| – | | |
| 60,000 | (3) | |
| 60,000 | (3) | |
$ | 10.22 | | |
January 19, 2032 | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| | | |
| | |
(1) |
Amounts represent options to purchase ordinary shares.
|
(2) |
These options to purchase ordinary shares were granted on January 13, 2021, have a ten-year
term and vest ratably on each of the first three anniversaries of the grant date.
|
(3) |
These options to purchase ordinary shares were granted on January 19, 2022, have a ten-year
term and vest ratably on each of the first four anniversaries of the grant date.
|
(4) |
The above table excludes 152,000 restricted stock units to Mr. Walters granted January 13,
2021 with a grant day value of $2,698,000, which vested on grant date but are subject to certain restrictions and 86,100 restricted stock
units granted January 19, 2022 with a grant day value of $879,942, which vested on grant date but are subject to certain restrictions.
|
(5) |
The above table excludes 23,040 restricted stock units to Mr. Shaw granted January 19, 2022
with a grant day value of $235,469, which vested on grant date but are subject to certain restrictions.
|
(6) |
The above table excludes 91,000 restricted stock units to Mr. Kramer granted January 13,
2021, with a grant day value of $1,615,250, which vested on grant date but are subject to certain restrictions and 17,200 restricted stock
units granted January 19, 2022 with a grant day value of $175,784, which vested on grant date but are subject to certain restrictions.
|
(7) |
The above table excludes 9,400 restricted stock units to Mr. Innaimo granted January 19,
2022, with a grant day value of $96,068, which vested on grant date but are subject to certain restrictions.
|
Indebtedness of Directors, Executive Officers and Senior Officers
None.
Directors' and Officers' Liability Insurance
The Company has purchased, at its expense, directors' and officers' liability
insurance policy to provide insurance against possible liabilities incurred by them in their capacity as directors and officers of the
Company.
(C) BOARD PRACTICES
Audit Committee
Our audit committee consists of Mr. Steven Mintz, Mr. James Mellon and
Mr. Mark Simon, with Mr. Steven Mintz serving as Chairperson. Each member of our audit committee meets the financial literacy requirements
of Nasdaq listing standards. In addition, our board of directors has determined that Mr. Steven Mintz is an audit committee financial
expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933. Mr. Steven Mintz is a Canadian Chartered
Professional Accountant. He has over sixteen years of international experience in corporate financial analysis, mergers and acquisitions.
He has been on the board of directors of several private and public corporations, operating in various sectors, including technology,
oil & gas and biotechnology.
Mr. Mellon is an author, entrepreneur and investor. He was one of
the founders of Portage Biotech and is the co-author of five books, all written with a view toward identifying emerging thematic trends
leading to investment opportunities.
Mr. Simon has over 30 years advising experience for biotech and pharma
companies as an investment banker and research analyst.
Our audit committee will, among other things:
| · | review our consolidated financial statements and our critical accounting policies and practices; |
| · | select a qualified firm to serve as the independent registered public accounting firm to audit our consolidated financial statements; |
| · | help to ensure the independence and performance of the independent registered public accounting firm; |
| · | discuss the scope and results of the audit with the independent registered public accounting firm and review, with management and
the independent registered public accounting firm, our interim and year-end results of operations; |
| · | pre-approve all audit and all permissible non-audit services to be performed by the independent registered public accounting
firm; |
| · | oversee the performance of our internal audit function when established; |
| · | review the adequacy of our internal controls; |
| · | develop procedures for employees to submit concerns anonymously about questionable accounting or audit matters; |
| · | review our policies on risk assessment and risk management; and |
| · | review related party transactions. |
Pre-Approval Policies and Procedures
In the event that the Company plans to retain the services of the external
auditors to the Company for tax compliance, tax advice or tax planning, the Chief Financial Officer of the Company must consult with the
chair of the ACC, who has the authority to approve or disapprove on behalf of the committee, those non-audit services. All other permissible
non-audit services shall be approved or disapproved by the ACC as a whole.
The Company external auditors are prohibited from performing for the Company
non-audit services of the following nature: (a) bookkeeping or other services related to the accounting records or financial statements;
(b) financial information systems design and implementation; (c) appraisal or valuation services, fairness opinions or contribution in-kind
reports; (d) actuarial services; (e) internal audit outsource services; (f) management functions; (g) human resources; (h) broker or dealer,
investment adviser or investment banking services; (i) legal services; (j) expert services unrelated to the audit; and (k) any other service
that the Canadian and the United States Public Company Accounting Oversight Board determines is impermissible.
The ACC Charter relating to compensation matters sets forth the evaluation
and review requirements for incentive and equity-based compensation plans for the executives based on their periodic performance evaluation.
Compensation Committee
Our compensation committee consists of Ms. Linda Kozick, Mr. Gregory Bailey
and Mr. Steven Mintz, with Ms. Linda Kozick serving as Chairperson. Each member of the compensation committee is also a non-employee director,
as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. The purpose of our compensation committee is to discharge the
responsibilities of our board of directors relating to compensation of our executive officers. Our compensation committee will, among
other things:
| · | review, approve and determine, or make recommendations to our board of directors regarding, the compensation of our executive officers; |
| · | administer our stock and equity incentive plans; |
| · | review and approve, or make recommendations to our board of directors regarding, incentive compensation and equity plans; and |
| · | establish and review general policies relating to compensation and benefits of our employees. |
Nominating Committee
Our nominating and corporate governance committee consists of Mr. Mark
Simon, Ms. Linda Kozick and Mr. James Mellon with Mr. Mark Simon as Chairperson. Our nominating and corporate governance committee will,
among other things:
| · | identify, evaluate and select, or make recommendations to our board of directors regarding, nominees for election to our board of
directors and its committees; |
| · | evaluate the performance of our board of directors and of individual directors; |
| · | consider and make recommendations to our board of directors regarding the composition of our board of directors and its committees; |
| · | review developments in corporate governance practices; |
| · | oversee environmental, social and governance (ESG) matters; |
| · | evaluate the adequacy of our corporate governance practices and reporting; and |
| · | develop and make recommendations to our board of directors regarding corporate governance guidelines and matters. |
Role of Board of Directors in Risk Oversight Process
Our board of directors has responsibility for the oversight of our risk
management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their
potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from
board committees and members of senior management to enable our board of directors to understand our risk identification, risk management
and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, cybersecurity,
strategic and reputational risk.
Code of Business Conduct
The Company has established a Code of Conduct applicable to our directors,
officers and employees. The Code of Conduct is accessible on our website at www.portagebiotech.com. If we make any substantive
amendments to the Code of Conduct or grant any waiver, including any implicit waiver, from a provision of the Code of Conduct to our officers,
we will disclose the nature of such amendment or waiver on that website or in a report on Form 8-K.
Compensation Committee Interlocks and Insider Participation
All compensation and related matters are reviewed by our Compensation
Committee. None of the members of our compensation committee is or has at any time during the past year been an officer or employee of
ours. None of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our board of directors or on our compensation committee.
EXECUTIVE COMPENSATION
For the year ended March 31, 2022, our NEOs, which are each person who
served as our principal executive officer during 2022 and the next four most highly compensated executive officers, are:
| · | Ian B. Walters, President and Chief Executive Officer and Director |
| · | Allan Shaw, Chief Financial Officer |
| · | Steven Innaimo, Vice President of Project Management & Operations |
| · | Robert Kramer, Chief Scientific Officer |
| · | Brian Wiley, Chief Business Officer |
Executive Compensation Overview
Through November 30, 2021, the compensation of our NEOs has primarily
consisted of consulting fees (and in some cases bonuses), and share-based compensation. During Fiscal 2022, the Company entered into Employment
contracts with five employees that provide for a combination of base salary, bonuses and long-term incentive compensation in the
form of restricted stock units and options to purchase common stock. Our NEOs, like all full-time employees, are eligible to participate
in our health and dental benefit plans and 401(k) plan matching program. At a minimum, we expect to review executive compensation annually
with input from a compensation consultant. As part of this review process, we expect the board of directors and the compensation committee
to apply our values and philosophy, while considering the compensation levels needed to ensure our executive compensation program remains
competitive. We will also review whether we are meeting our retention objectives and the potential cost of replacing a key employee.
Narrative Disclosure to the Summary Compensation Table
Annual Base Salary
Our NEOs each receive a base salary to compensate them for services rendered
to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting
the executive’s skill set, experience, role and responsibilities. Base salaries are reviewed annually, typically in connection with
our annual performance review process, approved by our board of directors or the compensation committee, and may be adjusted from time
to time to realign salaries with market levels after taking into account individual responsibilities, performance, and experience.
Employment Agreements
PDS entered into a Services Agreement with Mr. Walters effective on December
15, 2021. The Services Agreement provides that Mr. Walters will receive a base salary of $618,000, plus cost-of-living increases.
The Services Agreement provides for annual increases based upon the review of the base salary by the board of directors prior to the anniversary
of the Services Agreement provided that the annual increase cannot be less than the cost-of-living increase. The Services Agreement also
provides that Mr. Walters is eligible to receive an annual performance-based bonus targeted at 59% of the applicable year’s
base salary, which bonus is earned based on the achievement of performance targets, as determined annually by the Board of Directors and
communicated to Mr. Walters in the first quarter of the year. Any annual bonus, to the extent earned, is to be paid no later than March
15 of the following year. The Services Agreement is for an initial term of three years, after which it will automatically renew annually
unless terminated in accordance with the Services Agreement.
Under the Services Agreement, Mr. Walters may terminate his
employment at any time for Good Reason, as defined in the Services Agreement. We may terminate Mr. Walter’s employment
immediately upon his death, upon a period of disability or without “Just Cause”, as defined. In the event that
Mr. Walter’s employment is terminated due to his death or Disability, for “Good Reason” or without
“Just Cause”, Mr. Walters will be entitled to Accrued Benefits (accrued unpaid portion of base salary, accrued unused
vacation time and any unpaid expenses). Additionally, he may be entitled to Severance Benefits, which include his then current base
salary and the average of his annual bonus for the prior two completed performance years, paid over 12 monthly installments.
Additionally, Mr. Walters will be entitled to life insurance benefits and medical and dental benefits for a period of 12 months at
the same rate Mr. Walters and the Company shared such costs during his period of employment.
Additionally, all stock options (and any other unvested equity incentive
award) held by the CEO relating to shares of the Company will be deemed fully vested and exercisable on the Termination Date, as defined,
and the exercise period for such stock options will be increased by a period of two years from the Termination Date.
If the CEO’s employment by the Company is terminated by the
Company or any successor entity without “Just Cause” (not including termination by virtue of the CEO’s death or
Disability) or by the CEO for Good Reason within twelve (12) months following the effective date of a “Change in
Control” (as defined), then in addition to paying or providing Executive with the Accrued Obligations, the Company will provide
the following “Change in Control Severance Benefits”:
| (1) | The Company will pay the Base Salary continuation benefit for eighteen (18) months; |
| (2) | The Company will pay the life insurance benefit for eighteen (18) months; |
| (3) | The Company will pay an additional amount equivalent to the CEO’s target annual bonus calculated using the Bonus
Percentage for the performance year in which Executive’s termination occurs. This bonus will be paid in twelve equal
installments commencing on the first payroll date that is more than sixty (60) days following the date of termination of
Executive’s employment, with the remaining installments occurring on the first day of the month for the eleven (11) months
thereafter; |
| (4) | The Company will provide the CEO with continued medical and dental benefits, as described above, for eighteen (18) months; and |
| (5) | All stock options (and any other unvested equity incentive award) held by the CEO relating to shares of the Company or its parent
will be deemed fully vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be
increased by a period of two years from the Termination Date. |
PDS entered into Services Agreements with each of Messrs. Shaw, Kramer and
Innaimo and Wiley (individually, “Executive” and collectively, “Executives”) dated as of December 1, 2021 (except
Mr. Iannaimo, which was dated December 15, 2021). Each of the Services Agreements provides for an initial term of two years and are automatically
renewed for one-year periods (except Mr. Wiley, which provides for an initial term of one year and is automatically renewed for one-year
periods). The Services Agreements initially provide for base salary and annual bonus, as described in the table below. They also provide
for long-term incentives in the form of equity awards from time to time under the Portage Biotech Inc. Amended and Restated 2021 Equity
Incentive Plan.
| |
BASE SALARY | |
TARGET BONUS |
Allan Shaw | |
$ | 348,000 | | |
| 40 | % |
Robert Kramer | |
$ | 216,000 | | |
| 40 | % |
Steven Innaimo | |
$ | 310,000 | | |
| 30 | % |
Brian Wiley | |
$ | 175,000 | | |
| 30 | % |
The Services Agreements can be terminated by the Company without “Just
Cause”, by death or Disability, or by the Executive for “Good Reason”. In such instances, the Services Agreements provide
for the payment of Accrued Obligations (accrued unpaid portion of base salary, accrued unused vacation time and any unpaid expenses).
Additionally, Executives (except Mr. Wiley) are entitled to 50% of base salary plus 50% of average annual bonus earned over the prior
two performance years, as well as prevailing life insurance benefits for a period of six months and medical and dental benefits for a
period of six months at the prevailing rate the Company and the Executive were sharing such expenses.
Additionally, all stock options (and any other unvested equity incentive
award) held by the Executives relating to shares of the Company will be deemed fully vested and exercisable on the Termination Date, as
defined, and the exercise period for such stock options will be increased by a period of two years from the Termination Date.
If Executive’s employment by the Company is terminated by the Company
or any successor entity without “Just Cause” (not including termination by virtue of CEO’s death or Disability) or by
Executive for Good Reason within twelve (12) months following the effective date of a “Change in Control” (as defined), then
in addition to paying or providing Executive with the Accrued Obligations, the Company will provide the following “Change in Control
Severance Benefits” (except in one case in which Executive is entitled to Item (5) and 50% of Items (1) and (3) below):
| (1) | The Company will pay the Base Salary continuation benefit for twelve (12) months; |
| (2) | The Company will pay the life insurance benefit for twelve (12) months; |
| (3) | The Company will pay an additional amount equivalent to Executive’s target annual bonus calculated using the Bonus Percentage
for the performance year in which Executive’s termination occurs. This bonus will be payable in twelve equal installments commencing
on the first payroll date that is more than sixty (60) days following the date of termination of Executive’s employment, with the
remaining installments occurring on the first day of the month for the eleven (11) months thereafter; |
| (4) | The Company will provide the Executive with continued medical and dental benefits, as described above, for twelve (12) months; and |
| (5) | All stock options (and any other unvested equity incentive award) held by the Executive relating to shares of the Company or its parent
will be deemed fully vested and exercisable on the Termination Date and the exercise period for such stock options will be increased by
a period of two years from the Termination Date. |
The Services Agreements also include customary confidentiality, as well
as provisions relating to assignment of inventions. The Services Agreements also includes non-competition and non-solicitation of
employees and customers provision that run during the Executive’s employment with the Company and for a period of one year after
termination of employment.
Director Compensation
Non-Employee Director Compensation Policy
Effective January 1, 2022, our board of directors adopted a non-employee director
compensation policy that is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors.
Under the policy, each director who is not an employee will be paid cash compensation quarterly in arrears based upon the following table:
| |
ANNUAL RETAINER |
Board of Directors: | |
| | |
Chair | |
$ | 30,000 | |
All non-employee members | |
$ | 40,000 | |
Audit Committee: | |
| | |
Chair | |
$ | 15,000 | |
Members | |
$ | 7,500 | |
Compensation Committee: | |
| | |
Chair | |
$ | 12,000 | |
Members | |
$ | 6,000 | |
Nominating Committee: | |
| | |
Chair | |
$ | 8,000 | |
Members | |
$ | 4,000 | |
(D) EMPLOYEES
The Company currently has six employees. It also uses the services of
consultants from time to time.
(E) SHARE OWNERSHIP
The Board decided to discontinue the 2013 Option Plan, under which stock
options to acquire common shares of the Company were granted to directors, employees and consultants of the Company. At March 31, 2022,
no stock options were outstanding under the 2013 Option Plan.
On January 13, 2021, the Company approved the 2021 Equity Incentive Plan,
which amended and restated the Portage Biotech Inc. 2020 Stock Option Plan. On January 13, 2021, the Company granted in total 868,000
stock options to purchase ordinary shares to four members of our Board of Directors and four executives, including our CEO, who also is
a member of our Board of Directors. The stock options have an exercise price of US$17.75 per share and vest over various terms. The Company
also granted 243,000 restricted stock units to two executives, one of whom is our CEO, which vested immediately and are subject to certain
restrictions.
On January 19, 2022, the Board of Directors unanimously approved the Amended
and Restated 2021 Equity Incentive Plan. The Amended and Restated 2021 Equity Incentive Plan provides for:
| (1) | An increase of aggregate number of shares available for awards to 2,001,812, which is equal to 15% of the issued and outstanding common
shares in the capital of the Company as of January 19, 2022 subject to discretionary annual increases (on a cumulative basis) as may be
approved by the Board in future years by a number of shares not to exceed an additional five percent (5%) of the aggregate number of shares
then outstanding; |
| (2) | The authorization of incentive stock options (should shareholder approval be sought and obtained) under the Amended and Restated 2021
Equity Incentive Plan; and |
| (3) | The provision of dividend equivalent rights to be issued when authorized. |
The following table sets forth the share ownership of our executive officers
and directors as at March 31, 2022:
| |
Ordinary Shares Beneficially Owned |
Name | |
Number | |
Percentage * |
Gregory Bailey | |
| 3,458,862 | (1) | |
| 25.35 | % |
Steven Mintz | |
| 109,905 | (1)(2) | |
| 0.65 | % |
James Mellon | |
| 3,031,721 | (7) | |
| 17.89 | % |
Linda Kozick | |
| – | (7) | |
| – | % |
Mark Simon | |
| – | (7) | |
| – | % |
Ian Walters | |
| 265,424 | (3) | |
| 1.56 | % |
Allan Shaw | |
| 43,666 | (4) | |
| 0.26 | % |
Robert Kramer | |
| 161,067 | (5) | |
| 0.95 | % |
Steven Innaimo | |
| 58,333 | (6) | |
| 0.34 | % |
Brian Wiley | |
| – | (8) | |
| – | % |
* Based on issued and outstanding ordinary shares at August 1, 2022 plus vested stock
options and stock options that vest in the next 60 days.
| (1) | Includes 56,667 vested stock options to purchase ordinary shares and excludes 28,333 unvested stock options granted January 13, 2021.
Excludes 6,900 unvested stock options granted January 19, 2022. |
| (2) | Excludes 60,000 shares for which Mr. Mintz has shared investment
control and disclaims beneficial ownership. |
| (3) | Includes 50,333 vested stock options to purchase ordinary shares and excludes 152,000 vested restricted stock units subject to certain
restrictions and 100,667 unvested stock options granted January 13, 2021. Excludes 86,100 vested restricted stock units subject to certain
restrictions and 125,700 unvested stock options granted January 19, 2022. Additionally, excludes 87,519 shares held in trusts for the
benefit of his children for which Mr. Walters disclaims beneficial ownership. |
| (4) | Includes 43,666 vested stock options to purchase ordinary shares and excludes 87,334 unvested stock options granted January 13, 2021.
Excludes 23,040 vested restricted stock units and 33,600 unvested stock options granted January 19, 2022. |
| (5) | Includes 20,333 vested stock options and excludes 91,000 vested restricted stock units subject to certain restrictions and 40,667
unvested stock options granted January 13, 2021. Excludes 17,200 vested restricted stock units granted January 13, 2021 and 25,100 unvested
stock options granted January 19, 2022. |
| (6) | Includes 58,333 vested stock options to purchase ordinary shares and excludes 116,667 unvested stock options granted January 13, 2021.
Excludes 9,400 vested restricted stock units subject to certain restrictions and 13,800 unvested stock options granted January 19, 2022. |
| (7) | Excludes 13,800 unvested stock options granted February 15, 2022. |
| (8) | Excludes 60,000 unvested stock options granted January 19, 2022. |
All shares held by the above persons carry same rights as the other holders
of the ordinary shares of the Company.
ITEM 7 – MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
(A) MAJOR SHAREHOLDERS
The Company's ordinary shares are recorded on the books of its transfer
agent in registered form. A large number of the ordinary shares are, however, registered in the name of intermediaries such as brokerage
houses and clearing firms on behalf of their respective clients. The Company does not have knowledge of all the beneficial owners of its
ordinary shares. Intermediaries like CDS & Co, Toronto, Canada and Cede & Co., New York, USA held approximately 17% of the issued
and outstanding ordinary shares of the company on behalf of beneficial shareholders whose individual holdings details were not available.
At March 31, 2022, the Company had 13,348,943 ordinary shares issued and
outstanding and at August 1, 2022, the Company had 16,944,783 ordinary shares issued and outstanding.
The following table sets forth persons known by us to be beneficial owners
of more than 5% of our ordinary shares as of August 1, 2022. Beneficial ownership of shares is determined under rules of the SEC and generally
includes any shares over which a person exercises sole or shared voting or investment power. Shares subject to options and warrants that
are currently exercisable or exercisable within 60 days of the date indicated above are deemed to be beneficially owned by the person
holding the option and warrant and included in the holding. These beneficially held ordinary shares, however, are not deemed outstanding
for the purpose of computing the percentage ownership of any other person.
Name of Beneficial Owner | |
No. of Shares | |
Percentage of Shares* |
| |
| |
|
Gregory Bailey | |
| 3,458,862 | | |
| 20.35 | % |
James Mellon | |
| 3,031,721 | | |
| 17.89 | % |
* Based on shares issued and outstanding as of August 1, 2022.
The Company is a publicly owned BVI business company. The Company is
not owned or controlled directly or indirectly by another corporation or any foreign government. There are no arrangements, known to
the Company, the operation of which may at a subsequent date result in a change of control of the Company.
Insider Reports under Canadian Securities Legislation
Since the Company is a reporting issuer under the Securities Acts of each
of the province of Ontario and British Columbia in Canada, certain "insiders" of the Company (including its directors, certain
executive officers, and persons who directly or indirectly beneficially own, control or direct more than 10% of its ordinary shares) are
generally required to file insider reports of changes in their ownership of the Company's ordinary shares five days following the trade
under National Instrument 55-104 - Insider Reporting Requirements and Exemptions, as adopted by the Canadian Securities Administrators.
Insider reports must be filed electronically five days following the date of the trade at www.sedi.ca. The public is able to access these
reports at www.sedi.ca.
The United States also has rules governing public reporting of the ownership
of securities held in public companies. Section 13 of the Exchange Act imposes reporting requirements on persons who acquire beneficial
ownership (as such term is defined in the Rule 13d-3 under the Exchange Act) of more than five per cent of a class of an equity security
registered under Section 12 of the Exchange Act. In general, these persons must file, within 10 days after such acquisition, a report
of beneficial ownership with the United States Securities and Exchange Commission containing the information prescribed by the regulations
under Section 13 of the Exchange Act. This information is also required to be sent to the issuer of the securities and to each exchange
where the securities are traded.
As a foreign private issuer, the reporting and short-swing profit re-capture
rules of Section 16 of the Exchange Act are not applicable to our directors, offices and holders of 10% or more of our issued and outstanding
ordinary shares, calculated on a beneficial basis under Rule 13d-3.
(B) RELATED PARTY TRANSACTIONS
All related party transactions that occurred with key management personnel
are discussed below. Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the Company. The board of directors has determined that the Chairman, Chief Executive Officer and Chief Financial Officer
are key management personnel.
SalvaRx Acquisition
On January 8, 2019, the Company acquired 100% of SalvaRx Limited from
SalvaRx Group plc. in exchange for 8,050,701 ordinary shares of the Company for an aggregate consideration of US$92.6 million. Four of
the six directors of the Company are also directors of SalvaRx Group plc. The Company's CEO is also the CEO of SalvaRx Limited and
employees of the Company comprise the management team of SalvaRx Limited.
Payable
In January 2020, the Chairman of the Company advanced the Company $1.0
million which was repaid in July 2020. There was no interest or fees associated with this advance.
