Alpha Compute Corp 6-K, filed Aug 30, 2021
Alpha Compute Corp (ALP)
About this 6-K
Alpha Compute Corp filed this 6-K on August 30, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2021
Commission File Number:
(Translation of registrant's name into English)
| N/A |
| (Translation of Registrant's name into English) |
| British Virgin Islands |
| (Jurisdiction of incorporation or organization) |
| (Address of principal executive offices) |
c/o Portage Biotech, Inc., Ian Walters, 203.221.7376
6
Adelaide Street East, Suite 300, Toronto, Ontario, Canada M5C 1H6
(Name, telephone, e-mail and/or facsimile number and Address of Company Contact Person)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
EXHIBITS
Exhibit 99.1
Portage Biotech Inc.
Condensed Consolidated Interim Financial Statements
For the Three Months Ended June 30, 2021
(Unaudited – Prepared by Management)
(U.S. Dollars)
Portage Biotech Inc.
Condensed Consolidated Interim Financial Statements
| Index | Page | |
| Notice to Reader | F-1 | |
| Condensed Consolidated Interim Statements of Financial Position | ||
| As of June 30, 2021 (Unaudited) and March 31, 2021 | F-2 | |
| Condensed Consolidated Interim Statements of Operations and Other Comprehensive Income (Unaudited) | ||
| Three months ended June 30, 2021 and 2020 | F-3 | |
| Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity (Unaudited) | ||
| Three months ended June 30, 2021 and 2020 | F-4 | |
| Condensed Consolidated Interim Statements of Cash Flows (Unaudited) | ||
| Three months ended June 30, 2021 and 2020 | F-5 | |
| Notes to Condensed Consolidated Interim Financial Statements | F-6 to F-27 |
NOTICE TO READER OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The condensed consolidated interim financial statements for Portage Biotech Inc. are comprised of the condensed consolidated statements of financial position as of June 30, 2021 and March 31, 2021, and the condensed consolidated interim statements of operations and comprehensive loss for the three months ended June 30, 2021 and 2020 and the statements of equity and cash flows for each of the three months then ended and are the responsibility of the Company’s management.
The condensed consolidated interim financial statements have been prepared by management and include the selection of appropriate accounting principles, judgments and estimates necessary to prepare these condensed consolidated interim financial statements in accordance with International Financial Reporting Standards.
| “signed” | “signed” |
| Allan Shaw, CFO | Ian Walters MD, Director |
| DATE: August 30, 2021 |
| F-1 |
Portage Biotech Inc.
Condensed Consolidated Interim Statements of Financial Position
(U.S. Dollars in thousands)
(Unaudited – see Notice to Reader dated August 30, 2021)
| As of, | Notes | June 30, 2021 | March 31, 2021 | |||||||
| (Audited) | ||||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | $ | $ | ||||||||
| Prepaid expenses and other receivables | 5 | |||||||||
| Total current asset | ||||||||||
| Long-term assets | ||||||||||
| Long-term portion of other receivables | 5 | |||||||||
| Investment in associate | 7 | |||||||||
| Investments in private companies | 9 | |||||||||
| Goodwill | 10 | |||||||||
| In-process research and development | 11 | |||||||||
| Other assets | ||||||||||
| Total assets | $ | $ | ||||||||
| Liabilities and Equity | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||||
| Warrant liability | 13 | |||||||||
| Unsecured notes payable | 12 | |||||||||
| Total current liabilities | ||||||||||
| Non-current liabilities | ||||||||||
| Deferred tax liability | 11 | |||||||||
| Total non-current liabilities | ||||||||||
| Total liabilities | ||||||||||
| Shareholders’ Equity | ||||||||||
| Capital stock | 14 | |||||||||
| Stock option reserve | 15 | |||||||||
| Accumulated other comprehensive income | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total equity attributable to owners of the Company | ||||||||||
| Non-controlling interest | 21 | |||||||||
| Total equity | $ | $ | ||||||||
| Total liabilities and equity | $ | $ | ||||||||
| Commitments and Contingent Liabilities (Note 17) | ||||||||||
| On behalf of the Board | “Allan Shaw” | Chief Financial Officer | “Ian Walters” | Director |
| (signed) | (signed) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| F-2 |
Portage Biotech Inc.