Investments
The Company has entered into related party transactions and certain services
agreement with the companies that it has invested in. Key management of the Company has also entered into related party transactions
with these invested companies. The related party transactions are as follows:
The following subsidiaries and associates are considered related parties:
| (a) | Stimunity. The CEO of Portage is one of three members of the Board of Directors of Stimunity. In July 2022, the Company entered
into a commitment with Stimunity to provide €600,000 under a Convertible Note with a maturity date of September 1, 2023 (“Maturity
Date”). The Convertible Note provides for interest at 7% per annum. The Convertible Note is automatically converted upon Stimunity
commencing a Series A subscription round for €20 million. If such Subscription round is completed prior to the Maturity Date, the
Company will be entitled to convert the Convertible Note at the subscription share price less 15%. Additionally, if subscribers create
a new category of shares with additional rights of less than €5 million (the “Minimum Raise”), the Company will have
the right to convert the Convertible Note and historical shares owned into the new category of shares. In the event that Stimunity does
not close a subscription prior to the Maturity Date or raises less than the Minimum Raise, the Company will have the right to convert
at €363.00 per share or the raise price less 15%, whichever is lower. |
| (b) | iOx. Two of the three directorships on the Board of Directors of iOx are controlled by Portage. Additionally, Portage has an
observer on the Board of iOx. The CEO of Portage is also the CEO of iOx, and the management team of the Company comprise the management
team of iOx. |
| (c) | Saugatuck. One of the three directorships on the Board of Directors of Saugatuck is controlled by Portage. Additionally, the
CEO of the Company is also the CEO of Saugatuck and the management team of the Company comprise the management team of Saugatuck. |
| (d) | Intensity. The CEO of Portage is an officer of Intensity and both he and the VP of Projects and Operations of the Company provide
services to Intensity. The Company commenced invoicing Intensity for such services in February 2022. Additionally, Intensity provides
services (primarily rent) to Portage, which is billed monthly. Portage paid Intensity $83,437, $77,088 and $62,132 for the years ended
March 31, 2022, 2021 and 2020, respectively. |
| (e) | PGL. PPL held 65% equity in PGL, committed to provide financing and also handles financial and administrative matters of PGL.
The Company disposed of 100% of its interests in PPL and PGL on March 3, 2021. |
| (f) | Portage Development Services. Portage Development Services is a 100% owned subsidiary of the Company, incorporated in Delaware,
which provides human resources, and other services to each operating subsidiary via a shared services agreement. |
The following are significant related party balances and transactions
other than those disclosed elsewhere in the consolidated financial statements:
Interest expense includes $78,427 and $226,018 interest incurred in the
years ended March 31, 2021 and 2020, respectively, on notes issued to members of the Portage Board of Directors. The SalvaRx Notes were
settled as of August 6, 2020 and, accordingly, no further interest expense was incurred. In connection with the settlement of the SalvaRx
Notes, $692,045 of accrued interest and $805,000 of principal was paid to directors. The directors also exchanged an aggregate $2,415,000
of notes payable for SalvaRx warrants at a price of $6.64, which were exchanged for Portage warrants and converted to Portage stock on
October 13, 2020.
In January 2020, a board member of the Company advanced the Company $1.0
million, which was repaid in July 2020. There was no interest or fees associated with this advance.
Transactions between the parent company and its subsidiaries, which are
related parties, have been eliminated in consolidation and are not disclosed in this note.
On September 8, 2021, the Company,
through SalvaRx, completed a settlement of loans (including interest) to and receivables from iOx for services rendered in exchange for
23,772 ordinary shares of iOx at a price of £162. Simultaneously, the Company entered into an agreement with Oxford Sciences Innovation,
Plc (“OSI”), the holder of $0.15 million notes plus accrued interest under which OSI exchanged the notes plus accrued
interest for 820 shares of iOx. The Company followed the guidance provided by an IFRS Discussion Group Public Meeting dated
November 29, 2016, following the general tenets of IAS 39, “Financial Instruments: Recognition and Measurement,” and IFRIC
19, “Extinguishing Financial Liabilities with Equity Instruments” and recorded the exchange at historical cost. Additionally,
no profit or loss was recorded in connection with the exchange. As a result of these transactions, the Company, through SalvaRx, increased
its ownership up from 60.49% to 78.32%.
Employment Agreements
PDS entered into a Services Agreement with Mr. Walters effective on December
15, 2021. The Services Agreement provides that Mr. Walters will receive a base salary of $618,000, plus cost-of-living increases.
The Services Agreement provides for annual increases based upon the review of the base salary by the board of directors prior to the anniversary
of the Services Agreement provided that the annual increase cannot be less than the cost-of-living increase. The Services Agreement also
provides that Mr. Walters is eligible to receive an annual performance-based bonus targeted at 59% of the applicable year’s
base salary, which bonus is earned based on the achievement of performance targets, as determined annually by the Board of Directors and
communicated to Mr. Walters in the first quarter of the year. Any annual bonus, to the extent earned, is to be paid no later than March
15 of the following year. The Services Agreement is for an initial term of three years, after which it will automatically renew annually
unless terminated in accordance with the Service Agreement.
Under the Service Agreement, Mr. Walters may terminate his employment
at any time for Good Reason, as defined in the Service Agreement. We may terminate Mr. Walter’s employment immediately upon
his death, upon a period of disability or without “just cause”, as defined. In the event that Mr. Walter’s employment
is terminated due to his death or disability, for “Good Reason” or without “just cause”, Mr. Walters will be entitled
to Accrued Benefits (accrued unpaid portion of base salary, accrued unused vacation time and any unpaid expenses). Additionally, he may
be entitled to Severance Benefits, which include his then current base salary and the average of his annual bonus for the prior two completed
performance years, paid over 12 monthly installments. Additionally, Mr. Walters will be entitled to life insurance benefits and medical
and dental benefits for a period of 12 months at the same rate Mr. Walters and the Company shared such costs during his period of employment.
Additionally, all stock options (and any other unvested equity incentive
award) held by the CEO relating to shares of the Company will be deemed fully vested and exercisable on the Termination Date, as defined,
and the exercise period for such stock options will be increased by a period of two years from the Termination Date.
If CEO’s employment by the Company is terminated by the Company
or any successor entity without “Just Cause” (not including termination by virtue of CEO’s death or Disability) or by
the CEO for Good Reason within twelve (12) months following the effective date of a “Change in Control” (as defined), then
in addition to paying or providing Executive with the Accrued Obligations the Company will provide the following “Change in Control
Severance Benefits”:
| (1) | The Company will pay the Base Salary continuation benefit for eighteen (18) months; |
| (2) | The Company will pay the life insurance benefit for eighteen (18) months; |
| (3) | The Company will pay an additional amount equivalent to CEO’s target annual bonus calculated using the Bonus Percentage for
the performance year in which Executive’s termination occurs. This bonus will be paid in twelve equal installments commencing on
the first payroll date that is more than sixty (60) days following the date of termination of Executive’s employment, with the remaining
installments occurring on the first day of the month for the eleven (11) months thereafter; |
| (4) | The Company will provide the CEO with continued medical and dental benefits, as described above, for eighteen (18) months; and |
| (5) | All stock options (and any other unvested equity incentive award) held by the CEO relating to shares of the Company or its parent
will be deemed fully vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be
increased by a period of two years from the Termination Date. |
We entered into Service Agreements with each of Messrs. Shaw, Kramer and
Innaimo and Wiley (individually, “Executive” and collectively, “Executives”) dated as of December 1, 2021 (except
Mr. Innaimo, which was dated December 15, 2021). Each of the Service Agreements provides for an initial term of two years and are automatically
renewed for one-year periods (except Mr. Wiley, which provides for an initial term of one year and is automatically renewed for one-year
periods). The Service Agreements initially provide for base salary and annual bonus, as described in the table below. They also provide
for long-term incentives in the form of equity awards from time to time under the Portage Biotech Inc. Amended and Restated 2021 Equity
Incentive Plan.
| |
BASE SALARY | |
TARGET BONUS |
Allan Shaw | |
$ | 348,000 | | |
| 40 | % |
Robert Kramer | |
$ | 216,000 | | |
| 40 | % |
Steven Innaimo | |
$ | 310,000 | | |
| 30 | % |
Brian Wiley | |
$ | 175,000 | | |
| 30 | % |
The Service Agreements can be terminated by the Company “without
cause”, by death or disability, or by the Executive for “good reason”. The Service Agreements provide for the payment
of Accrued Obligations (accrued unpaid base salary plus earned but unused vacation time). Additionally, Executives (except Mr. Wiley)
are entitled to 50% of base salary plus 50% of average annual bonus earned over the prior two performance years, as well as prevailing
life insurance benefits for a period of six months and medical and dental benefits for a period of six months at the prevailing rate the
Company and the Executive were sharing such expenses.
Additionally, all stock options (and any other unvested equity incentive
award) held by the Executives relating to shares of the Company will be deemed fully vested and exercisable on the Termination Date, as
defined, and the exercise period for such stock options will be increased by a period of two years from the Termination Date.
If Executive’s employment by the Company is terminated by the Company
or any successor entity without “Just Cause” (not including termination by virtue of CEO’s death or Disability) or by
Executive for Good Reason within twelve (12) months following the effective date of a “Change in Control” (as defined), then
in addition to paying or providing Executive with the Accrued Obligation, the Company will provide the following “Change in Control
Severance Benefits” ( except in one case in which Executive is entitled to 50% of Items 1-4 below):
| (1) | The Company will pay the Base Salary continuation benefit for twelve (12) months; |
| (2) | The Company will pay the life insurance benefit for twelve (12) months; |
| (3) | The Company will pay an additional amount equivalent to Executive’s target annual bonus calculated using the Bonus Percentage
for the performance year in which Executive’s termination occurs. This bonus will be payable in twelve equal installments commencing
on the first payroll date that is more than sixty (60) days following the date of termination of Executive’s employment, with the
remaining installments occurring on the first day of the month for the eleven (11) months thereafter; |
| (4) | The Company will provide the Executive with continued medical and dental benefits, as described above, for twelve (12) months; and |
| (5) | All stock options (and any other unvested equity incentive award) held by the Executive relating to shares of the Company or its parent
will be deemed fully vested and exercisable on the Termination Date and the exercise period for such stock options will be increased by
a period of two years from the Termination Date. |
The Service Agreements also include customary confidentiality, as well
as provisions relating to assignment of inventions. The Employment Agreements also includes non-competition and non-solicitation of
employees and customers provision that run during the executive’s employment with the Company and for a period of one year after
termination of employment.
Bonuses & Board Compensation Arrangements
In December 2021, the Compensation
Committee approved performance bonuses payable to senior management totaling $0.7 million. The bonuses were paid in December 2021.
In addition, the Compensation Committee of the Board established board
of director compensation. Effective January 1, 2022, each non-executive board member will be entitled to receive cash board fees of $40,000
per annum, payable quarterly in arrears. Additionally, each non-executive board member will be entitled to an annual grant of 6,900 options
to purchase common shares, which would vest the first annual anniversary of the date of grant.
The chairman of the Board will be entitled to an annual cash fee of $30,000,
payable quarterly in arrears. Additionally, the chairperson of each of the Audit Committee, Compensation Committee and Nominating Committee
will be entitled to annual fees of $15,000, $12,000 and $8,000, respectively, payable quarterly in arrears. Members of those committees
will be entitled to annual fees of $7,500, $6,000 and $4,000, respectively, payable quarterly in arrears.
(C) INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8 – FINANCIAL INFORMATION
(A) CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
Financial Statements
Information regarding our financial statements is contained under Item18
of this Annual Report.
Dividend Policy
Since its incorporation, the Company has not declared or paid, and has
no present intention to declare or to pay in the foreseeable future, any cash dividends with respect to its ordinary shares. Earnings
will be retained to finance further growth and development of the business of the Company. However, if the Board of Directors declares
dividends; all the ordinary shares will participate equally in the dividends, and, in the event of liquidation, in the net assets, of
the Company.
In January 2018, the Company declared and distributed its then holdings
of common shares of Biohaven Pharmaceuticals Holding Company Ltd. as stock dividend. Whether or not the Board of Directors will determine
to do any other distributions of property of the Company in the future is in their sole discretion and will depend on their determination
at the future time.
(B) SIGNIFICANT CHANGES
There were no significant events or changes to report that happened subsequent
to March 31, 2022, to the date of this report.
ITEM 9 – THE OFFER AND LISTING
(A) OFFER AND LISTING DETAILS
The following tables set forth the reported high and low sale prices for
our ordinary shares as quoted on the Nasdaq Capital Market (“NASDAQ”) since February 25, 2021, the over-the-counter (“OTC”)
market where the ordinary shares were trading until February 25, 2021, and on the Canadian Securities Exchange (“CSE”), where
the Company's ordinary shares were listed and trading from October 28, 2013 until April 23, 2021, when the Company voluntarily delisted
its ordinary shares from the CSE. The Company’s shares trade on NASDAQ on the Nasdaq Capital Market under the symbol “PRTG”.
The following table outlines the annual high and low market prices for
an ordinary share for the five most recent fiscal years. Except as noted, reflects share price prior to the 100 to 1 reverse stock split
effective June 5, 2020:
| |
High | |
Low |
| |
NASDAQ | |
CSE | |
NASDAQ | |
CSE |
Year ended March 31, | |
US$ | |
US$ | |
US$ | |
US$ |
2022* | |
| 42.81 | | |
| N/A | | |
| 6.57 | | |
| N/A | |
2021* | |
| 39.50 | | |
| 38.99 | | |
| 8.88 | | |
| 0.09 | |
2020 | |
| 0.15 | | |
| 0.14 | | |
| 0.07 | | |
| 0.08 | |
2019 | |
| 0.14 | | |
| 0.15 | | |
| 0.07 | | |
| 0.07 | |
2018 | |
| 0.66 | | |
| 0.66 | | |
| 0.06 | | |
| 0.06 | |
2017 | |
| 0.25 | | |
| 0.22 | | |
| 0.10 | | |
| 0.12 | |
* Reflects share price subsequent to the 100 to 1 reverse stock split
effective June 5, 2020.
The following table outlines the high and low market prices for an ordinary
share for each fiscal financial quarter for the two most recent fiscal periods and subsequent periods. Except as noted, reflects share
price prior to the 100 to 1 reverse stock split effective June 5, 2020:
| |
High | |
Low |
| |
NASDAQ | |
CSE (a) | |
NASDAQ | |
CSE (a) |
Quarter ended: | |
US$ | |
US$ | |
US$ | |
US$ |
30-Jun-22* | |
| 11.95 | | |
| N/A | | |
| 5.16 | | |
| N/A | |
31-Mar-22* | |
| 12.00 | | |
| N/A | | |
| 6.57 | | |
| N/A | |
31-Dec-21* | |
| 23.74 | | |
| N/A | | |
| 10.73 | | |
| N/A | |
30-Sept-21* | |
| 22.40 | | |
| N/A | | |
| 13.65 | | |
| N/A | |
30-Jun-21* | |
| 42.81 | | |
| N/A | | |
| 20.96 | | |
| N/A | |
31-Mar-21* | |
| 39.50 | | |
| 38.99 | | |
| 17.55 | | |
| 17.54 | |
31-Dec-20* | |
| 19.59 | | |
| 19.50 | | |
| 8.88 | | |
| 8.85 | |
30-Sept-20* | |
| 10.75 | | |
| 10.80 | | |
| 9.06 | | |
| 9.29 | |
30-Jun-20 | |
| 0.14 | | |
| 0.14 | | |
| 0.09 | | |
| 0.10 | |
* Reflects share price subsequent to the 100 to 1 reverse stock split
effective June 5, 2020.
| (a) | The Company voluntarily delisted its common shares from the CSE at the market close on April 23, 2021. |
The following table outlines the high and low market prices for each of
the most recent six months:
| |
High | |
Low |
| |
NASDAQ | |
NASDAQ |
Month | |
US$ | |
US$ |
July 2022 (through July 29) | |
| 10.12 | | |
| 7.09 | |
June 2022 | |
| 11.95 | | |
| 6.70 | |
May 2022 | |
| 10.00 | | |
| 5.16 | |
April 2022 | |
| 7.06 | | |
| 5.28 | |
March 2022 | |
| 8.44 | | |
| 6.57 | |
February 2022 | |
| 8.84 | | |
| 7.25 | |
(B) PLAN OF DISTRIBUION
Not applicable.
(C) MARKETS
The Company's ordinary shares currently trade in one place. Before April
23, 2021, the Company’s ordinary shares were traded in two places.
| 1. | Since February 25, 2021, the ordinary shares of the Company began trading on NASDAQ under the trading symbol “PRTG”. Before
then, the ordinary shares had been traded in the OTC market since 2000 under the trading symbol "PTGEF”. |
| 2. | Effective October 28, 2013, the Company's ordinary shares were also listed for trading in United States currency on the Canadian Securities
Exchange (formerly, Canadian National Stock Exchange) under the symbol "PBT.U". The Company voluntarily delisted its common
shares from the CSE at the market close on April 23, 2021, since the Company’s shares were trading on NASDAQ from February 2021. |
(D) SELLING SHAREHOLDERS
Not applicable.
(E) DILUTION
Not applicable.
(F) EXPENSES OF THE ISSUE
Not applicable.
ITEM 10 – ADDITIONAL INFORMATION
(A) SHARE CAPITAL
This Form 20-F is being filed as an Annual Report under the Exchange Act
and, as such, there is no requirement to provide any information under this section.
(B) MEMORANDUM AND ARTICLES OF ASSOCIATION
General
Portage Biotech Inc., by action of its board of directors, amended its
Memorandum of Association and Articles of Association (the “M&A”) on June 19, 2022 and filed an updated version thereof
with the Registrar of Companies in the British Virgin Islands on June 21, 2022.
Pursuant to our Memorandum and Articles of Association, we are authorized
to issue an unlimited number of ordinary shares of no-par value.
The following are summaries of material terms and provisions of our Memorandum
and Articles of Association and the BVI Act, insofar as they relate to the material terms applicable to our ordinary shares. Unless otherwise
stated, the following summaries are of the terms of our shares as of the date of this annual report. This summary is not intended to be
complete, and you should read the form of our Memorandum and Articles of Association, which has been filed as an exhibit to this report.
Meetings of shareholders
If our shareholders want us to hold a meeting of shareholders of the company,
they may requisition the directors to hold one upon the written request of shareholders entitled to exercise at least 10% of the voting
rights in respect of the matter for which the meeting is requested. Under British Virgin Islands law, this 10% threshold may only be increased
to a maximum of 30% and any such increase would require an amendment to the Memorandum and Articles of Association.
Subject to our Memorandum and Articles of Association, a meeting of shareholders
of the company will be called by not less than ten days' written notice and no more than 60 days’ notice. Notice of every meeting
of shareholders may be delivered electronically and will be given to all of our shareholders. However, the inadvertent failure of the
convener or conveners of a meeting of shareholders to give notice of the meeting to a shareholder, or the fact that a shareholder has
not received the notice, does not invalidate the meeting.
A meeting of shareholders is duly constituted if, at the commencement
of the meeting, there are present in person or by proxy two or more shareholders entitled to vote at the meeting.
Rights attaching to shares
Voting rights
Holders of our ordinary shares have identical rights, including dividend
and liquidation rights, provided that, except as otherwise expressly provided in our Amended Memorandum and Articles of Association or
required by applicable law, on any matter that is submitted to a vote of our shareholders, holders of our ordinary shares are entitled
to one vote per ordinary share.
Under the BVI Act, the ordinary shares are deemed to be issued when the
name of the shareholder is entered in our register of members. Our register of members is maintained by our transfer agent, TSX Trust
Company, which enters the names of our shareholders in our register of members. If (a) information that is required to be entered in the
register of shareholders is omitted from the register or is inaccurately entered in the register, or (b) there is unreasonable delay in
entering information in the register, a shareholder of the company, or any person who is aggrieved by the omission, inaccuracy or delay,
may apply to the British Virgin Islands courts for an order that the register be rectified, and the court may either refuse the application
or order the rectification of the register, and may direct us to pay all costs of the application and any damages the applicant may have
sustained.
Subject to any rights or restrictions attached to any shares, at any general
meeting on a show of hands every shareholder of record who is present in person (or, in the case of a shareholder being a corporation,
by its duly authorized representative) or by proxy shall have one vote and on a poll every shareholder present in person (or, in the case
of a shareholder being a corporation, by its duly appointed representative) or by proxy shall have one vote for each share which such
shareholder is the holder. Voting at any meeting of the shareholders is by show of hands unless a poll is demanded. A poll may be demanded
by shareholders present in person or by proxy if the shareholder disputes the outcome of the vote on a proposed resolution and the chairman
shall cause a poll to be taken. In the case of a tie vote at a meeting of shareholders, the chairman shall be entitled to a second or
casting vote.
No shareholder shall be entitled to vote or be reckoned in a quorum, in
respect of any share, unless such shareholder is registered as our shareholder at the applicable record date for that meeting. Shareholders
of record may also pass written resolutions without a meeting by a majority vote.
Protection of minority shareholders
Under the laws of the British Virgin Islands, there is little statutory
law for the protection of minority shareholders other than the provisions of the BVI Act dealing with shareholder remedies. The principal
protection under statutory law is that shareholders may bring an action to enforce the BVI Act or the constituent documents of the Company,
our Memorandum and Articles of Association. Shareholders are entitled to have our affairs conducted in accordance with the BVI Act and
the Memorandum and Articles of Association.
There are common law rights for the protection of shareholders that may
be invoked, largely dependent on English company law, since the common law of the British Virgin Islands is limited. Under the general
rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management
of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company's affairs
by the majority or the board of directors. However, every shareholder is entitled to have the affairs of the company conducted properly
according to British Virgin Islands law and the constituent documents of the company. As such, if those who control the company have persistently
disregarded the requirements of the BVI Act or the provisions of the company's Memorandum and Articles of Association, then the courts
may grant relief. Generally, the areas in which the courts will intervene are the following: (1) an act complained of which is outside
the scope of the authorized business or is illegal or not capable of ratification by the majority; (2) acts that constitute fraud on the
minority where the wrongdoers control the company; (3) acts that infringe or are about to infringe on the personal rights of the shareholders,
such as the right to vote; and (4) where the company has not complied with provisions requiring approval of a special or extraordinary
majority of shareholders, which are more limited than the rights afforded minority shareholders under the laws of many states in the U.S.
Pre-emption rights
British Virgin Islands law does not make a distinction between public
and private companies and some of the protections and safeguards (such as statutory pre-emption rights) that investors may expect to find
in relation to a public company are not provided for under British Virgin Islands law, save to the extent they are expressly provided
for in the Memorandum and Articles of Association. There are no pre-emption rights applicable to the issuance of new shares by us under
either British Virgin Islands law generally or our Memorandum and Articles of Association more specifically.
Modification of rights
As permitted by British Virgin Islands law, and our Memorandum and Articles
of Association, we may vary the rights attached to our ordinary shares.
Transfer of shares
Subject to any applicable restrictions set forth in our Memorandum and
Articles of Association, any of our shareholders may transfer all or any of his or her shares by a written instrument of transfer in the
usual or common form or in any other form which our directors may approve. Shares may be held electronically and transferred electronically.
The registration of transfers may be suspended at such times and for such
periods as the directors may from time to time determine. If the directors were to refuse (or suspend) a transfer, then the directors
should provide the transferor and transferee with a notice providing their reasons for the suspension. The directors can only refuse or
delay the registration of a transfer of shares if the transferor has failed to pay amount due in respect of those shares.
Changes in authorized ordinary shares
By resolution of our directors we may (i) consolidate and divide all or
any of our unissued authorized shares into shares of larger amount than our existing shares; (ii) sub-divide our existing ordinary shares,
or any of them into shares of smaller amount than is fixed by our memorandum of association, subject nevertheless to the provisions of
the BVI Act; or (iii) create new classes of shares with preferences to be determined by the board of directors at the time of authorization.
Dividends
Subject to the BVI Act and our Memorandum and Articles of Association,
our directors may, by resolution, authorize a distribution to shareholders at such time and of such an amount as they think fit, if they
are satisfied, on reasonable grounds, that, immediately after the distribution, we will satisfy the 'solvency test'. A company will satisfy
the solvency test if (i) the value of the company's assets exceeds its liabilities; and (ii) the company is able to pay its debts as they
fall due. Where a distribution is made to a shareholder at a time when the company did not, immediately after the distribution, satisfy
the solvency test, it may be recovered by the company from the shareholder unless (i) the shareholder received the distribution in good
faith and without knowledge of the company's failure to satisfy the solvency test; (ii) the shareholder has altered his position in reliance
on the validity of the distribution; and (iii) it would be unfair to require repayment in full or at all.
Share repurchases
As permitted by the BVI Act and our Memorandum and Articles of Association,
shares may be repurchased, redeemed or otherwise acquired by us provided that, immediately following the repurchase or redemption, we
are satisfied we will pass the aforementioned solvency test.
We will require member consent before any share can be purchased, redeemed
or otherwise acquired by us, save where such redemption is pursuant to certain statutory provisions, such as pursuant to section 179 of
the BVI Act (redemption of minority shares) which allows for the holders of 90% or more of the votes to instruct the company to redeem
the shares of the company held by the remaining shareholders.
Liquidation rights
As permitted by British Virgin Islands law and our Memorandum and Articles
of Association, a voluntary liquidator may be appointed under Part XII of the BVI Act if we satisfy the solvency test (as aforementioned
save that it is satisfied if assets equal or exceed liabilities).
Board of directors
We are managed by a board of directors, which consisted of six directors
at March 31, 2022. On July 1, 2022, in connection with the Tarus Therapeutics transaction, we added a seventh board member. Our Memorandum
and Articles of Association provide that the board of directors may be established by the board of directors up to a maximum of 15 members.
Our shareholders may, pursuant to our Memorandum and Articles of Association,
by resolution of shareholders passed at a meeting of shareholders called for the purpose of removing the director or for purposes including
the removal of the director or by a written resolution of shareholders at any time remove any director before the expiration of his or
her period of office with or without cause, and may, pursuant to our Memorandum and Articles of Association, elect another person in his
or her stead. Subject to our Memorandum and Articles of Association, the directors will have power at any time and from time to time to
appoint any person to be a director, either as an addition to the existing directors or to fill a vacancy as long as the total number
of directors (exclusive of alternate directors) does not at any time exceed the maximum number fixed by or in accordance with our Memorandum
and Articles of Association (if any) and one third times the number of directors to have been elected at the last annual meeting of shareholders.
Our Memorandum and Articles of Association do not provide for alternate
directors.
There are no share ownership qualifications for directors, unless otherwise
decided by a resolution of shareholders. Meetings of our board of directors may be convened at any time deemed necessary by any of our
directors.
Unless the quorum has been otherwise fixed by the board, a meeting of
our board of directors will be competent to make lawful and binding decisions if at least one-half of the directors are present or represented.
Unless there are only two directors, in which case, the quorum shall be two. At any meeting of our directors, each director, whether by
his or her presence or by his or her alternate, is entitled to one vote.
Questions arising at a meeting of our board of directors are required
to be decided by simple majority votes of the directors' present or represented at the meeting. In the case of a tie vote, the chairman
of the meeting shall not have a second or deciding vote. Our board of directors may also pass written resolutions without a meeting by
a majority vote.
The remuneration to be paid to the directors shall be such remuneration
as the directors or shareholders shall determine through a resolution.
Issuance of additional ordinary shares
Our Memorandum and Articles of Association authorize our board of directors
to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized
but unissued shares.
Our Memorandum and Articles of Association authorize our board of directors
from time to time to issue ordinary shares to the extent permitted by the BVI Act.
Changes in authorized shares
We are authorized to issue unlimited number of ordinary shares without
par value, which will be subject to the same provisions with reference to the payment of calls, liens, transfers, transmissions, forfeitures
and otherwise as the shares in issue. We may by resolution:
● |
consolidate and divide all or any of our unissued authorized shares into shares of a larger amount than our existing shares; |
● |
sub-divide our existing ordinary shares, or any of them into shares of smaller amount than is fixed by our memorandum of association, subject nevertheless to the provisions of the BVI Act; or |
● |
create new classes of shares with preferences to be determined by the board of directors at the time of authorization. |
Inspection of books and records
Under British Virgin Islands law holders of our ordinary shares will be
entitled, on giving written notice to us, to inspect and make copies or take extracts of our: (a) Memorandum and Articles of Association;
(b) register of shareholders; (c) register of directors; and (d) minutes of meetings and resolutions of shareholders and those classes
of shareholders of which he is a shareholder.
Subject to our Memorandum and Articles of Association, our board of directors
may, if they are satisfied that it would be contrary to our interest to allow a shareholder to inspect any document, or part of a document
as referenced above, refuse to permit the shareholder to inspect the document or limit the inspection of the document, including limiting
the making of copies or the taking of extracts from the records. Where our directors exercise their powers in these circumstances, they
shall notify the shareholder as soon as reasonably practicable.
Conflicts of interest
Pursuant to the BVI Act and the company's memorandum and articles of association,
a director of a company who has an interest in a transaction and who has declared such interest to the other directors, may:
● |
vote on a matter relating to the transaction; |
● |
attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum; and |
● |
sign a document on behalf of the company or do any other thing in his capacity as a director, that relates to the transaction. |
Anti-money laundering laws
In order to comply with legislation or regulations aimed at the prevention
of money laundering we are required to adopt and maintain anti-money laundering procedures and may require subscribers to provide evidence
to verify their identity. Where permitted, and subject to certain conditions, we may also delegate the maintenance of our anti-money laundering
procedures (including the acquisition of due diligence information) to a suitable person.
We reserve the right to request such information as is necessary to verify
the identity of a subscribe for our ordinary shares. In the event of delay or failure on the part of the subscriber in producing any information
required for verification purposes, we may refuse to accept the application, in which case any funds received will be returned without
interest to the account from which they were originally debited.
If any person resident in the British Virgin Islands knows or suspects
that another person is engaged in money laundering or terrorist financing and the information for that knowledge or suspicion came to
their attention in the course of their business, the person will be required to report his belief or suspicion to the Financial Investigation
Agency of the British Virgin Islands, pursuant to the Proceeds of Criminal Conduct Act (Revised Edition, as amended). Such a report shall
not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.
Duties of directors
British Virgin Islands law provides that every director of the company
in exercising his powers or performing his duties shall act honestly and in good faith and in what the director believes to be in the
best interests of the company. Additionally, the director shall exercise the care, diligence, and skill that a reasonable director would
exercise in the same circumstances taking into account the nature of the company, the nature of the decision and the position of the director
and his responsibilities. In addition, British Virgin Islands law provides that a director shall exercise his powers as a director for
a proper purpose and shall not act, or agree to the company acting, in a manner that contravenes British Virgin Islands law or the memorandum
and articles of association of the company.
Anti-takeover provisions
The BVI Act does not prevent companies from adopting a wide range of defensive
measures, such as staggered boards, blank check preferred shares, removal of directors only for cause and provisions that restrict the
rights of shareholders to call meetings and submit shareholder proposals.
Voting rights and quorum requirements
Under British Virgin Islands law, the voting rights of shareholders are
regulated by the company's Memorandum and Articles of Association and, in certain circumstances, the BVI Act. The articles of association
will govern matters such as quorum for the transaction of business, rights of shares, and majority votes required to approve any action
or resolution at a meeting of the shareholders or board of directors. Unless the articles of association otherwise provide, the requisite
majority is usually a simple majority of votes cast. Under the M&A, a resolution of shareholders requires a majority vote of those
persons voting at a meeting or in the case of a written resolution of shareholders, the vote of a majority of the shareholders.
Mergers and similar arrangements
Under the BVI Act, two or more companies may merge or consolidate in accordance
with the statutory provisions. A merger means the merging of two or more constituent companies into one of the constituent companies,
and a consolidation means the uniting of two or more constituent companies into a new company. In order to merge or consolidate, the directors
of each constituent company must approve a written plan of merger or consolidation which must be authorized by a resolution approved,
at a duly convened and constituted meeting of the shareholders of the Company, by the affirmative vote of a majority of those persons
voting at a meeting or in the case of a written resolution of shareholders, the vote of a majority of the shareholders.
Shareholders not otherwise entitled to vote on the merger or consolidation
may still acquire the right to vote if the plan or merger or consolidation contains any provision which, if proposed as an amendment to
the memorandum of amended association and articles of association, would entitle them to vote as a class or series on the proposed amendment.
In any event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to
vote at the meeting or consent to the written resolution to approve the plan of merger or consolidation.
Shareholder suits
We are not aware of any reported class action or derivative action having
been brought against the company in a British Virgin Islands court.
Under the BVI Act, if a company or a director of a company engages in,
or proposes to engage in, conduct that contravenes the BVI Act or the memorandum of association or articles of the company, the BVI Court
may, on the application of a shareholder or a director of the company, make an order directing the company or director to comply with,
or restraining the company or director from engaging in that conduct.
In addition, under the BVI Act, the BVI Court may, on the application
of a shareholder of a company, grant leave to that shareholder to bring proceedings in the name and on behalf of that company or to intervene
in proceedings to which the company is a party for the purpose of continuing, defending or discontinuing the proceedings on behalf of
the company. In determining whether to grant leave for such derivative actions, the Court must take into account certain matters, including
whether the shareholder is acting in good faith, whether the derivative action is in the interests of the company taking account of the
views of the company's directors on commercial matters and whether an alternative remedy to the derivative claim is available.
A shareholder of a company may bring an action against the company for
breach of a duty owed by the company to him as a shareholder. The BVI Act also includes provisions for actions based on oppression, and
for representative actions where the interests of the claimant are substantially the same as those of other shareholders.
Corporate governance
British Virgin Islands laws do not restrict transactions between a company
and its directors, requiring only that directors exercise a duty to act honestly, in good faith and in what the directors believe to be
in the best interests to the companies for which they serve.
Indemnification
British Virgin Islands law does not limit the extent to which a company's
memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision
may be held by the British Virgin Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud
or the consequences of committing a crime. Our Memorandum and Articles of Association provide for the indemnification of our directors
against all losses or liabilities incurred or sustained by a director as a director of our company in defending any proceedings, whether
civil or criminal and this indemnity only applies if he or she acted honestly and in good faith with a view to our best interests and,
with respect to any criminal action, he or she must have had no reasonable cause to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted for directors, officers or persons controlling us under the foregoing provisions, we have been advised that, in the
opinion of the U.S. Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act
and therefore is unenforceable.
Staggered board of directors
The BVI Act does not contain statutory provisions that require staggered
board arrangements for a British Virgin Islands company and our Memorandum and Articles of Association do not provide for a staggered
board.
(C) MATERIAL CONTRACTS
The Company had no material contract, other than contracts entered into
in the ordinary course of business, to which we or any of our subsidiaries is a party, for the fiscal year immediately preceding the filing
of this report that are not otherwise discussed herein.
(D) EXCHANGE CONTROLS
There is no income or other tax of the British Virgin Islands imposed
by withholding or otherwise on any payment to be made by us.
We are free to acquire, hold and sell foreign currency and securities
without restriction. There is no exchange control legislation under British Virgin Islands law and accordingly there are no exchange control
regulations imposed under British Virgin Islands law that would prevent us from paying dividends to shareholders in United States Dollars
or any other currencies, and all such dividends may be freely transferred out of the British Virgin Islands, clear of any income or other
tax of the British Virgin Islands imposed by withholding or otherwise without the necessity of obtaining any consent of any government
or authority of the British Virgin Islands.
(E) TAXATION
British Virgin Islands Tax Consequences
Under the law of the British Virgin Islands as currently in effect, a
holder of shares of the Company who is not a resident of the British Virgin Islands is not liable for British Virgin Islands income tax
on dividends paid with respect to the shares of the Company, and all holders of securities of the Company are not liable to the British
Virgin Islands for income tax on gains realized on the sale or disposal of securities. The British Virgin Islands does not impose a withholding
tax on dividends paid by a company incorporated or continued under the BVI Act.
There are no capital gains, gift or inheritance taxes levied by the British
Virgin Islands on companies incorporated under the BVI Act. In addition, securities of companies incorporated under the BVI Act are not
subject to transfer taxes, stamp duties or similar charges.
There is no income tax treaty or convention currently in effect between
(i) the United States and the British Virgin Islands or (ii) Canada and the British Virgin Islands, although a Tax Information Exchange
Agreement is in force between the United States and the BVI and Canada and the BVI.
The BVI Economic Substance (Companies and Limited Partnership) Act (Revised Edition 2020)
(“ESA”)
The above legislation aimed at addressing concerns raised by the Council
of the European Union as to offshore structures engaged in certain activities, which attract profits without real economic activity provides
(among other things) that BVI companies that carry out certain defined activities, need to take steps to establish substance in the British
Virgin Islands. We have taken advice and will be filing our economic substance declaration in the BVI shortly in accordance with the requirements
of the legislation. The Company itself will not be subject to any such requirements to establish economic substance in the BVI. Although
it is presently anticipated that the ESA will have little material impact on the Company or its operations, as the legislation is new
and remains subject to further clarification and interpretation, it is not currently possible to ascertain the precise impact of these
legislative changes on the Company.
BVI Data Protection
The Data Protection Act, 2021 (the “BVI DPA”) came
into force in the British Virgin Islands on July 9, 2021. The BVI DPA establishes a framework of rights and duties designed to safeguard
individuals’ personal data, balanced against the need of public authorities, businesses and organizations to collect and use personal
data for lawful purposes. The BVI DPA is centered around seven data protection principles (the General Principle, the Notice and Choice
Principle, the Disclosure Principle, the Security Principle, the Retention Principle, the Data Protection Principle and the Access Principle)
which require that:
| · | personal data must not be processed without consent unless specific conditions are met and must not be transferred outside the British
Virgin Islands, unless there is proof of adequate data protection safeguards or consent from the data subject; |
| · | where consent has been given to processing of personal data, the data subject may at any time withdraw his or her consent; |
| · | a data controller must inform a data subject of specific matters, for instance the purposes for which it is being collected and further
processed; |
| · | personal data must not be disclosed for any purpose other than the purpose for which it was to be disclosed at the time of collection
or a purpose directly related thereto or to any party other than a third party of a class previously notified to the data subject; |
| · | a data controller shall, when processing personal data, take practical steps to protect personal data from loss, misuse, modification,
unauthorized or accidental access or disclosure, alteration or destruction; |
| · | personal data must not be kept for longer than is necessary for the purpose; |
| · | personal data must be accurate, complete, not misleading and kept up to date; and |
| · | a data subject must be given access to his or her own personal data and be able to correct that data where it is inaccurate, incomplete,
misleading or not up to date, except where a request for such access or correction is refused under the BVI DPA. |
The BVI DPA imposes specific obligations on data controllers, including
the duty to (i) apply the data protection principles; and (ii) respond in a timely fashion to requests from data subjects in relation
to their personal data.
The Information Commissioner is the regulator responsible for the proper
functioning and enforcement of the BVI DPA. Offences under the BVI DPA include:
| · | processing sensitive personal data in contravention of the BVI DPA; |
| · | willfully obstructing the Information Commissioner or an authorized officer in the conduct of his or her duties and functions; |
| · | willfully disclosing personal information in contravention of the BVI DPA; and |
| · | collecting, storing or disposing of personal information in a manner that contravenes the BVI DPA. |
Offences committed under the BVI DPA may result in fines (up to US$500,000
in certain cases) or imprisonment. Further, a data subject who suffers damage or distress as a result of their data being processed in
contravention of the DPA may institute civil proceedings in the British Virgin Islands courts.
U.S. Federal Income Tax Consequences
The discussion below is for general information only and is not, and should
not be interpreted to be, tax advice to any holder of our ordinary shares. Each holder or a prospective holder of our ordinary shares
is urged to consult his, her or its own tax advisor.
General
This section is a general summary of the material United States federal
income tax consequences to U.S. Holders, as defined below, of the ownership and disposition of our ordinary shares as of the date of this
report. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, the applicable Treasury
regulations promulgated and proposed thereunder, judicial decisions and current administrative rulings and practice, all of which are
subject to change, possibly on a retroactive basis. The summary applies to you only if you hold our ordinary shares as a capital asset
within the meaning of Section 1221 of the Code. In addition, this summary generally addresses certain U.S. federal income tax consequences
to U.S. Holders related to classification as a PFIC. The United States Internal Revenue Service, or the IRS, may challenge the tax consequences
described below, and we have not requested, nor will we request, a ruling from the IRS or an opinion of counsel with respect to the United
States federal income tax consequences of acquiring, holding or disposing of our ordinary shares. This summary does not purport to be
a comprehensive description of all the tax considerations that may be relevant to the ownership of our ordinary shares. In particular,
the discussion below does not cover tax consequences that depend upon your particular tax circumstances nor does it cover any state, local
or foreign law, or the possible application of the United States federal estate or gift tax. You are urged to consult your own tax advisors
regarding the application of the United States federal income tax laws to your particular situation as well as any state, local, foreign
and United States federal estate and gift tax consequences of the ownership and disposition of the ordinary shares. In addition, this
summary does not take into account any special United States federal income tax rules that apply to a particular U.S. or non-U.S. holder
of our common shares, including, without limitation, the following:
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a dealer in securities or currencies; |
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a trader in securities that elects to use a mark-to-market method of accounting for its securities holdings; |
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a financial institution or a bank; |
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an insurance company; |
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a tax-exempt organization; |
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a person that holds our common shares in a hedging transaction or as part of a straddle or a conversion transaction; |
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a person whose functional currency for United States federal income tax purposes is not the U.S. dollar; |
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a person liable for alternative minimum tax; |
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a person that owns, or is treated as owning, 10% or more, by voting power or value, of our ordinary shares; |
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certain former U.S. citizens and residents who have expatriated; or |
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a person who receives our shares pursuant to the exercise of employee stock options or otherwise as compensation. |
U.S. Holders
For purposes of the discussion below, you are a "U.S. Holder"
if you are a beneficial owner of our ordinary shares who or which is:
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an individual United States citizen or resident alien of the United States (as specifically defined for United States federal income tax purposes); |
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a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, any State or the District of Columbia; |
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an estate whose income is subject to United States federal income tax regardless of its source; or |
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a trust (x) if a United States court can exercise primary supervision over the trust's administration and one or more United States persons are authorized to control all substantial decisions of the trust or (y) if it was in existence on August 20, 1996, was treated as a United States person prior to that date and has a valid election in effect under applicable Treasury regulations to be treated as a United States person. |
If a partnership holds our ordinary shares, the tax treatment of a partner
will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner of a partnership
holding our ordinary shares, you should consult your tax advisor.
Passive Foreign Investment Company (PFIC)
Under the Code, we will be a PFIC for any taxable year in which, after
the application of certain "look-through" rules with respect to related companies, either (i) 75% or more of our gross income
consists of "passive income," or (ii) 50% or more of the average quarterly value of our assets consist of assets that produce,
or are held for the production of, "passive income." Passive income generally includes interest, dividends, rents, rents and
royalties other than certain rents and royalties which are received from unrelated parties in connection with the active conduct of a
trade or business, and capital gains. Whether we will be a PFIC in any year depends on the composition of our income and assets, and the
relative fair market value of our assets from time to time, which we expect may vary substantially over time. We must make a separate
determination each year as to whether we are a PFIC. As a result, our PFIC status may change from year to year based on our income and
assets and our anticipated future operations, we were a PFIC in the fiscal year ended in 2018 and may have been a PFIC in prior years
and may be a PFIC in the future. We do not believe, at this time, that we will be a PFIC for the fiscal year ended March 31, 2020, due
to the fact that we made the acquisition of several immune-oncology related businesses in 2018.
If we are a PFIC for any fiscal year during which a U.S. Holder holds
our ordinary shares, we generally will continue to be treated as a PFIC with respect to that U.S. Holder for all succeeding fiscal years
during which the U.S. Holder holds our ordinary shares, unless we cease to meet the threshold requirements for PFIC status and
that U.S. Holder makes a qualifying "deemed sale" election with respect to the ordinary shares. If such an election is made,
the U.S. Holder will be deemed to have sold the ordinary shares it holds at their fair market value on the last day of the last fiscal
year in which we qualified as a PFIC, and any gain from such deemed sale will be subject to the consequences described below. After the
deemed sale election, the ordinary shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC
unless we subsequently become a PFIC.
If we are a PFIC for any taxable year during which a U.S. Holder holds
our ordinary shares, the U.S. Holder may be subject to adverse tax consequences. Generally, gain recognized upon a disposition (including,
under certain circumstances, a pledge) of our ordinary shares by the U.S. Holder would be allocated ratably over the U.S. Holder's holding
period for such ordinary shares. The amounts allocated to the taxable year of disposition and to years before we became a PFIC would be
taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for that
taxable year for individuals or corporations, as appropriate, and would be increased by an additional tax equal to interest on the resulting
tax deemed deferred with respect to each such other taxable year. Further, to the extent that any distribution received by a U.S. Holder
on our ordinary shares exceeds 125% of the average of the annual distributions on such ordinary shares received during the preceding three
years or the U.S. Holder's holding period, whichever is shorter, that distribution would be subject to taxation in the same manner described
immediately above with respect to gain on disposition.
If we are a PFIC for any fiscal year during which any of our non-U.S.
subsidiaries is also a PFIC, a U.S. Holder of our ordinary shares during such year will be treated as owning a proportionate amount (by
value) of the shares of the lower-tier PFIC for purposes of the application of these rules to such subsidiary. U.S. Holders should consult
their tax advisers regarding the tax consequences if the PFIC rules apply to any of our subsidiaries. Alternatively, if we are a PFIC
and if our ordinary shares are "regularly traded" on a "qualified exchange," a U.S. Holder may be eligible to make
a mark-to-market election that would result in tax treatment different from the general tax treatment described above. Our ordinary shares
would be treated as "regularly traded" in any calendar year in which more than a de minimis quantity of the ordinary shares
are traded on a qualified exchange on at least 15 days during each calendar quarter. NASDAQ is a qualified exchange for this purpose.
Additionally, because a mark-to-market election cannot be made for equity interests in any lower-tier PFIC that we may own, a U.S. Holder
that makes a mark-to-market election with respect to us may continue to be subject to the PFIC rules with respect to any indirect investments
held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. If a U.S. Holder makes the mark-to-market
election, the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of the ordinary shares at the
end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax
basis of the ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of
income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election, the U.S. Holder's tax basis
in the ordinary shares will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition
of our ordinary shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss
(but only to the extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder
makes a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years
unless our ordinary shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election.
U.S. Holders are urged to consult their tax advisers about the availability of the mark-to-market election, and whether making the election
would be advisable in their particular circumstances.
Alternatively, a U.S. Holder of stock in a PFIC may make a so-called "Qualified
Electing Fund" election to avoid the PFIC rules regarding distributions and gain described above. The PFIC taxation regime would
not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held our ordinary shares while we
are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has made a valid and effective
QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder's pro rata share of our ordinary
earnings as ordinary income and such U.S. Holder's pro rata share of our net capital gains as long-term capital gain, regardless of whether
we make any distributions of such earnings or gain. In general, a QEF election is effective only if we make available certain required
information. U.S. Holders should be aware, however, that we are not required to make this information available but have agreed to do
so for our fiscal year ended March 31, 2022 for those United States shareholders who ask for it. The QEF election is made on a shareholder-by-shareholder
basis and generally may be revoked only with the consent of the IRS. U.S. Holders should consult with their own tax advisors regarding
eligibility, manner and advisability of making a QEF election if we are treated as a PFIC.
In addition, if we are a PFIC or, with respect to particular U.S. Holders,
are treated as a PFIC for the taxable year in which we paid a dividend or for the prior taxable year, the preferential rates discussed
above with respect to dividends paid to certain non-corporate U.S. Holders would not apply.
If a U.S. Holder owns our ordinary shares during any year in which we
are a PFIC, the U.S. Holder generally will be required to file an IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign
Investment Company or Qualified Electing Fund) with respect to us, generally with the U.S. Holder's federal income tax return for that
year. If we are a PFIC for a given taxable year, then you should consult your tax advisor concerning your annual filing requirements.