Condensed Consolidated Interim Statements of Operations and Other Comprehensive (Loss)
(U.S. Dollars in thousands, except per share amounts)
(Unaudited – see Notice to Reader dated August 30, 2021)
| Note | Three Months Ended | |||||||||
| June 30, 2021 | June 30, 2020 | |||||||||
| Expenses | ||||||||||
| Research and development | $ | $ | ||||||||
| General and administrative expenses | ||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||
| Change in fair value of warrant liability | 13 | |||||||||
| Share of (loss) income in associates accounted for using equity method | 7 | ( | ) | |||||||
| Interest (expense) | ( | ) | ( | ) | ||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||||
| Income tax benefit | ||||||||||
| Net (loss) | ( | ) | ( | ) | ||||||
| Other comprehensive income (loss) | ||||||||||
| Unrealized gain on investments | 6, 9 | |||||||||
| Total comprehensive (loss) for period | $ | ( | ) | $ | ( | ) | ||||
| Net (loss) income attributable to: | ||||||||||
| Owners of the Company | $ | ( | ) | $ | ( | ) | ||||
| Non-controlling interest | 21 | ( | ) | |||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | ||||
| Comprehensive (loss) income attributable to: | ||||||||||
| Owners of the Company | $ | ( | ) | $ | ( | ) | ||||
| Non-controlling interest | 21 | ( | ) | |||||||
| Total comprehensive (loss) income for year | $ | ( | ) | $ | ( | ) | ||||
| (Loss) per share | 16 | |||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding | 16 | |||||||||
| Basic and diluted | ||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| F-3 |
Portage Biotech Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
For the Three Months Ended June 30, 2021 and 2020
(U.S. Dollars)
(Unaudited – see Notice to Reader dated August 30, 2021)
| Number of Shares | Capital Stock | Stock Option Reserve | Accumulated Other Comprehensive Income | Retained Earnings (Accumulated Deficit) | Equity Attributable to Owners of Company | Non-controlling Interest | Total Equity | |||||||||||||||||||||||||
| In ‘000’ | In ‘000’$ | In ‘000’$ | In ‘000’$ | In ‘000’$ | In ‘000’$ | In ‘000’$ | In ‘000’$ | |||||||||||||||||||||||||
| Balance, April 1, 2020 | ( | ) | ||||||||||||||||||||||||||||||
| Issued under private placement | ||||||||||||||||||||||||||||||||
| Share issuance costs | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Share-based compensation | – | |||||||||||||||||||||||||||||||
| Unrealized gain on investments | – | |||||||||||||||||||||||||||||||
| Net loss for period | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Balance, April 1, 2021 | ( | ) | ||||||||||||||||||||||||||||||
| Share-based compensation | – | |||||||||||||||||||||||||||||||
| Shares issued under ATM | ||||||||||||||||||||||||||||||||
| Shares issued under offering | ||||||||||||||||||||||||||||||||
| Share issuance costs | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Shares issued or accrued for services | ||||||||||||||||||||||||||||||||
| Net loss for period | – | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| F-4 |
Portage Biotech Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the Three Months Ended June 30, 2021 and 2020
(U.S. Dollars in thousands)
(Unaudited – see Notice to Reader dated August 30, 2021)
| Three Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows provided by (used in) operating activities: | ||||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments for non-cash items: | ||||||||
| Increase in deferred tax liability | ||||||||
| Income on fair value of warrant liability | ( | ) | ||||||
| Value of shares issued for services | ||||||||
| Amortization of debt discount | ||||||||
| Share of loss (gain) in associates | ( | ) | ||||||
| Stock-based compensation expense | ||||||||
| Changes in operating working capital: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other receivables | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Other | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows provided by (used in) investing activities: | ||||||||
| Investment in associates | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows provided by (used in) financing activities: | ||||||||
| Proceeds from shares issued under registered offering | ||||||||
| Share issuance costs | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Increase in cash and cash equivalents during period | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Increase in accounts payable for stock issuance costs | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Fair value of warrant liability for Portage warrants issued | $ | $ | ||||||
| Unrealized (loss) on investment in investments | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| F-5 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 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 FH Chambers, P.O. Box 4649, Road Town, Tortola, BVI. Its Toronto agent, Portage Services Ltd., is located at 6 Adelaide Street East, Suite 300, Toronto, Ontario, M5C 1H6, Canada.
The Company is a reporting issuer with the securities commissions of the provinces of Ontario and British Columbia. Its ordinary shares were listed on the Canadian Stock 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”. The Company voluntarily delisted its common shares from the CSE at the market close on April 23, 2021, since the Company’s shares began trading on NASDAQ.
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
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 registration statement and prospectus with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(2) 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 Registration Statement includes:
| · | a
base prospectus, which covers the offering, issuance and sales by us of up to $ |
| · | a
sales agreement supplemental prospectus covering the offer, issuance and sale by us of up
to a maximum aggregate offering price of up to $ |
| · | 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. |
| F-6 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 1. NATURE OF OPERATIONS (Cont’d)
NOTE 2. LIQUIDITY
As
of June 30, 2021, the Company had cash and cash equivalents of $
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.
| F-7 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 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 condensed consolidated interim financial statements have been prepared in accordance with the 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. These condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Company for the year ended March 31, 2021.
These condensed consolidated interim financial statements have been prepared on an historical cost basis except for items disclosed herein at fair value (see Note ----19, Financial Instruments and Risk Management”). In addition, these condensed consolidated interim 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 condensed consolidated interim financial statements were approved and authorized for issuance by the Audit Committee and Board of Directors on August 26, 2021.
Consolidation
The condensed consolidated interim 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 based immune-oncology company, a
(c)
Saugatuck Therapeutics, Ltd. (“Saugatuck”), a
(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.
| F-8 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 3. BASIS OF PRESENTATION (Cont'd)
Consolidation (Cont’d)
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 |
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
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 condensed consolidated interim 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.
| F-9 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 4. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies are set out in Note 4 to the fiscal 2021 audited consolidated financial statements. These policies have been applied consistently to all periods presented in these condensed consolidated interim financial statements.
Recent Accounting Pronouncements
Impact of Adoption of Significant New IFRS Standards in 2020
| (a) | IAS 1: Presentation of Financial Statements, and IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (Amendment) |
The amendments to IAS 1 and IAS 8 clarify the definition of material and seek to align the definition used in the Conceptual Framework with that in the standards themselves, as well as ensuring the definition of material is consistent across all IFRS. The Company adopted these amendments effective January 1, 2020. The adoption of these amendments did not have a significant impact on the Company’s annual consolidated financial statements.
| (b) | Conceptual Framework for Financial Reporting |
Together with the revised Conceptual Framework published in March 2018, the IASB also issued Amendments to References to the Conceptual Framework in IFRS Standards. The Company adopted the Revised Conceptual Framework effective January 1, 2020. The adoption of these amendments did not have a significant impact on the Company’s annual consolidated financial statements.
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 condensed consolidated interim 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.
| (c) | 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 will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.
| F-10 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 4. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
| (d) | 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 will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.
| (e) | 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 will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.
| (f) | 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.
| (g) | 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 and IAS 28 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, 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.
| F-11 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 5. PREPAID EXPENSES AND OTHER RECEIVABLES
| Schedule of prepaid expenses and other receivables | ||||||||
| (In thousands) | As
of June 30, 2021 | As
of March 31, 2021 | ||||||
| Prepaid insurance | $ | $ | ||||||
| Research & development tax credits | ||||||||
| Other prepaid expenses | ||||||||
| Other receivables | ||||||||
| Total prepaid expenses and other receivables | $ | $ | ||||||
In
October 2016, the Company's wholly-owned subsidiary, PPL, agreed to a settlement, from a claim made against a supplier, to receive $
NOTE 6. INVESTMENT IN MARKETABLE EQUITY SECURITIES
As
of March 31, 2020, the Company’s investment in marketable equity securities was comprised of
In
August 2020, the Company sold the shares of Biohaven for proceeds of $resulting in a gain of $
The following table is a roll-forward of the investment in Biohaven as of June 30, 2021 and 2020:
| Schedule of investment in marketable equity securities | ||||||||
| Three Months Ended June 30, | ||||||||
| (In thousands) | 2021 | 2020 | ||||||
| Balance, beginning of period | $ | $ | ||||||
| Unrealized gain on investment | ||||||||
| Balance, end of period | $ | $ | ||||||
NOTE 7. INVESTMENT IN ASSOCIATE
Details of the Company’s associate as of June 30, 2021 and March 31, 2021 are as follows:
| Schedule of investment associate | ||||||||
| Name | Principal Activity | Place
of Incorporation and Principal Place of Business | Voting
Rights Held as of June 30, 2021 | Voting
Rights Held as of March 31, 2021 | ||||
The abovementioned associate is accounted for using the equity method in these condensed consolidated interim financial statements.