The U.S. federal income tax rules relating to PFICs are complex. U.S.
Holders are urged to consult their own tax advisers with respect to the acquisition, ownership and disposition of our ordinary shares,
the consequences to them if we are or become a PFIC, any elections available with respect to our ordinary shares, and the IRS information
reporting obligations with respect to the acquisition, ownership and disposition of our ordinary shares.
Non-U.S. Holders
If you are not a U.S. Holder, you are a "Non-U.S. Holder."
Distributions on Our Ordinary Shares
You generally will not be subject to U.S. federal income tax, including
withholding tax, on distributions made on our ordinary shares unless:
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you conduct a trade or business in the United States; and |
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the distributions are effectively connected with the conduct of that trade or business (and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax on a net income basis in respect of income from our ordinary shares, such distributions are attributable to a permanent establishment that you maintain in the United States). |
If you meet the two tests above, you generally will be subject to tax
in respect of such dividends in the same manner as a U.S. Holder, as described above. In addition, any effectively connected dividends
received by a non-U.S. corporation may also, under certain circumstances, be subject to an additional "branch profits tax" at
a 30 percent rate or such lower rate as may be specified by an applicable income tax treaty.
Sale, Exchange or Other Disposition of Our Ordinary Shares
Generally, you will not be subject to U.S. federal income tax, including
withholding tax, in respect of gain recognized on a sale or other taxable disposition of our ordinary shares unless:
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your gain is effectively connected with a trade or business that you conduct in the United States (and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax on a net income basis in respect of gain from the sale or other disposition of our ordinary shares, such gain is attributable to a permanent establishment maintained by you in the United States); or |
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you are an individual Non-U.S. Holder and are present in the United States for at least 183 days in the taxable year of the sale or other disposition, and certain other conditions exist. |
You will be subject to tax in respect of any gain effectively connected
with your conduct of a trade or business in the United States generally in the same manner as a U.S. Holder, as described above. Effectively
connected gains realized by a non-U.S. corporation may also, under certain circumstances, be subject to an additional "branch profits
tax" at a rate of 30 percent or such lower rate as may be specified by an applicable income tax treaty.
Backup Withholding and Information Reporting
Payments, including dividends and proceeds of sales, in respect of our
ordinary shares that are made in the United States or by a United States related financial intermediary will be subject to United States
information reporting rules. In addition, such payments may be subject to United States federal backup withholding tax. You will not be
subject to backup withholding provided that:
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you are a corporation or other exempt recipient; or |
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you provide your correct United States federal taxpayer identification number and certify, under penalties of perjury, that you are not subject to backup withholding. |
Amounts withheld under the backup withholding rules may be credited against
your United States federal income tax, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS in a timely manner.
Foreign asset reporting
Certain U.S. Holders, who are individuals, are required to report information
relating to an interest in ordinary shares, subject to certain exceptions (including an exception for ordinary shares held in accounts
maintained by U.S. financial institutions). U.S. Holders are urged to consult their tax advisors regarding their information reporting
obligations, if any, with respect to their ownership and disposition of ordinary shares.
(F) DIVIDEND AND PAYING AGENTS
Not applicable.
(G) STATEMENT BY EXPERTS
Not applicable.
(H) DOCUMENTS ON DISPLAY
We are currently subject to the informational requirements of the Exchange
Act applicable to foreign private issuers. To fulfill these requirements we file with the Securities and Exchange Commission, within four
months after the end of our fiscal year an annual report on Form 20-F containing financial statements that will be examined and reported
on, with an opinion expressed, by an independent public accounting firm. We also file current reports on Form 6-K for significant corporate
events throughout the year. As a foreign private issuer, we are exempt from the rules under the Exchange Act relating to the furnishing
of proxy statements. Also, because we are a foreign private issuer our officers, directors and principal shareholders are exempt
from the reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act.
You may read and copy any document we file with the SEC without charge
at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of the documents
at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the
SEC at 1 800 SEC 0330 for further information on the public reference room. The SEC also maintains an Internet site that contains reports
and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are also available to the public
through this web site at http://www.sec.gov.
(I) SUBSIDIARY INFORMATION
The documents concerning the Company's subsidiaries referred to in this
Annual Report may be inspected at the Company's office at 6 Adelaide Street East, Suite 300, Toronto, Ontario, Canada M5C 1H6.
ITEM 11 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed in varying degrees to a number of risks arising
from financial instruments. Management's close involvement in the operations allows for the identification of risks and variances from
expectations. The Company does not participate in the use of financial instruments to mitigate these risks and has no designated hedging
transactions. The Board approves and monitors the risk management processes. The Board's main objectives for managing risks are to ensure
liquidity, the fulfilment of obligations, the continuation of the Company's search for new business participation opportunities, and limited
exposure to credit and market risks while ensuring greater returns on the surplus funds on hand. There were no changes to the objectives
or the process from the prior year.
A summary of the Company's risk exposures as it relates to financial instruments
are reflected below.
Fair Value of Financial Instruments
The Company’s financial assets and liabilities are comprised of
cash and cash equivalents, receivables and investments in equities and private entities, accounts payable, warrant liability and unsecured
notes payable.
The Company classifies the fair value of these transactions according
to the following fair value hierarchy based on the amount of observable inputs used to value the instrument:
| · | Level 1 – Values are based on unadjusted quoted prices available in active markets for identical assets or liabilities as of
the reporting date. |
| · | Level 2 – Values are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which
can be substantially observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as of
the reporting date. |
| · | Level 3 – Values are based on prices or valuation techniques that are not based on observable market data. Investments are classified
as Level 3 financial instrument. |
Assessment of the significance of a particular input to the fair value
measurement requires judgment and may affect the placement within the fair value hierarchy.
Management has assessed that the fair values of cash and cash equivalents,
other receivables and accounts payable approximate their carrying amounts largely due to the short-term maturities of these instruments.
The Company’s financial instruments are exposed to certain financial
risks: credit risk and liquidity risk.
Credit Risk
Credit risk is the risk of loss associated with a counterparty’s
inability to fulfil its payment obligations. The credit risk is attributable to various financial instruments, as noted below. The credit
risk is limited to the carrying value as reflected in the Company’s consolidated statements of financial position.
Cash and cash equivalents. Cash and cash equivalents are
held with major international financial institutions and therefore the risk of loss is minimal.
Other receivables. The Company was exposed to credit risk
attributable to its debtor since a significant portion of this amount represents the amount agreed on a settlement of a claim by PPL,
originally payable over the next four years. The installment note was repaid in full in July 2021.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty
in satisfying financial obligations as they become due.
The Company’s approach to managing liquidity is to ensure, as far
as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without
incurring unacceptable losses or risking harm to the Company’s reputation. The Company holds sufficient cash and cash equivalents
to satisfy obligations under accounts payable and accruals.
The Company monitors its liquidity position regularly to assess whether
it has the funds necessary to meet its operating needs and needs for investing in new projects. The Company believes that it has sufficient
funding to finance the committed drug development work, apart from meeting its operational needs for the foreseeable future.
However, as a biotech company at an early stage of development and without
significant internally generated cash flows, there are inherent liquidity risks, including the possibility that additional financing may
not be available to the Company, or that actual drug development expenditures may exceed those planned. The current uncertainty in global
markets could have an impact on the Company’s future ability to access capital on terms that are acceptable to the Company. There
can be no assurance that required financing will be available to the Company.
ITEM 12 – DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
The accompanying notes are an integral part of these consolidated financial
statements.
The accompanying notes are an integral part of these consolidated financial
statements.
The accompanying notes are an integral part of these consolidated financial
statements.
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to Consolidated Financial Statements
(U.S. Dollars)
March 31, 2022 and 2021
NOTE
1. NATURE OF OPERATIONS
Portage
Biotech Inc. (the "Company" or “Portage”) is incorporated in the British Virgin Islands ("BVI")
with its registered office located at Clarence Thomas Building, P.O. Box 4649, Road Town, Tortola, BVI. Its USA agent, Portage Development
Services ("PDS"), is located at 61 Wilton Road, Westport, CT, 06880, USA.
The
Company is a foreign private issuer under SEC rules. It is also a reporting issuer under the securities legislation of the provinces
of Ontario and British Columbia. Its ordinary shares were listed on the Canadian Securities Exchange (“CSE”) under the symbol
“PBT.U”. On February 25, 2021, the ordinary shares of the Company began trading on the NASDAQ Capital Market (“NASDAQ”)
under the symbol “PRTG”. As the principal market for the Company’s ordinary shares is NASDAQ, the Company voluntarily
delisted from the CSE on April 23, 2021.
Portage
is a clinical stage immune-oncology company focused on overcoming immune resistance and currently managing 10 immuno-oncology assets
at various development stages. We source, nurture and develop the creation of early- to mid-stage, first- and best-in-class therapies
for a variety of cancers, by funding, implementing viable, cost-effective product development strategies, clinical counsel/trial design,
shared services, financial and project management to enable efficient, turnkey execution of commercially informed development plans.
Our drug development pipeline portfolio encompasses products or technologies based on biology addressing known resistance pathways/mechanisms
of current check point inhibitors with established scientific rationales, including intratumoral delivery, nanoparticles, liposomes,
aptamers, and virus-like particles
On
August 13, 2018, the Company reached a definitive agreement to acquire 100% of SalvaRx Limited (“SalvaRx”) in exchange for
8,050,701 ordinary shares of the Company (the "SalvaRx Acquisition"). The SalvaRx Acquisition was completed on January 8, 2019
(the “Acquisition Date”) upon receiving shareholder and regulatory approval. In connection with the SalvaRx Acquisition,
the Company acquired interests in SalvaRx’s five research and development invested entities and subsidiaries: iOx Therapeutics
Ltd. (“iOx”), Nekonal Oncology Limited (“Nekonal”), Intensity Therapeutics, Inc. (“Intensity”), Saugatuck
Therapeutics Ltd. (“Saugatuck”) and Rift Biotherapeutics Inc. (“Rift”). The Company also acquired an option
in Nekonal SARL, a Luxembourg-based company holding intellectual property rights for therapeutics and diagnostics in the field of autoimmune
disorders and oncology, to participate in the funding of its autoimmune programs. During fiscal 2021, the Company abandoned its interests
in Nekonal (see Note 10, “Acquisition and Business Combination”).
On
June 5, 2020, the Company effected a 100:1 reverse stock split. All share and per share information included in the consolidated financial
statements have been retroactively adjusted to reflect the impact of the reverse stock split. The shares of ordinary shares authorized
remained at an unlimited number of ordinary shares without par value.
Portage
filed a shelf registration statement and prospectus with the Securities and Exchange Commission (“SEC”) under which it may
sell shares, debt securities, warrants and units that Portage may sell in one or more offerings from time to time, which became effective
on March 8, 2021 (“Registration Statement” or “Prospectus”). The specific terms of any securities to be offered
pursuant to the base prospectus are specified in the sales agreement prospectus. The Registration Statement currently includes:
| ● | a
base prospectus, which covers the offering, issuance and sales by us of up to $200,000,000
in the aggregate of the securities identified above from time to time in one or more offerings; |
| ● | a
sales agreement supplemental prospectus covering the offer, issuance and sale by us in an
“at the market” offering of up to a maximum aggregate offering price of up to
$50,000,000 of our ordinary shares that may be issued and sold from time to time under sales
agreement, or sales agreement, with Cantor Fitzgerald & Co., or Cantor Fitzgerald, the
sales agent; and |
| ● | a
prospectus supplement dated June 24, 2021, for the offer, issuance and sale by us of 1,150,000
ordinary shares for gross proceeds of approximately $26.5 million in a firm commitment underwriting
with Cantor Fitzgerald. |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 1. NATURE
OF OPERATIONS (Cont’d)
The
sales agreement with Cantor Fitzgerald permits the Company to sell in an at the market offering up to $50,000,000 of ordinary shares
from time to time, the amount of which is included in the $200,000,000 of securities that may be offered, issued and sold by us under
the base prospectus. The sales under the prospectus will be deemed to be made pursuant to an “at the market” offering as
defined in Rule 415(a)(4) promulgated under the Securities Act of 1933 (the Securities Act). Upon termination of the sales agreement,
any portion of the $50,000,000 included in the sales agreement prospectus that is not sold pursuant to the sales agreement will be available
for sale in other offerings pursuant to the base prospectus, and if no shares are sold under the sales agreement, the full $50,000,000
of securities may be sold in other offerings pursuant to the base prospectus. See Note 2, “Liquidity” and Note 17, “Capital
Stock” for a further discussion.
NOTE
2. LIQUIDITY
As
of March 31, 2022, the Company had cash and cash equivalents of approximately $23.4 million and total current liabilities of approximately
$0.8 million (inclusive of approximately $0.03 million warrant liability settleable on a non-cash basis). For the year ended March 31,
2022, the Company is reporting a net loss of approximately $19.2 million and cash used in operating activities of approximately $6.8
million. As of June 30, 2022, the Company had approximately $21.0 million of cash on hand.
During
the quarter ended June 30, 2021, the Company commenced an “at the market” offering, under which it sold 90,888 shares generating
gross proceeds of approximately $2.6 million ($2.5 million, net of commissions).
On
June 24, 2021, the Company completed a firm commitment underwritten public offering of 1,150,000 ordinary shares at a public offering
price of $23.00 per share for gross proceeds of approximately $26.5 million and was settled June 28, 2021. The Company incurred aggregate
offering expenses for the public offering of approximately $1.8 million, including approximately $1.6 million of management, underwriting
and selling expenses. Management believes the funds generated, along with existing cash and cash equivalents, will be sufficient to fund
the Company’s research and development activities, as well as the expansion of its operating infrastructure and achievement of
numerous developmental milestones. The amount raised is at least sufficient to fund operations through August 2023.
The
Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the
foreseeable future and may never become profitable. The losses result primarily from its conduct of research and development activities.
The
Company historically has funded its operations principally from proceeds from issuances of equity and debt securities and would expect
to enter the capital markets if additional funding is required.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 2. LIQUIDITY
(Cont’d)
COVID-19 Effect
Beginning
in early March 2020, the COVID-19 pandemic and the measures imposed to contain this pandemic have disrupted and are expected to continue
to impact the Company's business operations. The magnitude of the impact of the COVID-19 pandemic on the Company's productivity, results
of operations and financial position, and its disruption to the Company's business and clinical programs and timelines, will depend,
in part, on the length and severity of these restrictions and on the Company's ability to conduct business in the ordinary course.
NOTE
3. BASIS OF PRESENTATION
Statement of
Compliance and Basis of presentation
These
consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS")
issued by the International Accounting Standards Board ("IASB"), IAS 34 Interim Financial Reporting and interpretations
of the International Financial Reporting Interpretations Committee. Certain reclassifications have been made to prior years to
conform with current year presentation.
These
consolidated financial statements have been prepared on an historical cost basis except for items disclosed herein at fair value (see
Note 22, “Financial Instruments and Risk Management”). In addition, these consolidated financial statements have been prepared
using the accrual basis of accounting, except for cash flow information.
The
Company has only one reportable operating segment.
These
consolidated financial statements were approved and authorized for issuance by the Audit Committee and Board of Directors on August 1,
2022.
Consolidation
The
consolidated financial statements include the accounts of the Company and,
|
(a) |
SalvaRx Limited (“SalvaRx”),
a wholly-owned subsidiary, incorporated on May 6, 2015 in the British Virgin Islands. |
| (b) | iOx
Therapeutics Ltd. (“iOx”), a United Kingdom (“U.K.”) based immune-oncology
company, a 60.49% subsidiary, incorporated in the U.K. on February 10, 2015. In September
2021, the Company, through SalvaRx, exchanged certain notes, accrued interest, warrants and
receivables in exchange for shares of iOx. As a result of this exchange, the Company, through
SalvaRx, increased its ownership up from 60.49% to 78.32%. See
Note 25(c), “Events After the Balance Sheet Date – Share Exchange Agreement -
iOx” for a further discussion. |
| (c) | Saugatuck
Therapeutics, Ltd. (“Saugatuck”), a 70% owned subsidiary incorporated in the
British Virgin Islands. Saugatuck and subsidiary refers to Saugatuck and Saugatuck Rx LLC. |
| (d) | Portage
Developmental Services, a 100% owned subsidiary incorporated in Delaware, which provides
human resources, and other services to each operating subsidiary via a shared services agreement. |
| (e) | SalvaRx
LLC, a 100% owned subsidiary through SalvaRx. |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 3. BASIS
OF PRESENTATION (Cont'd)
Consolidation
(Cont’d)
|
(f) |
Saugatuck Rx LLC, a wholly-owned
subsidiary of Saugatuck. |
The
following companies were disposed of on March 3, 2021 (see Note 8, “Disposition of PPL”):
| ● | Portage
Pharmaceuticals Ltd. (“PPL”), a wholly-owned subsidiary acquired in a merger
on July 23, 2013, incorporated in the British Virgin Islands. |
| ● | EyGen
Limited, (“EyGen”), a wholly-owned subsidiary of PPL, incorporated on September
20, 2016, in the British Virgin Islands. |
| ● | Portage
Glasgow Ltd. (“PGL”), a 65% subsidiary of PPL, incorporated in Glasgow, Scotland. |
All
inter-company balances and transactions have been eliminated in consolidation.
Non-controlling
interest in the equity of a subsidiary is accounted for and reported as a component of stockholders’ equity. Non-controlling interests
represent the 21.68% shareholder ownership interest in iOx and the 30% shareholder ownership interest in Saugatuck, which are consolidated
by the Company. In years prior to March 31, 2021, non-controlling interest also included 35% in PGL. See Note 14, “Unsecured Notes
Payable – iOx Unsecured Notes Payable” for a discussion of the Company’s settlement of loans with iOx.
Functional
and Presentation Currency
The
Company’s functional and presentation currency is the U.S. Dollar.
Use of Estimates
and Judgments
The
preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected.
Significant
areas where estimates are made include valuation of financial instruments, research and development costs, fair value used for acquisition
and measurement of share-based compensation. Significant areas where critical judgments are applied include assessment of impairment
of investments and goodwill and the determination of the accounting acquirer and acquiree in the business combination accounting.
Reclassifications
Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on
the reported results of operations.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE
4. SIGNIFICANT ACCOUNTING POLICIES
The
accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements,
which have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant
accounting policies summarized below:
Financial Instruments
i) Financial
Assets
Classification
Upon
the initial recognition of a financial assets, the financial assets are classified as one of the following measurement methodologies:
(a) amortized cost, (b) fair value through other comprehensive income (FVTOCI), or (c) fair value through profit or loss (FVTPL).
Subsequent measurement will be based on the initial classification of the financial assets.
The
classification of a financial asset at initial recognition depends on the Company's business model for managing the financial asset and
the financial asset's contractual cash flow characteristics.
In
order for a financial asset to be measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that are
solely payments of principal and interest (“SPPI”) on the principal amount outstanding. This assessment is referred
to as the SPPI test and is performed at an instrument level.
The
Company's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows.
The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or
both.
Measurement
For
purposes of subsequent measurement, financial assets are classified in three categories:
| ● | Financial
assets at amortized cost (debt instruments); |
| ● | Financial
assets at FVTOCI; and |
| ● | Financial
assets at FVTPL. |
Financial Assets
at Amortized Cost (Debt Instruments)
The
Company measures financial assets at amortized cost if both of the following conditions are met:
- The
financial asset is held within a business model with the objective of holding the financial asset in order to collect contractual cash
flows; and
- The
contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
Financial
assets at amortized cost are subsequently measured using the effective interest rate method and are subject to a period impairment review.
Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.
The
Company's financial assets classified at amortized cost includes other receivables.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 4. SIGNIFICANT
ACCOUNTING POLICIES (Cont'd)
Financial Assets
designated at Fair Value through OCI (Equity Instruments)
Upon
initial recognition, the Company can elect to classify irrevocably its equity investments as equity instruments designated at FVTOCI
when they meet the definition of equity under IAS 32, “Financial Instruments: Presentation,” and are not held for trading.
The classification is determined on an instrument-by-instrument basis.
Gains
and losses on these financial assets are never recycled to profit or loss. Dividends are recognized as other income in the statement
of profit or loss when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of
part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through
OCI are not subject to impairment assessment.
The
Company irrevocably elected to classify its investments in Biohaven Pharmaceuticals Holding Company Ltd. (“Biohaven”), Sentien
and Intensity as FVTOCI.
Financial Assets
at Fair Value through Profit or Loss
Financial
assets at FVTPL include financial assets held for trading, financial assets designated upon initial recognition at fair value through
profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading
if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives,
are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows
that are not solely payments of principal and interest are classified and measured FVTPL, irrespective of the business model.
Financial
assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair
value recognized in the statement of profit or loss.
ii) Financial
Liabilities
The
Company's financial liabilities include accounts payable which approximates fair value due to their short maturity and unsecured notes
payable assumed in the SalvaRx Acquisition. The unsecured notes payable assumed in the SalvaRx Acquisition are recorded at fair value
on the acquisition date (see Note 10, “Acquisition and Business Combination” and Note 14, “Unsecured Notes Payable”).
Warrant Liability
and Note Payable
During
the year ended March 31, 2017, the Company's subsidiaries, PPL and EyGen, issued notes with warrants (see Note 14, “Unsecured Notes
Payable” and Note 16, “Warrant Liability”). The warrants, which were exercisable for common shares of PPL and EyGen,
expired in the year ended March 31, 2020.
Accordingly,
at inception a portion of the proceeds was allocated to the fair value of the warrants and the remainder was recorded as a note payable.
The warrants expired and the note payable was settled as part of the PPL disposition in March 2021 (see Note 8, “Disposition of
PPL”).
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 4.
SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
At
subsequent balance sheet dates the fair value of the warrant was remeasured with movements in the fair value recorded in profit or loss.
The loan was recorded at amortized cost and is accounted for using the effective interest method. In March 2021, the Company completed
the disposition of its interest in PPL and EyGen and these liabilities were settled.
In
connection with the SalvaRx Acquisition (see Note 10, “Acquisition and Business Combination”), the Company acquired notes
payable and associated warrants, which were recorded at fair value on the date of the acquisition. See Note 14, “Unsecured Notes
Payable” and Note 16, “Warrant Liability” for a further discussion.
Impairment of
Financial Assets
IFRS
9, “Financial Instruments,” requires the Company to recognize an allowance for expected credit losses ("ECLs") for
all debt instruments and investments not held at fair value through profit or loss and contract assets. For intangible assets,
at the end of each reporting period and whenever there is an indication that the intangible asset may be impaired, the Company reviews
the carrying amounts of its intangible assets to determine whether there is any indication that those assets have suffered an impairment
loss.
At
the end of each reporting period, the Company assessed whether there was objective evidence that a financial asset was impaired. The
Company recognizes an allowance for ECLs for all debt instruments not held at fair value through profit or loss. ECLs are based on the
difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to
receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from
the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs
are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition,
ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For
those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is
required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
Foreign Currencies
The
functional and presentation currency of the Company and its subsidiaries (see Note 3, “Basis of Presentation”) is the U.S.
dollar. Monetary assets and liabilities are translated at exchange rates in effect at the balance sheet date. Non-monetary assets are
translated at exchange rates in effect when they were acquired. Revenue and expenses are translated at the approximate average rate of
exchange for the period. Foreign currency differences arising on retranslation are recognized in income or loss.
The
effect of exchange rates on our foreign currency-denominated asset and liability balances are recorded as foreign currency transaction
losses in the determination of net income (loss).
Cash and Cash
Equivalents
Cash
and cash equivalents comprise cash on hand and on-demand deposits that are readily convertible to a known amount of cash with three months
or less from date of acquisition and are subject to an insignificant risk of change in value. As
of March 31, 2022, cash equivalents was comprised of a money market account with maturities less than 90 days from the date of purchase.
The Company did not have any cash equivalents as of March 31, 2021.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 4. SIGNIFICANT
ACCOUNTING POLICIES (Cont'd)
Intangible Assets
acquired in Business Combinations
Intangible
assets acquired in business combinations that are separable from goodwill are recorded at their acquisition date fair value. Subsequent
to initial recognition, intangible assets acquired in business combinations are reported net of accumulated amortization and any impairment
losses.