| F-12 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 7. INVESTMENT IN ASSOCIATE (Cont’d)
The following table is a roll-forward of the Company’s investment in Stimunity S.A. as of June 30, 2021 and 2020:
| Schedule of investment in Stimunity S.A. | ||||||||
| Three Months Ended June 30, | ||||||||
| (In thousands) | 2021 | 2020 | ||||||
| Balance, beginning of period | $ | $ | ||||||
| Additional investment | ||||||||
| Share of (loss) income | ( | ) | ||||||
| Balance, end of period | $ | $ | ||||||
On
June 1, 2020, the Company made an additional $
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) income in Stimunity of ($
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.
| F-13 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 8. DISPOSITION OF PPL
On
March 3, 2021, the Company disposed of
NOTE 9. INVESTMENTS IN PRIVATE COMPANIES
The following is a discussion of our investments in private companies as of June 30, 2021 and March 31, 2021.
Sentien
In
August 2015, the Company acquired 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
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 million shares, which represented a
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 $
During
the year ended March 31, 2020, the Company recorded an unrealized gain of $
As
of each of June 30, 2021 and March 31, 2021, the Company owned approximately
| F-14 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 10. GOODWILL
| Schedule of IPR&D projects | ||||||||
| (In thousands) | As
of June 30, 2021 | As
of March 31, 2021 | ||||||
| Balance, beginning of period | $ | $ | ||||||
| Balance, end of period | $ | $ | 43,324 | |||||
The Company’s goodwill arose from the acquisition of SalvaRx and its portfolio of several projects and investments.
As of June 30, 2021, the Company determined that it has only one cash-generating unit (“CGU”), the consolidated Portage Biotech, Inc.
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.
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 2021 and fiscal 2020 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.
| F-15 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 10. GOODWILL (Cont’d)
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
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. 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 three months ended June 30, 2021.
As of June 30, 2021, management assessed whether any indications of impairment existed for the Company’s CGU and concluded no indicators were present. Therefore, a test for impairment was not required and no impairment was recorded for the three months ended June 30, 2021.
NOTE 11. IN-PROCESS RESEARCH AND DEVELOPMENT AND DEFERRED TAX LIABILITY
In-process research and development (“IPR&D”) consists of the following projects (in 000’$):
| Schedule of In process research and development | ||||||||||
| Project # | Description | Value
as of June 30, 2021 | Value
as of March 31, 2021 | |||||||
| iOx: | ||||||||||
| IMM 60 | Melanoma & Lung Cancers | $ | $ | |||||||
| IMM 65 | Ovarian/Prostate Cancers | |||||||||
| 117,210 | 117,210 | |||||||||
| Oncomer/Saugatuck | DNA Aptamers | |||||||||
| $ | $ | |||||||||
| Deferred tax liability | $ | $ | ||||||||
| F-16 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 11. IN-PROCESS RESEARCH AND DEVELOPMENT AND DEFERRED TAX LIABILITY (Cont’d)
As of June 30, 2021, management assessed whether any indications of impairment existed for the Company’s IPR&D and concluded no indicators were present. Therefore, a test for impairment was not required and no impairment was recorded for the three months ended June 30, 2021.