Impairment of
Indefinite Life Intangible Assets other than Goodwill
At
the end of each annual reporting period and whenever there is an indication that an indefinite life intangible asset may be impaired,
the Company reviews the carrying amounts of such intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent
of impairment loss (if any). When it is not possible to estimate the recoverable amount of any individual asset, the Company estimates
the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can
be identified, corporate assets are also allocated to individual cash-generating units ("CGU" or "CGUs"), or the smallest
group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable
amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
Share-based Payments
The
Company determines the fair value of share-based payments granted to directors, officers, employees and consultants using the Black-Scholes
option-pricing model at the grant date. Assumptions for the Black-Scholes model are determined as follows:
|
• |
Expected Volatility.
The expected volatility rate used to value stock option grants is based on volatilities of a peer group of similar companies whose
share prices are publicly available. The peer group was developed based on companies in the life sciences industry. |
|
|
|
|
• |
Expected Term. The Company used historical
experience. |
|
|
|
|
• |
Risk-free Interest Rate. The risk-free
interest rate assumption was based on zero-coupon U.S. Treasury instruments that had terms consistent with the expected term of the
Company's stock option grants. |
|
|
|
|
• |
Expected Dividend Yield. The Company
has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future. |
Share-based
payments to employees, officers and directors are recorded and reflected as an expense over the vesting period with a corresponding increase
in the stock option reserve. On exercise, the associated amounts previously recorded in the stock option reserve are transferred to common
share capital.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 4. SIGNIFICANT
ACCOUNTING POLICIES (Cont'd)
(Loss) Per Share
Basic
(loss) per share is calculated by dividing net (loss) income (the numerator) by the weighted average number of ordinary shares outstanding
(the denominator) during the period. Diluted (loss) per share reflects the dilution that would occur if outstanding stock options
and share purchase warrants were exercised into ordinary shares using the treasury stock method and convertible debt were converted into
ordinary shares using the if-converted method. Diluted (loss) per share is calculated by dividing net (loss) income applicable to ordinary
shares by the sum of the weighted average number of ordinary shares outstanding and all additional ordinary shares that would have been
outstanding if potentially dilutive common shares had been issued. The share and per share information has been retroactively adjusted
to reflect the impact of the stock dividend.
The
inclusion of the Company's stock options, restricted stock units and share purchase warrants in the computation of diluted loss per share
would have an anti-dilutive effect on loss per share and are therefore excluded from the computation. Consequently, there is no difference
between basic loss per share and diluted loss per share for the years ended March 31, 2022, 2021 and 2020. The following table reflects
the outstanding securities by year that would have an anti-dilutive effect on loss per share, and accordingly, were excluded from the
calculation (see Note 19, “(Loss) Per Share”).
Schedule of anti-dilutive effect on loss per share | |
| |
| |
|
| |
As
of March 31, |
| |
2022 | |
2021 | |
2020 |
Stock
options | |
| 1,151,400 | | |
| 868,000 | | |
| 2,980 | |
Restricted
stock units | |
| 378,740 | | |
| 243,000 | | |
| – | |
Warrants | |
| 33,888 | | |
| 49,701 | | |
| – | |
Investments in
Private Companies
The
investment is comprised of shares of private companies that have been acquired through a private placement. The investment is initially
recorded at fair value. Following acquisition, the Company evaluates whether control or significant influence is exerted by the Company
over the affairs of the investee company. Based on the evaluation, the Company accounts for the investment using either the consolidation,
equity accounting or fair value method (see Note 9, “Investments in Private Companies”).
Investment in
Associate
An
associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial
and operating policy decisions of the investee but is not control or joint control over those policies.
The
results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method
of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in
accordance with IFRS 5, “Non-current Assets Held for Sale and Discontinued Operations”. Under the equity method, an investment
in an associate is initially recognized in the consolidated statement of financial position at cost from the date the investee becomes
an associate and adjusted thereafter to recognize the Company's share of the profit or loss and other comprehensive income of the associate.
When the Company's share of losses of an associate exceed the Company's interest in that associate (which includes any long-term interests
that, in substance, form part of the Company's net investment in the associate), the Company discontinues recognizing its share of further
losses. Additional losses are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments
on behalf of the associate.
After
application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in
its associate. At each reporting date, the Company determines whether there is objective evidence that the investment in the associate
is impaired. If there is such evidence, the Company calculates the amount of impairment as the difference between the recoverable amount
of the associate and its carrying value, and then recognizes the loss within 'share of (loss) income in associate' in the consolidated
statements of operations.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE
4. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Research and Development
Expenses
(i) Research
and Development
Expenditure
on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is expensed
as incurred.
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. Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated
amortization. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over
the period of expected future benefit. During the period of development, the asset is tested for impairment annually.
Research
and development expenses include all direct and indirect operating expenses supporting the products in development.
(ii) Subsequent
Expenditure
Subsequent
expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All
other expenditures are recognized in income or loss as incurred.
(iii) Clinical
Trial Expenses
Clinical
trial expenses are a component of the Company's research and development costs. These expenses include fees paid to contract research
organizations, clinical sites, and other organizations who conduct development activities on the Company's behalf. The amount of clinical
trial expenses recognized in a period related to clinical agreements are based on estimates of the work performed using an accrual basis
of accounting. These estimates incorporate factors such as patient enrolment, services provided, contractual terms, and prior experience
with similar contracts.
Contingent Liability
A
contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not within the control of the Corporation; or a present obligation that arises
from past events (and therefore exists), but is not recognized because it is not probable that a transfer or use of assets, provision
of services or any other transfer of economic benefits will be required to settle the obligation; or the amount of the obligation cannot
be estimated reliably.
Determination
of Fair Value
A
number of the Company's accounting policies and disclosures required the determination of fair value, both for financial and non-financial
assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on assumptions that market
participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. When
applicable, further information about the assumptions made in determining fair values is disclosed in Note 22, “Financial Instruments
and Risk Management” and other footnotes that specifically relate to assets or liabilities measured at fair value.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 4. SIGNIFICANT
ACCOUNTING POLICIES (Cont'd)
Income Tax
The
Company uses the asset and liability method to account for income taxes. Deferred income tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities for accounting
purposes, and their respective tax bases.
Deferred
income tax assets and liabilities are measured using tax rates that have been enacted or substantively enacted and applied to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets
and liabilities of a change in statutory tax rates is recognized in profit or loss in the year of change. Deferred income tax assets
are recorded when their recoverability is considered probable and are reviewed at the end of each reporting period.
Business Combinations
Business
combinations are accounted for using the acquisition method as of the date when control transfers to the Company. The total purchase
price less the fair value of non-controlling interest is allocated to the acquired net tangible and intangible assets and liabilities
assumed at fair value.
Transaction
costs that the Company incurs in connection with a business combination are expensed as incurred.
Goodwill
Goodwill
represents the excess of the purchase price paid for the acquisition of an entity and the amount recognized for non-controlling interests
over the fair value of the net identifiable assets acquired and liabilities assumed. Goodwill is allocated to the CGUs, which are expected
to benefit from the synergies of the combination. Goodwill is not subject to amortization and is tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be impaired.
Impairment
is determined for goodwill by assessing if the carrying value of a CGU, including the allocated goodwill, exceeds its recoverable amount
determined as the greater of the estimated fair value less costs to sell and the value in use. Impairment losses recognized in respect
of a CGU are first allocated to the carrying value of goodwill and any excess is allocated to the carrying amount of assets in the CGU.
Any goodwill impairment is recorded in income in the period in which the impairment is identified. Impairment losses on goodwill are
not subsequently reversed.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 4. SIGNIFICANT
ACCOUNTING POLICIES (Cont'd)
Recent Accounting
Pronouncements
IFRS Pronouncements
Issued But Not Yet Effective
New Accounting
Standards, Interpretations and Amendments
Standards
issued but not yet effective up to the date of issuance of the Company's consolidated financial statements are listed below. This listing
is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends
to adopt those standards when they become effective.
| (a) | Annual
Improvements to IFRS Standards 2018-2020 |
The
annual improvements process addresses issues in the 2018-2020 reporting cycles including changes to IFRS 9, “Financial Instruments,”
IFRS 1, “First Time Adoption of IFRS,” IFRS 16, “Leases,” and IAS 41, “Biological Assets”.
i)
The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities.
ii)
The amendment to IFRS 1 allows a subsidiary adopting IFRS at a later date than its parent to also measure cumulative translation differences
using the amounts reported by the parent based on the parent’s date of transition to IFRS.
iii)
The amendment to IFRS 16’s illustrative example 13 removes the illustration of payments from the lessor related to leasehold improvements.
These
amendments were effective for annual periods beginning on or after January 1, 2022. The adoption of these amendments did not have a significant
impact on the Company’s annual consolidated financial statements.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 4. SIGNIFICANT
ACCOUNTING POLICIES (Cont'd)
| (b) | IAS
37: Onerous Contracts - Cost of Fulfilling a Contract |
The
amendment to IAS 37 clarifies the meaning of costs to fulfil a contract and that before a separate provision for an onerous contract
is established, an entity recognizes any impairment loss that has occurred on assets used in fulfilling the contract, rather than on
assets dedicated to the contract. This amendment is effective for annual periods beginning January 1, 2022. The Company has determined
that the effect of adopting IAS 37 on its consolidated financial statements will not be significant.
| (c) | IAS
16: Proceeds Before Intended Use |
The
amendment to IAS 16 prohibits an entity from deducting from the cost of an item of Property, plant and equipment any proceeds received
from selling items produced while the entity is preparing the assets for its intended use (for example, the proceeds from selling samples
produced when testing a machine to see if it is functioning properly). It also clarifies that an entity is testing whether the asset
is functioning properly when it assesses the technical and physical performance of the asset. The amendment also requires certain related
disclosures. This amendment is effective for annual periods beginning January 1, 2022. The Company has determined that the effect of
adopting IAS 16 on its consolidated financial statements will not be significant.
| (d) | IAS
1: Presentation of Financial Statements |
The
amendment to IAS 1 clarifies how to classify debt and other liabilities as either current or non-current. The amendment will be effective
for annual periods beginning on or after January 1, 2023. The Company is currently evaluating the new guidance and impacts on its consolidated
financial statements.
| (e) | Amendments
to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and Its Associate
or Joint Venture |
The
amendment addresses the conflict between IFRS 10, “Consolidated Financial Statements,” and IAS 28, “Investments in
Associates and Joint Ventures,” in dealing with the loss of control of a subsidiary that is sold or contributed to an associate
or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business,
as defined in IFRS 3, “Business Combinations,” between an investor and its associate or joint venture, is recognized in full.
Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognized only to
the extent of unrelated investors' interests in the associate or joint venture. The IASB has deferred the effective date of these amendments
indefinitely, but an entity that early adopts the amendments must apply them prospectively. The Company is evaluating whether the adoption
of the above amendment will have a material impact on its financial statements.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE
5. PREPAID EXPENSES AND OTHER RECEIVABLES
Schedule of prepaid expenses and other receivables | |
| | | |
| | |
| |
As
of March 31, |
(In thousands) | |
2022 | |
2021 |
| |
| |
|
Prepaid
insurance | |
$ | 1,084 | | |
$ | 1,445 | |
Research
& development tax credits | |
| 169 | | |
| 649 | |
Tax
deposits | |
| 142 | | |
| – | |
Other
prepaid expenses | |
| 45 | | |
| 48 | |
Other
receivables | |
| 40 | | |
| 34 | |
Total
prepaid expenses and other receivables | |
$ | 1,480 | | |
$ | 2,176 | |
In
October 2016, the Company's wholly-owned subsidiary, PPL, agreed to a settlement, from a claim made against a supplier, to receive $120,000
in annual instalments of $11,250. Through March 31, 2022, the Company has collected the full amount. The balance of $33,750 was
classified $11,250 as a current asset in prepaid expenses and other receivables and $22,500 as a long-term receivable as of March 31,
2021. The installment note receivable was assigned to Portage by PPL prior to the disposition of PPL (see Note 8, “Disposition
of PPL”).
NOTE
6. INVESTMENT IN MARKETABLE EQUITY SECURITIES
As
of March 31, 2020, the Company’s investment in marketable equity securities was comprised of 2,000 shares in Biohaven Pharmaceutical
Holding Company Limited (“Biohaven”), a public company listed on the New York Stock Exchange. The Company accounted for its
investment in Biohaven as a financial asset classified as fair value through the statement of other comprehensive income (“FVTOCI”).
In
August 2020, the Company sold the shares of Biohaven for proceeds of $140,000 resulting in a gain of $72,000.
The
following table is a roll-forward of the investment in Biohaven as of and for the years ended March 31, 2022, 2021 and 2020:
Schedule of investment in marketable equity securities | |
| | | |
| | | |
| | |
| |
As
of and for the years ended March 31, |
(In thousands) | |
2022 | |
2021 | |
2020 |
| |
| |
| |
|
Balance,
beginning of year | |
$ | – | | |
$ | 68 | | |
$ | 103 | |
Unrealized
(loss) gain on investment | |
| – | | |
| – | | |
| (35 | ) |
Proceeds
from the sale of the investment | |
| – | | |
| (140 | ) | |
| – | |
Gain
on sale | |
| – | | |
| 72 | | |
| – | |
Balance,
end of year | |
$ | – | | |
$ | – | | |
$ | 68 | |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE
7. INVESTMENT IN ASSOCIATE
Details
of the Company’s associate as of March 31, 2022 and 2021 are as follows:
Schedule of investment associate | |
| |
| |
| |
|
Name | |
Principal
Activity | |
Place
of Incorporation and Principal Place of Business | |
Voting
Rights Held as of March 31, 2022 | |
Voting
Rights Held as of March 31, 2021 |
Associate:
Stimunity S.A. | |
Biotechnology | |
Paris,
France | |
| 44.0 | % | |
| 44.0 | % |
The
following table is a roll-forward of the Company’s investment in Stimunity S.A. as of and for the years ended March 31, 2022 and
2021:
Schedule of investment in Stimunity S.A. | |
| | | |
| | |
| |
As
of and for the Years Ended March 31, |
(In thousands) | |
2022 | |
2021 |
| |
| |
|
Balance,
beginning of year | |
$ | 1,735 | | |
$ | 1,225 | |
Additional
investment | |
| – | | |
| 1,000 | |
Share
of (loss) | |
| (62 | ) | |
| (490 | ) |
Balance,
end of year | |
$ | 1,673 | | |
$ | 1,735 | |
On
February 28, 2018, the Company made an initial investment of €0.5 million ($0.7 million) by subscribing to 3,780 new Class A shares
of Stimunity SAS ("Stimunity"), a French simplified joint stock company located and operating in Paris, France, for a 27% equity
interest. One of the three directors on the Board of Directors is represented by the Company. The management of Stimunity is controlled
by the two other founding shareholders of Stimunity. Management evaluated the Company's investment and concluded that the Company has
significant influence and therefore its investment in Stimunity is accounted for using the equity method.
Under
the Shareholders’ Agreement between the Company and the founders of Stimunity, the Company committed to a second investment in
the amount of €1.5 million ($1.9 million) (the "Stimunity Commitment") by subscribing to 4,140 Class A shares at a price
of €363 per share, upon Stimunity successfully completing agreed milestones (“Milestones”). On March 25, 2019, the
Company made an additional discretionary investment of €0.6 million ($0.7 million) by subscribing to 1,945 ordinary shares at a
price of €308.55 per share, increasing its ownership to approximately 37%.
On
June 1, 2020, the Company made an additional of €0.9 million ($1.0 million) by executing its subscription for 2,479 Class A shares
upon the achievement of certain Milestones, as provided in the Shareholders’ Agreement, increasing its equity share in Stimunity
to 44%. See Note 20, “Commitments and Contingent Liabilities” and Note 25(d), “Events
After the Balance Sheet Date – Stimunity Convertible Note” for a further discussion.
The
Company accounts for its investment in Stimunity under the equity method and accordingly, records its share of Stimunity’s earnings
or loss based on its ownership percentage. The Company recorded equity in (loss) in Stimunity of ($62,000) and $(490,000) for the years
ended March 31, 2022 and 2021, respectively.
Under
the Shareholders’ Agreement, Portage has (i) a preferential subscription right to maintain its equity interest in Stimunity in
the event of a capital increase from the issuance of new securities by Stimunity, except for issuances of new securities for stock options
under a merger plan or for an acquisition, or (ii) the right to vote against any (a) issuances of additional securities that would call
for the Company to waive its preferential subscription right, or (b) any dilutive issuance.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 7. INVESTMENT
IN ASSOCIATE (Cont'd)
The
following table illustrates the summarized financial information of the Company's investment in Stimunity S.A:
Schedule of details of the Company's associate | |
| | | |
| | |
| |
As
of March 31, |
(In millions) | |
2022 | |
2021 |
| |
(Unaudited) | |
(Unaudited) |
Current
assets | |
$ | 1.8 | | |
$ | 1.6 | |
Non-current
assets | |
$ | – | | |
$ | – | |
| |
| | | |
| | |
Current liabilities | |
$ | 0.6 | | |
$ | 0.7 | |
Non-current
liabilities | |
$ | 0.1 | | |
$ | .01 | |
Equity | |
$ | 1.1 | | |
$ | 0.8 | |
| |
| | | |
| | |
Company's
share in equity – 44.0% and 44.0% | |
$ | 0.5 | | |
$ | 0.4 | |
| |
| | | |
| | |
| |
Years
Ended March 31, |
| |
2022 | |
2021 |
| |
(Unaudited) | |
(Unaudited) |
Revenue | |
$ | 0.2 | | |
$ | 0.1 | |
Loss from
operations | |
$ | (0.8 | ) | |
$ | (1.5 | ) |
Net loss | |
$ | (0.4 | ) | |
$ | (1.1 | ) |
NOTE
8. DISPOSITION OF PPL
On
March 3, 2021, the Company disposed of 100% of its interest in PPL, which includes PPL’s interest in PGL and EyGen for $10 to an
entity controlled by one of the Company’s current directors and one of the Company’s former directors (the “Purchaser’s
Executives”). Under the terms of the arrangement, all outstanding payable obligations were assumed by the purchaser. Simultaneously,
the Company and the Purchaser’s Executives entered into a Revenue Share Deed with PPL under which they will be entitled to certain
revenue shares based on the achievement of milestones defined in the Revenue Share Deed. The Company may also be entitled to recover
an intercompany receivable from the purchaser in the amount of $229,848 on the fourth anniversary of the Revenue Share Deed. The Company
valued its interest in the Revenue Share Deed and the recovery of the $229,848 at zero for financials statement purposes. All other intercompany
balances were cancelled. The Company no longer has any interest or obligations associated with PPL, PGL and EyGen, other than the interests
provided for in the Revenue Share Deed.
NOTE
9. INVESTMENTS IN PRIVATE COMPANIES
The
following table is a roll-forward of the investments in Intensity and Sentien as of March 31, 2022 and 2021:
Schedule of investments in private companies |
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Intensity
|
|
|
Sentien
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Balance as of April 1, 2020 |
$ |
7,409 |
|
$ |
– |
|
$ |
7,409 |
|
Unrealized gain (loss) on
investment |
|
– |
|
|
– |
|
|
– |
|
Balance as of March 31, 2021 |
|
7,409 |
|
|
– |
|
|
7,409 |
|
Unrealized (loss) on
investment |
|
– |
|
|
– |
|
|
– |
|
Balance as of March 31, 2022 |
$ |
7,409 |
|
$ |
– |
|
$ |
7,409 |
|
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 9. INVESTMENTS
IN PRIVATE COMPANIES (Cont'd)
The
following is a discussion of our investments in private companies as of March 31, 2022 and March 31, 2021.
Intensity
In
connection with the SalvaRx Acquisition in fiscal 2019, the Company acquired a $4.5 million interest in Intensity, a clinical stage biotechnology
company, of 1.0 million shares, which represented a 7.5% equity interest in Intensity (see Note 10, “Acquisition and Business Combination”).
The investment was recorded at fair value (which approximates cost) at the acquisition date. The investment in Intensity has been irrevocably
designated as a financial asset recorded at fair value with gains and losses recorded through other comprehensive income. The fair value
of the asset is determined by considering other comparable equity funding transactions by Intensity with unrelated investors.
On
July 11, 2019, the Company entered into an agreement with Fast Forward Innovations Limited ("Fast Forward") to purchase Intensity
Holdings Limited ("IHL"), a wholly-owned subsidiary of Fast Forward. The Company paid $1.3 million for IHL through the issuance
of 129,806 ordinary shares. The sole asset of IHL consists of 288,458 shares of the private company, Intensity. This transaction increased
the Company's ownership to 1,288,458 shares of Intensity.
During
the year ended March 31, 2020, the Company recorded an unrealized gain of $1.6 million with respect to its investment in Intensity based
upon Intensity’s then most recent valuation. There was no unrealized gain or loss recognized during the years ended March 31, 2022
and 2021.
As
of March 31, 2022 and March 31, 2021, the Company owned approximately 7.35% and 8%, respectively, of the outstanding shares of Intensity,
on a fully diluted basis.
On
October 28, 2021, Intensity Therapeutics, Inc. filed a Form S-1 Registration Statement with the SEC to register shares for a public offering.
The offering was approved by the SEC, but subsequently withdrawn prior to closing. Intensity is still evaluating market conditions to
determine the timing of an offering. As of March 31, 2022, the Company has valued its investment in Intensity based on Intensity’s
Series C Preferred Stock Offering completed in 2020. If the offering is successful, the Company will value its investment in Intensity
based upon fair value (market price) and will record periodic changes in carrying value through OCI.
Sentien
In
August 2015, the Company acquired 210,210 shares of Series A preferred stock in Sentien (“Preferred Stock”), a Medford, MA
based private company for $700,000 of cash. The Preferred Stock is fully convertible into an equal number of common shares. The Company’s
holdings represent 5.06% of the equity of Sentien on a fully diluted basis as of each of March 31, 2022 and March 31, 2021. The investment
in Sentien has been irrevocably designated as a financial asset recorded at fair value with changes in fair value recorded through other
comprehensive income. As of March 31, 2020, the Company recorded an unrealized loss of $0.7 million after determining that cost no longer
was the best estimate of fair value due to a significant change in the strategy of Sentien and determined that the investment in Sentien
no longer had any fair value as Sentien was no longer pursing the proposed indication from the time of the Company's initial investment.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE
10. ACQUISITION AND BUSINESS COMBINATION
On
August 13, 2018, the Company reached a definitive agreement to acquire 100% of SalvaRx, a company incorporated in the British Virgin
Islands on May 6, 2015 focused on novel cancer immunotherapies and to develop clinical proof of concept, in exchange for 8,050,701 ordinary
shares of the Company (the "SalvaRx Acquisition"). The SalvaRx Acquisition was completed on January 8, 2019 (the "Acquisition
Date") upon receiving shareholder and regulatory approval. Shares issued by the Company on acquisition were valued at $92.6
million based on the market price of the Company shares of $11.50 per share on the Acquisition Date. Portage is the accounting acquirer
as the controlling group of shareholders of the Company increased their holdings, retained majority of voting rights after the acquisition
and the Company's management prior to the acquisition continued as management of the combined company. Four of the Company's Board members
are also directors of SalvaRx (see Note 21, “Related Party Transactions”). Notwithstanding the high degree of common ownership
between the companies, this was not considered a common control transaction as no single individual held a controlling interest and no
contractual arrangement exists among the group of shareholders.
In
connection with the SalvaRx Acquisition, the Company acquired SalvaRx's five invested entities and subsidiaries: iOx and Saugatuck (consolidated
subsidiary with non-controlling interest), Intensity (investment in private company) (see Note 9, “Investments in Private Companies”),
Nekonal (joint venture with no fair value due to a dispute with Nekonal, see below), and Rift (no fair value as operations are discontinued).
In connection with the SalvaRx Acquisition, the Company also acquired an option from Nekonal SARL that gives SalvaRx the right to acquire
shares in Nekonal for €50 ($55 USD) per share for four years. On January 8, 2019, the acquisition date, the fair value of
option was determined to be $0 due to a dispute with Nekonal.
SalvaRx
and Nekonal were involved in a dispute regarding Nekonal's claim that it attained a development milestone that would require SalvaRx
to provide the next tranche of funding. SalvaRx claims that Nekonal committed a breach of duties and fraud on its minority shareholders
with respect to its assumption that the milestone has been attained. Nekonal management has counterclaimed that SalvaRx is in breach
of contract with respect to the funding arrangement. While litigation was threatened, no legal proceedings have commenced. In fiscal
2021, the Company abandoned its interest in Nekonal.
The
acquisition of SalvaRx allowed the Company to acquire interest in the development of nine immune-oncology products. SalvaRx has three
in-process research and development ("IPR&D") projects identified.
The
following table presents unaudited supplemental pro forma consolidated net income based on SalvaRx's historical reporting periods as
if the SalvaRx Acquisition had occurred as of April 1, 2018 (in thousands):
Schedule of pro forma consolidated net income | |
| | |
Year Ended
March 31, | |
2019 |
Net
loss | |
$ | (5,160 | ) |
Net loss
applicable to common stockholders | |
$ | (3,920 | ) |
Net loss
per share, basic and diluted | |
$ | (0.01 | ) |
NOTE
11. GOODWILL
Schedule of goodwill | |
| |
|
| |
As
of March 31, |
(In thousands) | |
2022 | |
2021 |
| |
| |
|
Balance,
beginning of year | |
$ | 43,324 | | |
$ | 43,324 | |
Balance,
end of year | |
$ | 43,324 | | |
$ | 43,324 | |
The
Company’s goodwill arose from the acquisition of SalvaRx and its portfolio of several projects and investments.
As
of March 31, 2022, the Company determined that it has only one cash-generating unit (“CGU”), the consolidated Portage Biotech,
Inc.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 11.
GOODWILL (Cont'd)
Impairment
Review
On
an annual basis, pursuant to IAS 36, “Impairment of Assets,” the Company assesses its long-lived assets with definite lives,
which are not yet available for use, for potential indicators of impairment. At the end of each reporting period, the Company is required
to assess whether there is any indication that an asset may be impaired. Pursuant to IAS 36, the Company reviewed its assets for any
indicators of impairment and considered underlying fundamentals, execution, de-risking/advancement of assets and the value creation activities
during the year ended March 31, 2022.
If
any such indication exists, the Company estimates the recoverable amount of the asset or CGU and compares it to the carrying value.
The
Company performed its annual impairment test in each of fiscal 2022 and fiscal 2021 and estimated the recoverable amount of the above-noted
CGU based on its value in use, which was determined using a capitalized cash flow methodology and categorized within level 3 of the fair
market value hierarchy.
The
recoverable amount of the CGU has been determined based on its value in use. The recoverable amount considered assumptions based on probabilities
of technical, regulatory and clinical acceptances and financial support. Further, management uses risk-adjusted cash flow projections
based on financial budgets. Management believes that any reasonably possible change in the key assumptions on which the recoverable amount
is based would not cause the carrying amount to exceed its recoverable amount. The discount rate has been determined based on the Company’s
best estimate of a risk adjusted discount rate.
The
key assumptions used in the calculation of the recoverable amount include forecasts of the following:
|
(a) |
revenues; |
|
(b) |
normalized operating expenses; |
|
(c) |
income taxes; and |
|
(d) |
capital expenditures. |
Discounted
cash flows are determined with reference to undiscounted risk adjusted cash flows, and the discount rate approximated 20.5% and 20.0%
as of March 31, 2022 and 2021, respectively, based on the individual characteristics of the Company’s CGU, the risk-free rate of
return and other economic and operating factors.
The
recoverable amount exceeded the carrying amount of goodwill and therefore no impairment was considered necessary as of March 31, 2022
and 2021.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE
12. IN-PROCESS RESEARCH AND DEVELOPMENT AND DEFERRED TAX
LIABILITY
In-process
research and development (“IPR&D”) consists of the following projects (in thousands):
Schedule of In process research and development | |
| |
| | | |
| | |
Project
# | |
Description | |
Value
as of
March
31, 2022 | |
Value
as of
March
31, 2021 |
iOx: | |
| |
| | | |
| | |
PORT 2 (IMM60) | |
Melanoma
& Lung Cancers | |
$ | 84,213 | | |
$ | 84,213 | |
PORT 3
(IMM65) | |
Ovarian/Prostate
Cancers | |
| 32,997 | | |
| 32,997 | |
| |
| |
| 117,210 | | |
| 117,210 | |
Oncomer/Saugatuck | |
DNA
Aptamers | |
| 178 | | |
| 178 | |
| |
| |
$ | 117,388 | | |
$ | 117,388 | |
| |
| |
| | | |
| | |
Deferred
tax liability | |
| |
$ | 30,198 | | |
$ | 24,050 | |
Additionally, at the end of each reporting period, the Company is required to assess whether there is any indication that an asset
may be impaired. As indicated above, the Company did identify an external indicator of potential impairment. Pursuant to IAS 36, the Company completed its review of underlying fundamentals, execution, advancement of
assets and value creation activities and concluded that no provision for impairment was required.
Deferred
tax liability (DTL) represents iOx’s estimated tax on the difference between book and tax basis of the IPR&D, which is taxable
in the U.K.
Deferred tax liability related to IPR&D at
iOx is subject to tax in the U.K. As of March 31, 2022 and 2021, iOx had a deferred tax liability of approximately $30.2 million and approximately
$24.1 million, respectively. On January 8, 2019, the Company recognized a $19.8 million deferred tax liability for the difference between
the book and income tax basis of IPR&D acquired as part of the acquisition of SalvaRx. As the IPR&D process is in the U.K., the
deferred tax had been recorded at 17%, the rate applicable in the U.K. During the year ended March 31, 2020, the Company recorded a tax
expense of $2.2 million, including $2.3 million to increase the deferred tax liability due to the increase in the U.K. tax rate to 19%
in March 2020, $0.4 million of a return to provision adjustment and a decrease due to a refundable research and development credit of
$0.5 million. In 2022, the Company recorded $7.0 million increase in deferred income taxes to reflect a change in the U.K. income tax
rate and recognized $0.7 million of current year losses and $0.8 million of prior year losses.
Additionally, as the deferred tax liability may
be settled in the future in Great British pounds (“GBP”), the Company decreased the deferred tax liability by $1.1 million
as of March 31, 2022 and increased the deferred tax liability by $2.4 million as of March 31, 2021, respectively, to reflect the difference
in exchange rates from period to period.
NOTE
13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Schedule of accounts payable and accrued liabilities | |
| | | |
| | |
| |
As
of March 31, |
(In thousands) | |
2022 | |
2021 |
| |
| |
|
Accounts
payable | |
$ | 188 | | |
$ | 113 | |
Accrued
bonuses | |
| 193 | | |
| – | |
Accrued
legal fees | |
| 186 | | |
| – | |
Accrued
other professional fees | |
| 75 | | |
| 77 | |
Accrued
accounting and auditing fees | |
| 69 | | |
| 59 | |
Insurance
premium note | |
| – | | |
| 1,651 | |
Accrued
interest | |
| – | | |
| 5 | |
Other | |
| 39 | | |
| 33 | |
Total
accounts payable and accrued liabilities | |
$ | 750 | | |
$ | 1,938 | |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE
14. UNSECURED NOTES PAYABLE
Following
is a roll-forward of notes payable:
Schedule of notes payable | |
| | | |
| | | |
| | | |
| | |
| |
CURRENT | |
CURRENT | |
NON-CURRENT | |
|
(In thousands) | |
PPL | |
iOx | |
SalvaRx | |
Total |
| |
| |
| |
| |
|
Balance, April
1, 2020 | |
$ | 200 | | |
$ | 100 | | |
$ | 3,361 | | |
$ | 3,661 | |
Repayment | |
| – | | |
| – | | |
| (1,020 | ) | |
| (1,020 | ) |
Amortization
of debt discount | |
| – | | |
| – | | |
| 76 | | |
| 76 | |
Value of notes exchanged in
warrant exercise | |
| – | | |
| – | | |
| (2,640 | ) | |
| (2,640 | ) |
Settlement
in connection with disposition of PPL | |
| (200 | ) | |
| – | | |
| – | | |
| (200 | ) |
Loss on extinguishment
of debt | |
| – | | |
| – | | |
| 223 | | |
| 223 | |
Proceeds
from loan payable | |
| – | | |
| 50 | | |
| – | | |
| 50 | |
Balance,
March 31, 2021 | |
$ | – | | |
$ | 150 | | |
$ | – | | |
$ | 150 | |
Exchange
of notes payable and accrued interest for iOx shares | |
| – | | |
| (150 | ) | |
| – | | |
| (150 | ) |
Balance,
March 31, 2022 | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
PPL
and EyGen Unsecured Notes Payable
During
the year ended March 31, 2017, the Company's subsidiaries, PPL and EyGen, completed a private placement of unsecured notes (the "PPL
Unsecured Notes"). The balance outstanding as of March 31, 2020 was $0.2 million.
The
PPL Unsecured Notes were settled as part of the disposition of PPL in March 2021 (see Note 8, “Disposition of PPL”).
SalvaRx Unsecured
Notes Payable and Warrants
In
connection with the SalvaRx Acquisition in January 2019, the Company assumed $3.96 million of principal in unsecured notes due on March
2, 2021 (or earlier upon a qualifying event), that bear interest at 7% per annum (the "SalvaRx Notes"). The fair value of the
SalvaRx Notes was determined to be $3.4 million at January 2019. As the SalvaRx Acquisition was a qualifying event, the SalvaRx Notes
became due upon the acquisition. In December 2019, the maturity date of the SalvaRx Notes was extended to June 2021.
The
holders of the SalvaRx Notes received $7,500 of warrants in respect of each $10 thousand of principal issued. The warrants vest in the
event of a qualifying transaction and are exercisable at a 30% discount to the implied valuation of SalvaRx. On the Acquisition Date,
the fair value of the warrants, which are included in non-controlling interest, was determined to be $2.5 million using the Black-Scholes
model.
During
September 2020, the Company settled the SalvaRx Notes obligations originally due in June 2021 in an aggregate principal amount of approximately
$3.7 million, plus accrued interest of $0.75 million in exchange for cash payments totaling $1.77 million and 397,604 of the associated
SalvaRx warrants with an exercise price of $6.64 per share. The noteholders who accepted the offer exchanged their SalvaRx warrants for
an equal number of Portage shares at the same price per share. The Company accounted for the contractual value of the exercised and outstanding
warrants of $2.64 million (397,604 shares at $6.64 per share) as accrued equity issuable at September 30, 2020. The Company also recorded
a loss of $1.26 million during the year ended March 31, 2021, to recognize the discount between the fair value of the underlying shares
on October 13, 2020, the settlement date, ($9.80 per share) and the warrant exercise (contract) price of $6.64 per share.
Four
of the Company's directors, Gregory Bailey, James Mellon (former director), Steven Mintz (in trust) and Kam Shah, received, in total,
363,718 of the warrants pursuant to this transaction. Subsequent to the exercise of the warrants in October 2020, Portage had 12,083,395
and 49,701 issued and outstanding shares and warrants, respectively.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 14.
UNSECURED NOTES PAYABLE (Cont'd)
The
Company also recorded a loss on early extinguishment of debt of $0.22 million in the year ended March 31, 2021.
iOx Unsecured
Notes Payable
In
connection with the SalvaRx Acquisition in January 2019, the Company assumed $2.0 million of 7% convertible notes issued by iOx, a wholly-owned
subsidiary of SalvaRx (the “Convertible Notes”), of which the Company holds $1.9 million. As a result of the SalvaRx Acquisition,
iOx became a subsidiary of the Company during the year ended March 31, 2019. In accordance with IFRS 3, the fair value, including interest
receivable, of the Convertible Notes were effectively settled against the note receivable upon the business combination.
On
September 8, 2021, the Company, through SalvaRx, completed a settlement of loans (including interest) to and receivables from iOx
for services rendered in exchange for 23,772 ordinary shares of iOx at a price of £162. Simultaneously, the Company entered into
an agreement with Oxford Sciences Innovation, Plc (“OSI”), the holder of $0.15 million notes plus accrued interest under
which OSI exchanged the notes plus accrued interest for 820 shares of iOx. The Company followed the guidance provided by an
IFRS Discussion Group Public Meeting dated November 29, 2016, following the general tenets of IAS 39, “Financial Instruments: Recognition
and Measurement,” and IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments” and recorded the exchange
at historical cost. Additionally, no profit or loss was recorded in connection with the exchange. As a result of these transactions,
the Company, through SalvaRx, increased its ownership up from 60.49% to 78.32%.
NOTE
15. INCOME TAXES
The
Company is a British Virgin Island business company. The Government of the British Virgin Islands does not, under existing legislation,
impose any income or corporate tax on corporations.
PDS
is a U.S. corporation and is subject to U.S. federal, state and local income taxes, as applicable.
iOx
is subject to U.K. taxes.
The
benefit from (provision for) income taxes consists of the following:
Schedule
of income taxes benefit | |
| | | |
| | |
| |
Years
Ended March 31, |
(In thousands) | |
2022 | |
2021 |
| |
| |
|
Current: | |
| | | |
| | |
Federal | |
$ | – | | |
$ | – | |
State
and local | |
| – | | |
| – | |
Foreign | |
| 42 | | |
| 149 | |
Current | |
| 42 | | |
| 149 | |
| |
| | | |
| | |
Deferred: | |
| | | |
| | |
Federal | |
| – | | |
| – | |
State
and local | |
| – | | |
| – | |
Foreign | |
| (4,394 | ) | |
| (2,446 | ) |
Deferred | |
| (4,394 | ) | |
| (2,446 | ) |
Provision
for income taxes | |
$ | (4,352 | ) | |
$ | (2,297 | ) |
PORTAGE
BIOTECH INC.
Notes
to Consolidated Financial Statements
(U.S.
Dollars)
March
31, 2022 and 2021
NOTE
15. INCOME TAXES (Cont’d)
The
following is a reconciliation of the U.S. taxes to the effective income tax rates for the years ended March 31, 2022 and 2021 ($ in thousands):
Schedule
of reconciliation income tax rates | |
| | | |
| | |
| |
Years
Ended March 31, |
| |
2022 | |
2021 |
Loss
on ordinary activities before tax | |
$ | 1,342 | | |
$ | – | |
Statutory
U.S. income tax rate | |
| 21.0 | % | |
| 21.0 | % |
Loss
at statutory income tax rate | |
| 282 | | |
| – | |
Losses
(unrecognized) | |
| (282 | ) | |
| – | |
Income
tax benefit (expense) | |
$ | – | | |
$ | – | |
The
Company has a $1.3 million net operating loss, which expires March 31, 2042.
The
following is a reconciliation of the U.K. taxes to the effective income tax rates for the years ended March 31, 2022 and 2021 ($ in thousands):
Research
and development credit receivables of $0.2 million and $0.6 million were included in prepaid expenses and other receivables on the consolidated
statements of financial position as of March 31, 2022 and 2021, respectively.
The
following is a reconciliation of financial statement loss to tax basis loss (in thousands):
Schedule
of reconciliation of financial statement loss to tax basis loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Year
Ended March 31, 2022 | |
Year
Ended March 31, 2021 |
| |
United
States | |
BVI | |
United
Kingdom | |
Total | |
United
States | |
BVI | |
Foreign | |
Total |
| |
| |
| |
| |
| |
| |
| |
| |
|
Pre-tax
(loss) | |
$ | (1,342 | ) | |
$ | (9,348 | ) | |
$ | (4,127 | ) | |
$ | (14,817 | ) | |
$ | – | | |
$ | (13,674 | ) | |
$ | (1,218 | ) | |
$ | (14,892 | ) |
Losses
not subject to tax | |
| – | | |
| 9,348 | | |
| – | | |
| 9,348 | | |
| – | | |
| 13,674 | | |
| – | | |
| 13,674 | |
Taxable
(loss) | |
$ | (1,342 | ) | |
$ | – | | |
$ | (4,127 | ) | |
$ | (5,469 | ) | |
$ | – | | |
$ | – | | |
$ | (1,218 | ) | |
$ | (1,218 | ) |
PORTAGE
BIOTECH INC.
Notes
to Consolidated Financial Statements
(U.S.
Dollars)
March
31, 2022 and 2021
NOTE
15. INCOME TAXES (Cont’d)
As
of March 31, 2022 and 2021, the Company's deferred tax assets and liabilities in the U.K. consisted of the effects of temporary differences
attributable to the following (in thousands):
Schedule of deferred tax assets and liabilities | |
| | | |
| | |
| |
As of March 31, |
| |
2022 | |
2021 |
Deferred tax assets: | |
| | | |
| | |
Net operating loss | |
$ | (3,253 | ) | |
$ | (1,689 | ) |
Deferred tax asset (unrecognized) | |
| 1,500 | | |
| 1,689 | |
Deferred tax asset | |
| (1,753 | ) | |
| | |
| |
| | | |
| | |
Deferred tax liabilities: | |
| | | |
| | |
In-process research and development | |
| 30,198 | | |
| 24,050 | |
Deferred tax liability | |
| 30,198 | | |
| 24,050 | |
| |
| | | |
| | |
Net deferred tax liability | |
$ | 28,445 | | |
$ | 24,050 | |
iOx
generated research and development cash credits of approximately $0.04
million and $0.1
million that have been recorded for the years
ended March 31, 2022 and 2021, respectively.
As
of March 31, 2022, the Company had U.S. deferred tax assets of $0.3 million, which were not recognized for financial statement purposes.
There were no U.S. deferred tax assets as of March 31, 2021.
As
of March 31, 2022, 2021 and 2020, cumulative tax losses for iOx were approximately $13.0
million, $8.9
million and $7.7
million, respectively.
As of March 31, 2022 and 2021, iOx had a
deferred tax liability of approximately $28.4
million and approximately $24.1
million, respectively. On January 8, 2019, the Company recognized a $19.8 million
deferred tax liability for the difference between the book and income tax basis of IPR&D acquired as part of the acquisition of
SalvaRx. As the IPR&D process is in the U.K., the deferred tax had been recorded at 17%, the rate applicable in the U.K. During
the year ended March 31, 2020, the Company recorded a tax expense of $2.2
million, including $2.3 million to increase the deferred tax liability due to the increase in the U.K. tax rate to 19% in March
2020, $0.4
million of a return to provision adjustment and a decrease due to a refundable research and development credit of $0.5
million. In 2022, the Company recorded $7.0 million increase in deferred income taxes to reflect a change in the U.K. income tax
rate and recognized $0.7 million of current year losses and $0.8 million of prior year losses.
Additionally, as the deferred tax liability may
be settled in the future in GBP, the Company decreased the deferred tax liability by $1.1 million at March 31, 2022 and increased the
deferred tax liability by $2.4 million as of March 31, 2021, respectively, to reflect the difference in exchange rates from period to
period.
There
is no expiration date for accumulated tax losses in the U.K. entities.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE
16. WARRANT LIABILITY
Below
is the roll-forward of warrants issued by entity (see Note 14, “Unsecured Notes Payable”):
Schedule of warrant liability | |
| | | |
| | | |
| | |
| |
PBI |
| |
Exercise
Price | |
Warrants | |
Amount |
| |
| |
| |
In
000’$ |
Warrants
outstanding, April 1, 2021 | |
$ | 6.64 | | |
| 49,701 | | |
$ | 1,120 | |
Exercise
of warrants as of March 31, 2022 | |
$ | 6.64 | | |
| (15,813 | ) | |
| (235 | ) |
Fair
value adjustment as of March 31, 2022 (1) (2) | |
| – | | |
| – | | |
| (852 | ) |
Warrants
outstanding, March 31, 2022 | |
$ | 6.64 | | |
| 33,888 | | |
$ | 33 | |
(1)
Portage warrant liability valued at contract price, adjusted for fair value using the Black-Scholes model.
The
Black-Scholes assumptions used in the fair value calculation of the warrants as of March 31, 2022 were:
Risk
free rate: 1.06%
Expected
Dividend: $0
Expected
Life: 0.53 years
Volatility:
51.49%
| (2) | The
Company recognized a gain (loss) of $0.9 million, $(0.8) million and $0.02 million in the
years ended March 31, 2022, 2021 and 2020, respectively, to reflect the change in fair value
of the underlying warrants. The warrants expire in October 2022. |
NOTE
17. CAPITAL STOCK
|
(a) |
Authorized ordinary shares: Unlimited number
of common shares without par value. |
|
(b) |
Following is a roll-forward of ordinary shares for
the years ended March 31, 2022 and 2021: |
Common shares: Unlimited number of common shares without par value | |
| | | |
| | | |
| | | |
| | |
| |
Years
Ended March 31, |
| |
2022 | |
2021 |
| |
Ordinary
Shares | |
Amount | |
Ordinary
Shares (c) | |
Amount |
| |
In
000’ | |
In
000’$ | |
In
000’ | |
In
000’$ |
Balance,
beginning of year | |
| 12,084 | | |
$ | 130,649 | | |
| 10,988 | | |
$ | 117,817 | |
Shares
issued in public offering and ATM | |
| 1,241 | | |
| 27,216 | | |
| – | | |
| – | |
Warrants
exercised | |
| 16 | | |
| 339 | | |
| – | | |
| – | |
Shares
issued for services | |
| 8 | | |
| 120 | | |
| 1 | | |
| 25 | |
Shares
issued in a private placement, net of issue costs | |
| – | | |
| – | | |
| 698 | | |
| 6,732 | |
Exchange
of SalvaRx warrants for Portage warrants | |
| – | | |
| – | | |
| – | | |
| 2,640 | |
Settlement
of non-controlling interest in SalvaRx | |
| – | | |
| – | | |
| – | | |
| 2,451 | |
To
reflect warrants issued and outstanding (d) | |
| – | | |
| – | | |
| – | | |
| (330 | ) |
Fair
value adjustment for shares issued at a discount in SalvaRx | |
| – | | |
| – | | |
| 397 | | |
| 1,256 | |
Expiration
of unexercised stock options | |
| – | | |
| – | | |
| – | | |
| 58 | |
Balance,
end of year | |
| 13,349 | | |
$ | 158,324 | | |
| 12,084 | | |
$ | 130,649 | |
| (c) | Number
of ordinary shares have been retroactively adjusted to reflect the impact of 100:1 reverse
stock split on June 5, 2020. |
| (d) | Represents
the contractual value of the Portage warrants, which was adjusted to fair value of $271 using
the Black-Scholes model in the year ended March 31, 2021. |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 17. CAPITAL
STOCK (Cont’d)
On
June 16, 2020, the Company completed a private placement of 698,145 restricted ordinary shares at a price of $10.00 per share for gross
proceeds of $6.98 million to accredited investors. Directors of the Company subscribed for 215,000 shares, or approximately 30.8% of
the private placement, for proceeds of $2.15 million. The Company incurred costs of approximately $0.25 million in connection with the
offering, which was treated as contra-equity on the Company’s balance sheet.
During
September 2020, the Company settled the SalvaRx Notes obligations originally due in June 2021 in an aggregate principal amount of approximately
$3.7 million, plus accrued interest of $0.75 million in exchange for cash payments totaling $1.77 million and 397,604 of the associated
SalvaRx warrants with an exercise price of $6.64 per share. The warrants were exchanged for an equal number of warrants to acquire Portage
stock at the same price per share. The Company accounted for the contractual value of the exercised and outstanding warrants of $2.64
million (397,604 shares at $6.64 per share) as accrued equity issuable at September 30, 2020. The Company also recorded a loss of $1.26
million during the year ended March 31, 2021, to recognize the discount between the fair value of the underlying shares on October 13,
2020 (the settlement date) of $9.80 per share and the contract price of $6.64 per share.
Four
of the Company's directors, Gregory Bailey, James Mellon, Steven Mintz (in trust) and Kam Shah, received, in total, 363,718 of the shares
pursuant to this transaction.
During
the quarter ended June 30, 2021, the Company commenced an “at the market” offering, under which it sold 90,888 shares generating
gross proceeds of approximately $2.6 million ($2.5 million, net of commissions).