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 United Kingdom. As of June 30, 2021, the Company recorded deferred tax expense of $
NOTE 12. 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 | $ | $ | $ | $ | ||||||||||||
| Repayment | ( | ) | ( | ) | ||||||||||||
| Amortization of debt discount | ||||||||||||||||
| Value of notes exchanged in warrant exercise | ( | ) | ( | ) | ||||||||||||
| Settlement in connection with disposition of PPL | ( | ) | ( | ) | ||||||||||||
| Loss on extinguishment of debt | ||||||||||||||||
| Proceeds from loan payable | ||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | ||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ||||||||||||
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 $
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 $
| F-17 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 12. UNSECURED NOTES PAYABLE (Cont’d)
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 $
The noteholders who
accepted the offer exchanged their SalvaRx warrants for an equal number of Portage shares at the same price per share.
Four
of the Company's directors, Gregory Bailey, James Mellon (former director), Steven Mintz (in trust) and Kam Shah, received, in total,
of
the warrants pursuant to this transaction. Subsequent to the exercise of the warrants in October 2020, Portage had
The
Company also recorded a loss on early extinguishment of debt of $
iOx Unsecured Notes Payable
In
connection with the SalvaRx Acquisition in January 2019, the
NOTE 13. WARRANT LIABILITY
Below is the roll-forward of warrants issued by entity (see Note 12, “Unsecured Notes Payable”):
| Schedule of warrant liability | ||||||||||||
| PBI | ||||||||||||
| Exercise Price | Warrants | Amount | ||||||||||
| In 000’ | In 000’$ | |||||||||||
| Warrants outstanding, April 1, 2021 | $ | $ | ||||||||||
| Fair value adjustment as of June 30, 2021 (1) (2) | ( | ) | ||||||||||
| Warrants outstanding, June 30, 2021 | $ | $ | ||||||||||
| (1) |
The Black Scholes assumptions used in the fair value calculation of the warrants as of June 30, 2021 were:
Risk free rate: 0.11%
Expected Dividend: $0
Expected Life: 1.28 years
Volatility: 92.6%
| (2) |
| F-18 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 14. CAPITAL STOCK
| (a) | Authorized ordinary shares: Unlimited number of common shares without par value. |
| (b) | Following is a roll-forward of ordinary shares as of June 30, 2021, and 2020: |
| Common shares: Unlimited number of common shares without par value | ||||||||||||||||
| Three Months Ended June 30, | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Ordinary Shares | Amount | Ordinary
Shares | Amount | |||||||||||||
| In 000’ | In 000’$ | In 000’ | In 000’$ | |||||||||||||
| Balance, beginning of period | $ | $ | ||||||||||||||
| Shares issued in a private placement, net of share issue costs | ||||||||||||||||
| Shares issued for services | ||||||||||||||||
| Balance, end of period | $ | $ | ||||||||||||||
| (c) | Number of ordinary shares have been retroactively adjusted to reflect the impact of 100:1 reverse stock split on June 5, 2020. |
On June 16, 2020, the Company completed a private placement of restricted ordinary shares at a price of $per share for gross proceeds of $million to accredited investors. Directors of the Company subscribed for shares, or approximately 30.8% of the private placement, for proceeds of $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
the quarter ended June 30, 2021, the Company commenced an “at the market” offering, under which it sold shares generating gross proceeds of approximately
$million
($
| F-19 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
| (a) | The following table provides the activity for the Company’s stock option reserve for the three months ended June 30, 2021 and 2020: |
| Disclosure Of Terms Stock Option Reserve Explanatory | ||||||||||||||||
| Three Months Ended June 30, | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| (In thousands) | Non-Controlling Interest | Stock Option Reserve | Non-Controlling Interest | Stock Option Reserve | ||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | ||||||||||||
| Share-based compensation expense | ||||||||||||||||
| Balance, end of period | $ | $ | $ | $ | ||||||||||||
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,
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 stock options exercisable at a price of US$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. 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. 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.