On
June 24, 2021, the Company completed a firm commitment underwritten public offering of 1,150,000 ordinary shares at a public offering
price of $23.00 per share for gross proceeds of approximately $26.5 million and was settled June 28, 2021. The Company incurred aggregate
offering expenses for the public offering of approximately $1.8 million, including approximately $1.6 million of management, underwriting
and selling expenses. The Company is using the net proceeds raised to fund its research and development activities and support operations.
The amount raised is sufficient to fund operations through at least March 2023. Funds may be used to accelerate development activities
to advance the Company’s product portfolio, working capital and general corporate purposes.
See
Note 25, “Events After the Balance Sheet Date” for a discussion of additional ordinary shares issued.
NOTE
18. STOCK OPTION RESERVE
| (a) | The
following table provides the activity for the Company’s stock option reserve for the
years ended March 31, 2022 and 2021: |
Disclosure Of Terms Stock Option Reserve Explanatory | |
| | | |
| | | |
| | | |
| | |
| |
Years
Ended March 31, |
| |
2022 | |
2021 |
(In thousands) | |
Non-Controlling
Interest | |
Stock
Option Reserve | |
Non-Controlling
Interest | |
Stock
Option Reserve |
| |
| |
| |
| |
|
Balance,
beginning of year | |
$ | 11,468 | | |
$ | 7,977 | | |
$ | 10,618 | | |
$ | 58 | |
Share-based
compensation expense | |
| 191 | | |
| 8,951 | | |
| 850 | | |
| 7,977 | |
Expiration
of unexercised stock options | |
| – | | |
| – | | |
| – | | |
| (58 | ) |
Balance,
end of year | |
$ | 11,659 | | |
$ | 16,928 | | |
$ | 11,468 | | |
$ | 7,977 | |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 18. STOCK
OPTION RESERVE (Cont’d)
Stock Options
The
Board of Directors of the Company (the "Board") established a stock option plan (the "2013 Option Plan") under which
options to acquire ordinary shares of the Company are granted to directors, employees and consultants of the Company. The maximum number
of ordinary shares issuable under the 2013 Option Plan shall not exceed 10% of the total number of issued and outstanding ordinary shares,
inclusive of all shares presently reserved for issuance pursuant to previously granted stock options. If a stock option was surrendered,
terminated or expired without being exercised, the ordinary shares reserved for issuance pursuant to such stock option were available
for new stock options granted under the 2013 Option Plan. The options vest on a schedule determined by the Board of Directors, generally
over two to four years, and expire after five years.
As
of March 31, 2019, the Board decided to discontinue the 2013 Option Plan and during the year ended March 31, 2021, 2,980 outstanding
options issued under the plan expired unexercised and no options remained outstanding under the 2013 Option Plan.
On
June 25, 2020, at the annual meeting of shareholders, the Company’s new incentive stock option plan (the “2020 Stock Option
Plan”) was approved, which authorized the directors to fix the option exercise price and to issue stock options under the plan
as they see fit. The Company's 2020 Stock Option Plan is a 10% rolling stock option plan under which the directors are authorized to
grant up to a maximum of 10% of the issued and outstanding ordinary shares on the date of grant.
Effective
January 13, 2021, the Company amended and restated its 2020 Stock Option Plan to permit the grant of additional types of equity compensation
securities, including restricted stock units and dividend equivalent rights (the "2021 Equity Incentive Plan"). The aggregate
number of equity securities, which may be issued under the 2021 Equity Incentive Plan has not been changed. Pursuant to the 2021
Equity Incentive Plan, on January 13, 2021, the Company granted an aggregate of 868,000 stock options exercisable at a price of US$17.75
per share, representing the closing price of the shares on the day immediately preceding the grant date, which expire on January 13,
2031 to various directors, officers and consultants of the Company. 350,000 options granted to members of the Board of Directors’
vest 1/3 on grant date, 1/3 on the first anniversary of the grant and 1/3 on the second anniversary of the grant. 518,000 options granted
to consultants (one of whom is also a director) vest 1/3 on each of the first three anniversaries of the date of grant.
Additionally,
the Company granted 243,000 restricted stock units on January 13, 2021, with a fair value of $17.75 per share, which was the closing
price on the day immediately preceding the grant date. The restricted stock units vested on the date of grant, but underlying shares
cannot be sold until one of four conditions are met. In accordance with IFRS 2, “Share-based Payment,” the Company
recognized compensation expense of $4.3 million in the year ended March 31, 2021, in connection with the RSU grants.
Amended and
Restated 2021 Equity Incentive Plan and Grants of Stock Options and Restricted Stock Units
On
January 19, 2022, the Board of Directors unanimously approved the Amended and Restated 2021 Equity Incentive Plan (the “Amended
and Restated 2021 Equity Incentive Plan”). The Amended and Restated 2021 Equity Incentive Plan provides for:
| (1) | An
increase of aggregate number of shares available for awards to 2,001,812, which is equal
to 15% of the issued and outstanding common shares in the capital of the Company as of January
19, 2022 subject to discretionary annual increases (on a cumulative basis) as may be approved
by the Board in future years by a number of shares not to exceed an additional five percent
(5%) of the aggregate number of shares then outstanding; |
| (2) | The
authorization of incentive stock options (should shareholder approval be sought and obtained)
under the Amended and Restated 2021 Equity Incentive Plan; and |
| (3) | The
provision of dividend equivalent rights to be issued when authorized. |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 18. STOCK
OPTION RESERVE (Cont’d)
Pursuant
to the Amended and Restated 2021 Equity Incentive Plan, on January 19, 2022, the Company granted an aggregate of 302,000 stock options
exercisable at a price of US$10.22 per share, representing the average price of the shares on the day of grant (January 19, 2022), which
expire on January 19, 2032 to various directors, officers and consultants of the Company. A total of 13,800 of the 302,000 stock options
were granted to two members of the Board of Directors’ and vest on the first anniversary of the date of the grant. The balance
of 288,200 stock options were granted to employees (one of whom is also a director), and a consultant, which vest ratably on each of
the first four annual anniversaries of the date of the grant.
Additionally,
the Company granted 135,740 restricted stock units to employees (one of whom is also a director) on January 19, 2022, with a fair value
of US$10.22 per share, representing the average price of the shares on the day of grant (January 19, 2022). The restricted stock units
were fully vested and nonforfeitable as of the date
of the grant and will expire on January 19, 2032.
On
February 15, 2022, James Mellon, Linda Kozick and Mark Simon were appointed to the Board of Directors. Mr. Mellon owned approximately
23.9% of the Company’s outstanding shares at that date. Additionally, Mr. Mellon had previously served as a member of the Board
of Directors from 2016 to August 14, 2020. On February 15, 2022, in connection with the appointments, each of these directors were granted
13,800 non-incentive stock options, which vest ratably monthly over a three-year period. The options have an exercise price of $8.59
per share, the average price of the stock on February 15, 2022, the day immediately preceding the grant date, and will expire, if unexercised,
on February 15, 2032.
In
January 2019, iOx, a subsidiary of SalvaRx, was acquired by the Company as part of the SalvaRx Acquisition. Accordingly, the 2,599
stock options to acquire common shares of iOx (the “Acquired Options”) with an exercise price of £120 ($152.84)
per common share, outstanding under the iOx stock option plan (“iOx Option Plan”) have been acquired by the Company.
At the Acquisition Date, 1,643 of the stock options, with a fair value at the Acquisition Date of $7.4 million, are fully vested and
recorded in non-controlling interest with a corresponding increase to goodwill (see Note 11, “Goodwill”). Additionally,
the fair value of the remaining 956 unvested stock options was $4.3 million and is being recorded as compensation expense over the remaining
3-year vesting period.
Following
are the weighted average assumptions used in the calculation of the fair value of the vested and unvested options on the Acquisition
Date, with respect to the iOx Option Plan:
Schedule of fair value of these stock options on the date of grant and black-scholes option pricing model |
|
|
|
Assumption |
|
Vested
Options |
|
Grant Date |
|
November 28, 2016 |
|
Risk free interest rate |
|
2.6% |
|
Expected dividend |
|
Nil 0 |
|
Expected volatility |
|
80% |
|
Expected life |
|
1.3 years |
|
Fair value of iOx stock |
|
US$4,630.35 |
|
Following
are the weighted average assumptions used in connection with the January 13, 2021 option grant, with respect to the Company’s Amended
and Restated 2021 Equity Incentive Plan:
Assumption |
|
Vested
Options |
|
Unvested
Options |
Risk free interest rate |
|
0.48% |
|
0.48% |
Expected dividend |
|
Nil 0 |
|
Nil 0 |
Expected volatility |
|
139% |
|
144% |
Expected life |
|
5.5 years |
|
6.0 years |
Fair value of Portage stock |
|
US$16.66 |
|
US$17.11 |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 18. STOCK
OPTION RESERVE (Cont’d)
Following
are the weighted average assumptions used in connection with the January 19, 2022 option grant, with respect to the
Company’s Amended
and Restated 2021 Equity Incentive Plan:
Assumption |
|
Unvested
Options |
|
Risk free interest rate |
|
1.09% |
|
Expected dividend |
|
Nil 0 |
|
Expected volatility |
|
116% |
|
Expected life |
|
6.2 years |
|
Fair value of Portage stock |
|
US$8.74 |
|
Following
are the weighted average assumptions used in connection with the February 15, 2022 option grant, with respect to the
Company’s Amended
and Restated 2021 Equity Incentive Plan:
Assumption |
|
Unvested
Options |
|
Risk free interest rate |
|
1.99% |
|
Expected dividend |
|
Nil 0 |
|
Expected volatility |
|
111% |
|
Expected life |
|
6.0 years |
|
Fair value of Portage stock |
|
US$7.20 |
|
| (b) | The
movements in the number of options issued for the years ended March 31, 2022 and 2021were: |
Schedule of outstanding stock options | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
PBI
Amended and Restated 2021 Equity Incentive Plan | |
PBI
2013 Option Plan | |
iOx
Option Plan (Subsidiary Plan) |
| |
Years
Ended March 31, | |
Years
Ended March 31, | |
Years
Ended March 31, |
| |
2022 | |
2021 | |
2022 | |
2021 | |
2022 | |
2021 |
Balance,
beginning of year | |
| 868,000 | | |
| – | | |
| – | | |
| 2,980 | | |
| 1,924 | | |
| 2,599 | |
Granted | |
| 343,400 | | |
| 868,000 | | |
| – | | |
| – | | |
| – | | |
| – | |
Expired
or forfeited | |
| (60,000 | ) | |
| – | | |
| – | | |
| (2,980 | ) | |
| (649 | ) | |
| (675 | ) |
Balance,
end of year | |
| 1,151,400 | | |
| 868,000 | | |
| – | | |
| – | | |
| 1,275 | | |
| 1,924 | |
Exercisable,
end of year | |
| 405,997 | | |
| 116,666 | | |
| – | | |
| – | | |
| 1,275 | | |
| 1,604 | |
The
Board discontinued the 2013 Option Plan in fiscal 2019.
| (c) | The
following are the weighted average exercise price and the remaining contractual life for
outstanding options by plan as of March 31, 2022 and 2021: |
Schedule of weighted average exercise price and the remaining contractual life | |
| |
| |
| |
|
| |
PBI
Amended and Restated 2021 Equity Incentive Plan | |
iOx
Option Plan (Subsidiary Plan) |
| |
As
of March 31, | |
As
of March 31, |
| |
2022 | |
2021 | |
2022 | |
2021 |
Weighted
average exercise price | |
$ | 15.47 | | |
$ | 17.75 | | |
$ | 157.60 | | |
$ | 165.20 | |
Weighted
average remaining contractual life (in years) | |
| 9.10 | | |
| 9.79 | | |
| 0.05 | | |
| 0.95 | |
The
vested options can be exercised at any time in accordance with the applicable option agreement. The exercise price was greater than the
market price on the date of the grants for all options outstanding as of March 31, 2022 and March 31, 2021.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 18. STOCK
OPTION RESERVE (Cont’d)
The
Company recorded approximately $8.9 million and $8.0 million of share-based compensation expense with respect to the Amended and Restated
2021 Equity Incentive Plan in the years ended March 31, 2022 and 2021, respectively. The Company expects to record additional share-based
compensation expense of approximately $6.3 million through January 2026 with respect to the Amended and Restated 2021 Equity Incentive
Plan. Additionally, the intrinsic value of the stock options granted under the Amended and Restated 2021 Equity Incentive Plan was nil
at March 31, 2022.
The
Company recorded approximately $0.2 million, $0.9 million and $2.2 million of share-based compensation expense related to the iOx stock
option plan for the years ended March 31, 2022, 2021 and 2020, respectively. As of March 31, 2022, the Company’s iOx stock option
plan was fully vested. Additionally, the intrinsic value of the iOx stock options was approximately $0.1 million at March 31, 2022, all
of which is associated with vested exercisable options.
NOTE
19. (LOSS) PER SHARE
Basic
earnings per share ("EPS") is calculated by dividing the net income (loss) attributable to ordinary equity holders of the Company
by the weighted average number of ordinary shares outstanding during the year.
Diluted
EPS is calculated by dividing the net income (loss) attributable to ordinary equity holders of the Company by the weighted average number
of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion
of all the dilutive potential ordinary shares into ordinary shares.
The
following table reflects the loss and share data used in the basic and diluted EPS calculations (dollars in thousands, except per share
amounts):
Schedule of basic and diluted EPS calculations | |
| | | |
| | | |
| | |
| |
Years
Ended March 31, |
| |
2022 | |
2021 | |
2020 |
Numerator
(in 000’$) | |
| | | |
| | | |
| | |
Net
loss attributable to owners of the Company | |
$ | (16,870 | ) | |
$ | (15,833 | ) | |
$ | (5,333 | ) |
Denominator
(in 000’) | |
| | | |
| | | |
| | |
Weighted
average number of shares – Basic and Diluted | |
| 13,060 | | |
| 11,733 | | |
| 10,952 | |
Basic
and diluted (loss) per share (Actual) | |
$ | (1.29 | ) | |
$ | (1.35 | ) | |
$ | (0.49 | ) |
The
inclusion of the Company's stock options, restricted stock units and share purchase warrants in the computation of diluted loss per share
would have an anti-dilutive effect on loss per share and are therefore excluded from the computation. Consequently, there is no difference
between basic loss per share and diluted loss per share for the years ended March 31, 2022, 2021, and 2020. The following table reflects
the outstanding securities by year that would have an anti-dilutive effect on loss per share, and accordingly, were excluded from the
calculation.
Schedule of anti-dilutive share | |
| | | |
| | |
| |
As
of March 31, |
| |
2021 | |
2020 |
Stock
options | |
| 1,151,400 | | |
| 868,000 | |
Restricted
stock units | |
| 378,740 | | |
| 243,000 | |
Warrants | |
| 33,888 | | |
| 49,701 | |
Inclusion
of outstanding options or other common stock equivalents in the computation of diluted loss per share would have an anti-dilutive effect
on the loss per share and are therefore excluded from the computation. Consequently, there is no difference between loss per share and
diluted loss per share.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE
20. COMMITMENTS AND CONTINGENT LIABILITIES
Effective
March 15, 2022, iOx entered into a Master Services Agreement (“MSA”) with Parexel International (IRE) Limited (“Parexel”)
under which Parexel agrees to provide services as Contract Research Organization (“CRO”) provided in a work order (“Work
Order”) effective June 1, 2022 under which Parexel will operate a Phase 2 study of IMM60 and pembrolizumab in advanced melanoma
and NSCLC. The MSA provides for a five-year term, and the Work Order provides for a term to be ended upon the completion the services
required. The budget provides for service fees and pass-through expenses and clinical sites totaling $11.5 million.
NOTE
21. RELATED PARTY TRANSACTIONS
SalvaRx Acquisition
On
January 8, 2019, the Company acquired 100% of SalvaRx from SalvaRx Group plc. in exchange for 8,050,701 ordinary shares of the
Company for an aggregate consideration of US$92.6 million (see Note 10, “Acquisition and Business Combination”). Four of
the six directors of the Company are also directors of SalvaRx Group plc. The Company's CEO is also the CEO of SalvaRx and employees
of the Company comprise the management team of SalvaRx.
Investments
The
Company has entered into related party transactions and certain services agreements with its investees. Key management of the Company
has also entered into related party transactions with investees. Key management personnel are those persons having the authority and
responsibility for planning, directing and controlling the activities of the Company. The Board of Directors, Chairman, Chief Executive
Officer and Chief Financial Officer are key management personnel.
The
following subsidiaries and associates are considered related parties:
| (a) | Stimunity.
The CEO of Portage is one of three members of the Board of Directors of Stimunity (see Note
7, “Investment in Associate” and Note 25(d) “Stimunity Convertible Note”). |
| (b) | iOx.
Two of the three directorships on the Board of Directors of iOx is controlled by Portage.
Additionally, Portage has an observer on the Board of iOx. The CEO of Portage is also the
CEO of iOx, and the management team of the Company comprise the management team of iOx. |
| (c) | Saugatuck.
One of the three directorships on the Board of Directors of Saugatuck is controlled by Portage.
Additionally, the CEO of the Company is also the CEO of Saugatuck and the management team
of the Company comprise the management team of Saugatuck (see Note 10, “Acquisition
and Business Combination”). |
| (d) | Intensity.
The CEO of Portage is an officer of Intensity and both he and the VP of Projects and Operations
of the Company provide services to Intensity. The Company commenced invoicing Intensity for
such services in February 2022 (see Note 9, “Investments in Private Companies”).
Additionally, Intensity provides services (primarily rent) to Portage, which is billed monthly.
Portage paid Intensity $83,437, $77,088 and $62,132 for the years ended March 31, 2022, 2021
and 2020, respectively. |
| (e) | PGL.
PPL held 65% equity in PGL, committed to provide financing and also handles financial and
administrative matters of PGL. The Company disposed of 100% of its interests in PPL and PGL
on March 3, 2021 (see Note 8, “Disposition of PPL”). |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 21. RELATED
PARTY TRANSACTIONS (Cont'd)
| (f) | Portage
Development Services. Portage Development Services is a 100% owned subsidiary incorporated
in Delaware, which provides human resources, and other services to each operating subsidiary
via a shared services agreement. |
The
following are significant related party balances and transactions other than those disclosed elsewhere in the consolidated financial
statements:
Interest
expense includes $78,427 and $226,018 interest incurred in the years ended March 31, 2021 and 2020, respectively, on notes issued to
members of the Portage Board of Directors. The SalvaRx Notes were settled as of August 6, 2020 and, accordingly, no further interest
expense was incurred. In connection with the settlement of the SalvaRx Notes, $692,045 of accrued interest and $805,000 of principal
was paid to directors. The directors also exchanged an aggregate $2,415,000 of notes payable for SalvaRx warrants at a price of $6.64,
which were exchanged for Portage warrants and converted to Portage stock on October 13, 2020 (see Note 14, “Unsecured Notes Payable”).
In
January 2020, a board member of the Company advanced the Company $1.0 million, which was repaid in July 2020. There was no interest or
fees associated with this advance.
Transactions
between the parent company and its subsidiaries, which are related parties, have been eliminated in consolidation and are not disclosed
in this note.
On
September 8, 2021, the Company, through SalvaRx, completed a settlement of loans (including interest) to and receivables from iOx
for services rendered in exchange for 23,772 ordinary shares of iOx at a price of £162. Simultaneously, the Company entered into
an agreement with Oxford Sciences Innovation, Plc (“OSI”), the holder of $0.15 million notes plus accrued interest under
which OSI exchanged the notes plus accrued interest for 820 shares of iOx. The Company followed the guidance provided by an
IFRS Discussion Group Public Meeting dated November 29, 2016, following the general tenets of IAS 39, “Financial Instruments: Recognition
and Measurement,” and IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments” and recorded the exchange
at historical cost. Additionally, no profit or loss was recorded in connection with the exchange. As a result of these transactions,
the Company, through SalvaRx, increased its ownership up from 60.49% to 78.32%. See Note 25(c), “Events After the Balance
Sheet Date – Share Exchange Agreement - iOx” for a further discussion.
Employment
Agreements
PDS
entered into a Services Agreement with its CEO effective December 15, 2021. The Services Agreement provides that the CEO will receive
a base salary of $618,000, plus cost-of-living increases. The Services Agreement provides for annual increases based upon the review
of the base salary by the board of directors prior to the anniversary of the Services Agreement provided that the annual increase cannot
be less than the cost-of-living increase. The Services Agreement also provides that the CEO is eligible to receive an annual performance-based
bonus targeted at 59% of the applicable year’s base salary, which bonus is earned based on the achievement of performance targets,
as determined annually by the Board of Directors and communicated to the CEO in the first quarter of the year. Any annual bonus, to the
extent earned, is to be paid no later than March 15 of the following year. The Services Agreement is for an initial term of three years,
after which it will automatically renew annually unless terminated in accordance with the Services Agreement.
Under
the Services Agreement, the CEO may terminate his employment at any time for Good Reason, as defined in the Services Agreement. We may
terminate the CEO’s employment immediately upon his death, upon a period of disability or without “Just Cause”, as
defined. In the event that the CEO’s employment is terminated due to his death or Disability, for “Good Reason” or
without “Just Cause,” he will be entitled to Accrued Benefits (accrued unpaid portion of base salary, accrued unused vacation
time and any unpaid expenses). Additionally, he may be entitled to Severance Benefits, which include his then current base salary and
the average of his annual bonus for the prior two completed performance years, paid over 12 monthly installments. Additionally, the CEO
will be entitled to life insurance benefits and medical and dental benefits for a period of 12 months at the same rate the CEO and the
Company shared such costs during his period of employment.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 21. RELATED
PARTY TRANSACTIONS (Cont'd)
Additionally,
all stock options (and any other unvested equity incentive award) held by the CEO relating to shares of the Company will be deemed fully
vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be increased by a period
of two years from the Termination Date.
If
the CEO’s employment by the Company is terminated by the Company or any successor entity without “Just Cause” (not
including termination by virtue of the CEO’s death or Disability) or by the CEO for Good Reason within twelve (12) months
following the effective date of a “Change in Control” (as defined), then in addition to paying or providing Executive
with the Accrued Obligations, the Company will provide the following “Change in Control Severance Benefits”:
| (1) | The
Company will pay the Base Salary continuation benefit for eighteen (18) months; |
| (2) | The
Company will pay the life insurance benefit for eighteen (18) months; |
|
(3) |
The Company will pay an additional amount equivalent
to the CEO’s target annual bonus calculated using the Bonus Percentage for the performance year in which Executive’s
termination occurs. This bonus will be paid in twelve equal installments commencing on the first payroll date that is more than
sixty (60) days following the date of termination of Executive’s employment, with the remaining installments occurring on the
first day of the month for the eleven (11) months thereafter; |
|
(4) |
The Company will provide the CEO with continued medical
and dental benefits, as described above, for eighteen (18) months; and |
|
(5) |
All stock options (and any other unvested equity incentive
award) held by the CEO relating to shares of the Company or its parent will be deemed fully vested and exercisable on the Termination
Date, as defined, and the exercise period for such stock options will be increased by a period of two years from the Termination
Date. |
PDS entered into Services Agreements with each of our four other senior officers (individually,
“Executive” and collectively, “Executives”), three of which are dated as of December 1, 2021 and one of which
is dated December 15, 2021. Each of the Services Agreements provides for an initial term of two years and are automatically renewed for
one-year periods (except one, which provides for an initial term of one year and is automatically renewed for one-year periods). The Services
Agreements initially provide for annual base salaries ranging from $175,000 to $348,000 and annual bonus targets ranging from 30% to 40%. They also provide for long-term incentives
in the form of equity awards from time to time under the Portage Biotech Inc. Amended and Restated 2021 Equity Incentive Plan.
The
Services Agreements can be terminated by the Company without “Just Cause”, by death or Disability, or by the Executive for
“Good Reason”. In such instances, the Services Agreements provide for the payment of Accrued Obligations (accrued unpaid
portion of base salary, accrued unused vacation time and any unpaid expenses). Additionally, Executives (except one) are entitled to
50% of base salary plus 50% of average annual bonus earned over the prior two performance years, as well as prevailing life insurance
benefits for a period of six months and medical and dental benefits for a period of six months at the prevailing rate the Company and
the Executive were sharing such expenses.
Additionally,
all stock options (and any other unvested equity incentive award) held by the Executives relating to shares of the Company will be deemed
fully vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be increased by
a period of two years from the Termination Date.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 21. RELATED
PARTY TRANSACTIONS (Cont'd)
If
Executive’s employment by the Company is terminated by the Company or any successor entity without “Just Cause”
(not including termination by virtue of CEO’s death or Disability) or by Executive for Good Reason within twelve (12) months
following the effective date of a “Change in Control” (as defined), then in addition to paying or providing Executive
with the Accrued Obligations, the Company will provide the following “Change in Control Severance Benefits” (except in
one case in which Executive is entitled to Item (5) and 50% of Items (1) and (3) below):
|
(1) |
The Company will pay the Base Salary continuation benefit
for twelve (12) months; |
|
(2) |
The Company will pay the life insurance benefit for
twelve (12) months; |
|
(3) |
The Company will pay an additional amount equivalent
to Executive’s target annual bonus calculated using the Bonus Percentage for the performance year in which Executive’s
termination occurs. This bonus will be payable in twelve equal installments commencing on the first payroll date that is more than
sixty (60) days following the date of termination of Executive’s employment, with the remaining installments occurring on the
first day of the month for the eleven (11) months thereafter; |
|
(4) |
The Company will provide the Executive with continued
medical and dental benefits, as described above, for twelve (12) months; and |
|
(5) |
All stock options (and any other unvested equity incentive
award) held by the Executive relating to shares of the Company or its parent will be deemed fully vested and exercisable on the Termination
Date and the exercise period for such stock options will be increased by a period of two years from the Termination Date. |
The
Services Agreements also include customary confidentiality, as well as provisions relating to assignment of inventions. The Services
Agreements also includes non-competition and non-solicitation of employees and customers provision that run during the Executive’s
employment with the Company and for a period of one year after termination of employment.
Bonuses
& Board Compensation Arrangements
In
December 2021, the Compensation Committee approved performance bonuses payable to senior management totaling $0.7 million. The bonuses
were paid in December 2021.
In
addition, the Compensation Committee of the Board established board of director compensation. Effective January 1, 2022, each non-executive
board member will be entitled to receive cash board fees of $40,000 per annum, payable quarterly in arrears. Additionally, each non-executive
board member will be entitled to an annual grant of 6,900 options to purchase common shares, which would vest the first annual anniversary
of the date of grant.
The
chairman of the Board will be entitled to an annual cash fee of $30,000, payable quarterly in arrears. Additionally, the chairperson
of each of the Audit Committee, Compensation Committee and Nomination Committee will be entitled to annual fees of $15,000, $12,000 and
$8,000, respectively, payable quarterly in arrears. Members of those committees will be entitled to annual fees of $7,500, $6,000 and
$4,000, respectively, payable quarterly in arrears.
NOTE
22. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The
Company’s financial instruments recognized in the Company’s consolidated statements of financial position consist of the
following:
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 22. FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT (Cont'd)
Fair
value estimates are made at a specific point in time, based on relevant market information and information about financial instruments.
These estimates are subject to and involve uncertainties and matters of significant judgment, therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
The
following table summarizes the Company’s financial instruments as of March 31, 2022 and March 31, 2021:
Schedule of financial instruments | |
| | | |
| | | |
| | | |
| | |
| |
As
of March 31, |
| |
2022 | |
2021 |
(In thousands) | |
Amortized
Cost | |
Fair
Value through Other Comprehensive Income (FVTOCI) | |
Amortized
Cost | |
FVTOCI |
| |
| |
| |
| |
|
Financial
assets | |
| | | |
| | | |
| | | |
| | |
Cash
and cash equivalents | |
$ | 23,352 | | |
$ | – | | |
$ | 2,770 | | |
$ | – | |
Prepaid
expenses and other receivables | |
$ | 1,480 | | |
$ | – | | |
$ | 2,176 | | |
$ | – | |
Investments | |
$ | – | | |
$ | 9,082 | | |
$ | – | | |
$ | 9,144 | |
| |
Amortized
Cost | |
Fair
Value through Profit or Loss (FVTPL) | |
Amortized
Cost | |
FVTPL |
Financial
liabilities | |
| | | |
| | | |
| | | |
| | |
Accounts
payable and accrued liabilities | |
$ | 750 | | |
$ | – | | |
$ | 1,938 | | |
$ | – | |
Unsecured
notes payable | |
$ | – | | |
$ | – | | |
$ | 150 | | |
$ | – | |
Warrant
liability | |
$ | – | | |
$ | 33 | | |
$ | – | | |
$ | 1,120 | |
A
summary of the Company’s risk exposures as it relates to financial instruments are reflected below.
Fair value
of Financial Instruments
The
Company’s financial assets and liabilities are comprised of cash and cash equivalents, receivables and investments in equities
and private entities, accounts payable, warrant liability and unsecured notes payable.
The
Company classifies the fair value of these transactions according to the following fair value hierarchy based on the amount of observable
inputs used to value the instrument:
|
● |
Level 1 – Values are based on unadjusted quoted
prices available in active markets for identical assets or liabilities as of the reporting date. |
|
● |
Level 2 – Values are based on inputs, including
quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in
the marketplace. Prices in Level 2 are either directly or indirectly observable as of the reporting date. |
|
● |
Level 3 – Values are based on prices or valuation
techniques that are not based on observable market data. Investments are classified as Level 3 financial instrument. |
Assessment
of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair
value hierarchy.
Management
has assessed that the fair values of cash and cash equivalents, other receivables and accounts payable approximate their carrying amounts
largely due to the short-term maturities of these instruments.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 22. FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT (Cont'd)
The
following methods and assumptions were used to estimate their fair values:
Investment
in Sentien: Fair value of the asset is determined by considering strategy changes by Sentien (Level 3).
Investment
in Intensity: Fair value of the asset is determined by considering other comparable equity funding transactions by Intensity with
unrelated investors (Level 3).
Accrued
Equity Issuable: The fair value is estimated based on the average of the quoted market prices for the period in which the shares
were earned (Level 1).
Unsecured
Notes Payable: The fair value is estimated using a Black-Scholes model (Level 3) (see Note 14, “Unsecured Notes Payable”).
Warrant
Liability: The fair value is estimated using a Black-Scholes model (Level 3) (see Note 16, “Warrant Liability”).
There
have been no transfers between levels of the fair value hierarchy for the years ended March 31, 2022 and 2021.
The
Company’s financial instruments are exposed to certain financial risks: credit risk and liquidity risk.
Credit Risk
Credit
risk is the risk of loss associated with a counterparty’s inability to fulfil its payment obligations. The credit risk is attributable
to various financial instruments, as noted below. The credit risk is limited to the carrying value as reflected in the Company’s
consolidated statements of financial position.
Cash
and cash equivalents. Cash and cash equivalents are held with major international financial institutions and therefore the risk
of loss is minimal.
Other
Receivables. The Company was exposed to credit risk attributable to its debtor since a significant portion of this amount represents
the amount agreed on a settlement of a claim by PPL (see Note 5, “Prepaid Expenses and Other Receivables”), originally payable
over the next four years. The installment note was repaid in full in July 2021.
Liquidity Risk
Liquidity
risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due.
The
Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company’s reputation.
The Company holds sufficient cash and cash equivalents to satisfy obligations under accounts payable and accruals.
The
Company monitors its liquidity position regularly to assess whether it has the funds necessary to meet its operating needs and needs
for investing in new projects. The Company believes that it has sufficient funding to finance the committed drug development work, apart
from meeting its operational needs for the foreseeable future.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 22. FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT (Cont'd)
However,
as a biotech company at an early stage of development and without significant internally generated cash flows, there are inherent liquidity
risks, including the possibility that additional financing may not be available to the Company, or that actual drug development expenditures
may exceed those planned. The current uncertainty in global markets could have an impact on the Company’s future ability to access
capital on terms that are acceptable to the Company. There can be no assurance that required financing will be available to the Company.
See Note 2, “Liquidity” and Note 17, “Capital Stock” for a discussion of the Company’s share offering.
NOTE
23. CAPITAL DISCLOSURES
The
Company considers the items included in shareholders’ equity as capital. The Company had accounts payable and accrued expenses
of approximately $0.8 million as of March 31, 2022 (approximately $1.9 million as of March 31, 2021) and current assets of approximately
$24.8 million as of March 31, 2022 (approximately $4.9 million as of March 31, 2021). The Company’s objectives when managing capital
are to safeguard the Company’s ability to continue as a going concern in order to pursue new business opportunities and to maintain
a flexible capital structure, which optimizes the costs of capital at an acceptable risk.
The
Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics
of the underlying assets.
As
of March 31, 2022, shareholders’ equity attributable to the owners of the company was approximately $121.2 million (approximately
$101.4 million as of March 31, 2021).
The
Company is not subject to any externally imposed capital requirements and does not presently utilize any quantitative measures to monitor
its capital. There have been no changes to the Company’s approach to capital management during the years ended March 31, 2022 and
2021.
NOTE
24. NON-CONTROLLING INTEREST
Schedule of non-controlling interest | |
| | | |
| | | |
| | | |
| | | |
| | |
(In
thousands) | |
PGL | |
SalvaRx | |
iOx | |
Saugatuck
and subsidiary | |
Total |
Non-controlling
interest as of April 1, 2020 | |
$ | (81 | ) | |
$ | 2,451 | | |
$ | 46,712 | | |
$ | 28 | | |
$ | 49,110 | |
Share-based
compensation expense | |
| – | | |
| – | | |
| 850 | | |
| – | | |
| 850 | |
Exchange
of SalvaRx warrants for Portage warrants in SalvaRx Notes settlement | |
| – | | |
| (2,451 | ) | |
| – | | |
| – | | |
| (2,451 | ) |
Net
(loss) attributable to non-controlling interest | |
| 81 | | |
| – | | |
| (1,389 | ) | |
| (48 | ) | |
| (1,356 | ) |
Non-controlling
interest as of March 31, 2021 | |
$ | – | | |
$ | – | | |
$ | 46,173 | | |
$ | (20 | ) | |
$ | 46,153 | |
Share-based
compensation expense | |
| – | | |
| – | | |
| 191 | | |
| – | | |
| 191 | |
Exchange
of notes payable, accrued interest and warrants for iOx shares | |
| – | | |
| – | | |
| 184 | | |
| – | | |
| 184 | |
Net
(loss) attributable to non-controlling interest | |
| – | | |
| – | | |
| (1,847 | ) | |
| (452 | ) | |
| (2,299 | ) |
Non-controlling
interest as of March 31, 2022 | |
$ | – | | |
$ | – | | |
$ | 44,701 | | |
$ | (472 | ) | |
$ | 44,229 | |
On
September 8, 2021, the Company, through SalvaRx, completed a settlement of loans (including interest) to and receivables from iOx for
services rendered in exchange for 23,772 ordinary shares of iOx at a price of £162. See Note 14, “Unsecured Notes Payable
– iOx Unsecured Notes Payable” for a further discussion.
Saugatuck
and subsidiary includes Saugatuck and its wholly-owned subsidiary, Saugatuck Rx LLC.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 25. EVENTS
AFTER THE BALANCE SHEET DATE
| (a) | Tarus
Therapeutics, Inc. Merger Agreement |
On
July 1, 2022, the Company, its wholly-owned subsidiary, Tarus Acquisition Inc., and Tarus Therapeutics, Inc., a Delaware Corporation
advancing adenosine receptor agonists for the treatment of solid tumors, entered into an Agreement and Plan of Merger and Reorganization
(the “Merger Agreement”). Under the structure of the Merger Agreement, Tarus Therapeutics, Inc. was ultimately merged into
a wholly-owned subsidiary of the Company with the surviving entity renamed Tarus Therapeutics, LLC. The Tarus merger entitles the Company
to the rights, know-how and/or ownership related to the assets developed by Tarus (the “Adenosine Compounds”), including:
| 1. | All
rights and obligations related to the License Agreement between Tarus and Impetis, dated
October 29, 2019, and the Call Option under the License Agreement, which was exercised on
November 5, 2020. |
| 2. | All
intellectual property and related documents owned or controlled by Tarus, including issued
or pending patents, patent applications and trade secrets. Additionally, any draft submissions
and/or correspondence with patent authorities. |
| 3. | All
documents and supplies related to Adenosine Compounds including inventory, reagents, data,
assays, reports, vendor agreements and other information related to the preclinical development. |
| 4. | All
clinical supplies, manufacturing know-how, batch records, regulatory documents pertaining
to the Adenosine Compounds, certain reservations for manufacturing campaigns and any related
agreements. |
| 5. | All
regulatory documents and correspondence pertaining to the Adenosine Compounds. |
| 6. | All
CRO agreements and protocol related documents for Adenosine Compounds. |
| 7. | All
current documents related to market research, forecasting, budgets and competitive intelligence. |
| 8. | Rights
to the use of Tarus Therapeutics name for regulatory purposes. |
As
consideration for Tarus, the Company issued to Tarus shareholders an aggregate of 2,425,999 ordinary shares of Portage, calculated on
the basis of $18M divided by the 60-day Volume Weighted Average Price per share. The shares are unregistered and subject to lock-ups
for terms ranging from six to twelve months. Additionally, payments of up to $32 million in cash or Portage ordinary shares would be
triggered upon achievement of future development and sales milestones. As a result of the transaction:
| · | The
Company also assumed $2M short-term debt held by Tarus and deferred license milestones obligations
($1M plus interest). |
| · | Upon
enrolling the first patient in a Phase 2 clinical trial, Portage will pay an additional one-time
payment of $15M. Payment will be in the form of cash or PRTG stock (at the discretion of
Portage). |
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 25. EVENTS
AFTER THE BALANCE SHEET DATE (Cont’d)
On
July 6, 2022 (the “Signing Date”), the Company entered into a Purchase Agreement (the “Purchase Agreement”) with
Lincoln Park Capital Fund, LLC (“Lincoln”), pursuant to which the Company may require Lincoln to purchase ordinary shares
having an aggregate value of up to $30 million over a period of 36 months. Pursuant to the Purchase Agreement, Lincoln will be obligated
to purchase ordinary shares in three different scenarios as described below.
Upon
execution of the Purchase Agreement, The Company issued to Lincoln 94,508 ordinary shares, representing a 3% commitment fee valued at
$0.9 million The Company has the right to terminate the Purchase Agreement for any reason, effective upon one (1) business day prior
written notice to Lincoln. Lincoln has no right to terminate the Purchase Agreement.
The
Purchase Agreement does not impose any financial or business covenants on the Company and there are no limitations on the use of proceeds
received by the Company from Lincoln. The Company may raise capital from other sources in its sole discretion; provided, however, that
the Company shall not enter into any similar agreement for the issuance of variable priced equity-like securities until the three (3)
year anniversary of the Signing Date, excluding, however, an at-the-market (“ATM”) transaction with a registered broker-dealer.
In
connection with the Purchase Agreement, the Company and Lincoln entered into a Registration Rights Agreement (the “Registration
Rights Agreement”), dated July 6, 2022. Pursuant to the Registration Rights Agreement, the Company agreed, that within the time
required under Rule 424(b) under the Securities Act, it will file with the SEC the Initial Prospectus Supplement to the Company’s
shelf registration statement pursuant to Rule 424(b) for the purpose of registering for resale the ordinary shares to be issued to Lincoln
under the Purchase Agreement. All reasonable expenses of the Company incurred through the registration of the ordinary shares under the
Purchase Agreement shall be paid by the Company.
| (c) | Share
Exchange Agreement - iOx |
On
July 18, 2022, the Company entered into a Share Exchange Agreement with each of the minority shareholders of iOx (Sellers). Under the
terms of the Share Exchange Agreement, each Seller shall sell to Company, and Company shall acquire from each Seller, legal and beneficial
ownership of the number of iOx Shares held by each Seller, free and clear of any Share Encumbrances, in exchange for the issuance in an
aggregate of 1,070,000 Portage Shares to be allocated among the Sellers based upon their relative ownership. Upon the completion of the
Share Exchange, Portage owns 100% of the issued and outstanding shares of iOx.
As
additional consideration for the sale of the iOx Exchange Shares to the Company, the Sellers shall have the contingent right to receive
additional shares (“Earnout Shares”) from the Company having an aggregate value equal to $25M calculated at the Per Share
Earnout Price, as defined, upon the achievement of certain milestones defined as the dosing of the first patient in a Phase 3 clinical
trial for either PORT-2 (IMM60 iNKT cell activator/agonist) or PORT-3 (PLGA-nanoparticle formulation of IMM60 combined with a NY-ESO-1
peptide vaccine). The Company shall have the option, in its sole and absolute discretion, to pay the Sellers up to USD $25M in cash.
PORTAGE BIOTECH
INC.
Notes to Consolidated
Financial Statements
(U.S. Dollars)
March
31, 2022 and 2021
NOTE 25. EVENTS
AFTER THE BALANCE SHEET DATE (Cont’d)
| (d) | Stimunity
Convertible Note |
On
July 13, 2022, the Company entered into a commitment with Stimunity to provide €600,000 under a Convertible Note with a maturity
date of September 1, 2023 (the “Maturity Date”). The Convertible Note provides for interest at 7% per annum. The Convertible
Note is automatically converted upon Stimunity commencing a Series A subscription round for €20 million. If such Subscription round
is completed prior to the Maturity Date, the Company will be entitled to convert the Convertible Note at the subscription share price
less 15%. Additionally, if subscribers create a new category of shares with additional rights of less than €5 million (the “Minimum
Raise”), the Company will have the right to convert the Convertible Note and historical shares owned into the new category of shares.
In the event that Stimunity does not close a subscription prior to the Maturity Date or raises less than the Minimum Raise, the Company
will have the right to convert at €363.00 per share or the raise price less 15%, whichever is lower. The Convertible Note is expected
to be funded by September 1, 2022.
It
is anticipated that such Convertible Note will be funded by existing cash and cash provided under the ELOC.
(b) EXHIBITS
The following documents are filed as part of this
Annual Report on Form 20-F.
Exhibit No. |
|
Description of Exhibit |
|
|
|
1.1 |
|
Certificate of Continuance - Incorporated herein by reference to Exhibit 3.1 to Form 6-K filed on August 1, 2013. |
|
|
|
1.2 |
|
Memorandum of Association and Articles of Association of Portage Biotech Inc. as filed in the British Virgin Island on June 21, 2022 - Incorporated herein by reference to Exhibit 99.1 to Form 6-K filed on June 23, 2022. |
|
|
|
2.1* |
|
Description of Rights of Stock Registered under Section 12 of the Exchange Act. |
|
|
|
2.2 |
|
Agreement and Plan of Merger and Reorganization among Portage Biotech Inc., Portage Merger Sub 1, Inc., Portage Merger Sub 2, LLC, Tarus Therapeutics, Inc. and Shareholder Representative Services LLC dated as of July 1, 2022 - Incorporated herein by reference to Exhibit 2.1 to Form 6-K filed on July 8, 2022. |
|
|
|
2.3 |
|
Share Exchange Agreement dated as of July 18, 2022, by and among Portage Biotech Inc., SalvaRx Ltd., and each of the shareholders of iOx Therapeutics Ltd. - Incorporated herein by reference to Exhibit 2.1 to Form 6-K filed on July 19, 2022. |
|
|
|
4(a).1 |
|
Controlled Equity OfferingSM Sales Agreement by and between Portage Biotech Inc. and Cantor Fitzgerald & Co., dated February 24, 2021 - Incorporated herein by reference to Exhibit 1.1 to Form F-3 filed on February 24, 2021. |
|
|
|
4(a).2 |
|
Underwriting Agreement, dated as of June 24, 2021 the Company, Cantor Fitzgerald & Co. and Oppenheimer & Co. Inc. - Incorporated herein by reference to Exhibit 1.1 to Form 6-K filed on June 24, 2021. |
|
|
|
4(c)(iv).1 |
|
2011 Consultant Stock Compensation Plan - Incorporated herein by reference to Exhibit 10.1 to Form S-8 filed on April 21, 2011. |
|
|
|
4(c)(iv).2 |
|
2013 Stock Option Plan - Incorporated herein by reference to Exhibit 10 to Form S-8 filed on December 19, 2013. |
|
|
|
4(c)(iv).3 |
|
Stock Option Plan - Incorporated herein by reference to Exhibit 10 to Form S-8 filed on March 17, 2015. |
|
|
|
4(c)(iv).4 |
|
Portage Biotech Inc. 2021 Equity Incentive Plan dated as of January 13, 2021 - Incorporated herein by reference to Exhibit 4(c)(iv).4 to Form 20-F filed on July 29, 2021. |
|
|
|
4(c)(iv).5* |
|
Portage Biotech Inc. Amended and Restated 2021 Equity Incentive Plan dated as of January 19, 2022. |
|
|
|
8.1* |
|
List of Subsidiaries. |
|
|
|
10.1 |
|
Form of Lock-Up Agreement dated July 1. 2022 - Incorporated herein by reference to Exhibit 10.1 to Form 6-K filed on July 8, 2022. |
(b) EXHIBITS (Cont’d)
Exhibit No. |
|
Description of Exhibit |
|
|
|
10.2 |
|
Form of Lock-Up Agreement dated July 1, 2022 - Incorporated herein by reference to Exhibit 10.2 to Form 6-K filed on July 8, 2022. |
|
|
|
10.3 |
|
Purchase Agreement dated as of July 6, 2022, by and between Portage Biotech Inc. and Lincoln Park Capital Fund, LLC - Incorporated herein by reference to Exhibit 10.3 to Form 6-K filed on July 8, 2022. |
|
|
|
10.4 |
|
Registration Rights Agreement dated as of July 6, 2022, by and between Portage Biotech Inc. and Lincoln Park Capital Fund, LLC - Incorporated herein by reference to Exhibit 10.4 to Form 6-K filed on July 8, 2022. |
|
|
|
10.5* |
|
Services Agreement effective as of December 15, 2021, by and between Portage Development Services Inc. and Ian B. Walters, MD. |
|
|
|
10.6* |
|
Services Agreement effective as of December 1, 2021, by and between Portage Development Services Inc. and Allan Shaw. |
|
|
|
10.7* |
|
Services Agreement effective as of December 1, 2021, by and between Portage Development Services Inc. and Robert Kramer, PhD. |
|
|
|
10.8* |
|
Services Agreement effective as of December 15, 2021, by and between Portage Development Services Inc. and Steven Innaimo. |
|
|
|
10.9* |
|
Services Agreement effective as of December 1, 2021, by and between Portage Development Services Inc. and Brian Wiley. |
|
|
|
10.10* |
|
Form of Share Option Agreement dated as of January 13, 2021. |
|
|
|
10.11* |
|
Form of Share Option Agreement dated as of January 13, 2021. |
|
|
|
10.12* |
|
Form of Restricted Share Unit Award and Dividend Equivalent Rights Agreement dated as of January 13, 2021. |
|
|
|
10.13* |
|
Form of Share Option Agreement dated as of January 19, 2022. |
|
|
|
10.14* |
|
Form of Share Option Agreement dated as of January 19, 2022. |
|
|
|
10.15* |
|
Form of Restricted Share Unit Award and Dividend Equivalent Rights Agreement dated as of January 19, 2022. |
|
|
|
10.16* |
|
Form of Share Option Agreement dated as of February 15, 2022. |
|
|
|
11.1 |
|
Charter of Audit and Compensation Committee Regarding Compensation Matters - Incorporated herein by reference to Exhibit 11.1 to Form F-20 filed on July 31, 2014. |
|
|
|
11.2 |
|
Charter of Audit and Compensation Committee Regarding Audit Matters - Incorporated herein by reference to Exhibit 11.2 to Form F-20 filed on July 31, 2014. |
|
|
|
11.3 |
|
Code of Conduct - Incorporated herein by reference to Exhibit 11.3 to Form F-20 filed on July 31, 2014. |
|
|
|
11.4* |
|
Nominating Committee Charter. |
(b) EXHIBITS (Cont’d)
_________________
* Filed herewith