| F-20 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 15. STOCK OPTION RESERVE (Cont’d)
Additionally,
the Company granted
| (b) | The movements in the number of options issued were: |
| Schedule of outstanding stock options | ||||||||||||||||||||||||
PBI 2021 Equity Incentive Plan | PBI 2013 Option Plan | iOx Option Plan (Subsidiary Plan) | ||||||||||||||||||||||
| Three Months Ended June 30, | Three Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Balance, beginning of period | ||||||||||||||||||||||||
| Granted | ||||||||||||||||||||||||
| Expired or forfeited | ||||||||||||||||||||||||
| Balance, end of period | ||||||||||||||||||||||||
| Exercisable, end of period | ||||||||||||||||||||||||
The Board discontinued the 2013 Option Plan in fiscal 2019.
| (c) | Following are the weighted average exercise price and the remaining contractual life for outstanding options by plan: |
| Schedule of weighted average exercise price and the remaining contractual life | ||||||||||||||||||||||||
PBI 2021 Equity Incentive Plan | PBI 2013 Option Plan | iOx Option Plan (Subsidiary Plan) | ||||||||||||||||||||||
| As of June 30, | As of June 30, | As of June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Weighted average exercise price | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Weighted average remaining contractual life (in years) | – | – | ||||||||||||||||||||||
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 June 30, 2021 and March 31, 2021.
The
Company recorded approximately $
The
Company recorded $
| F-21 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
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 | ||||||||
| Three Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Numerator (in 000’$) | ||||||||
| Net loss attributable to owners of the Company | $ | ( | ) | $ | ( | ) | ||
| Denominator (in 000’) | ||||||||
| Weighted average number of shares – Basic and Diluted | ||||||||
| Basic and diluted (loss) per share (Actual) | $ | ( | ) | $ | ( | ) | ||
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 three months ended June 30, 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 effect on Loss Per Share | ||||||||
| As of June 30, | ||||||||
| 2021 | 2020 | |||||||
| Stock options | ||||||||
| Restricted stock units | ||||||||
| Warrants | ||||||||
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.
NOTE 17. COMMITMENTS AND CONTINGENT LIABILITIES
The
Company is committed to invest approximately €1.5 million ($
| F-22 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 18. RELATED PARTY TRANSACTIONS
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. One of the three directors on the Board of Directors of Stimunity is controlled by Portage (see Note 7, “Investment in Associate”). |
| (b) | iOx. Two of the five 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 the Company 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. One of the four directorships on the Board of Directors of Intensity is represented by Portage. Additionally, the CEO of the Company is an officer and employee of Intensity (see Note 9, “Investments in Private Companies”). |
| (e) | PGL. PPL holds 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”). |
| (f) | Portage Development Services. 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 condensed consolidated interim financial statements:
Interest
expense includes $
In
January 2020, a board member of the Company advanced the Company $
| F-23 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 18. RELATED PARTY TRANSACTIONS (Cont’d)
Transactions between the parent company and its subsidiaries, which are related parties, have been eliminated in consolidation and are not disclosed in this note.
NOTE 19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company’s financial instruments recognized in the Company’s condensed consolidated interim statements of financial position consist of the following:
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 June 30, 2021 and March 31, 2021:
| Schedule of financial instruments | ||||||||||||||||
| As of June 30, 2021 | As of March 31, 2021 | |||||||||||||||
| (In thousands) | Amortized Cost | Fair
Value through Other Comprehensive Income (FVTOCI) | Amortized Cost | FVTOCI | ||||||||||||
| Financial assets | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Prepaid expenses and other receivables | $ | $ | $ | $ | ||||||||||||
| Investments | $ | $ | $ | $ | ||||||||||||
| Amortized Cost | Fair Value through Profit or Loss (FVTPL) | Amortized Cost | FVTPL | |||||||||||||
| Financial liabilities | ||||||||||||||||
| Accounts payable and accrued liabilities | $ | $ | $ | $ | ||||||||||||
| Unsecured notes payable | $ | $ | $ | $ | ||||||||||||
| Warrant liability | $ | $ | $ | $ | ||||||||||||
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, 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. |
| F-24 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Cont’d)
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 following methods and assumptions were used to estimate their fair values:
Investment in Biohaven: Fair value was based on a quoted market price of $per share as of March 31, 2020 (Level 1). The investment was sold in August 2020.
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 12, Unsecured Notes Payable”).
Warrant Liability: The fair value is estimated using a Black Scholes model (Level 3) (see Note 13, “Warrant Liability”).
There have been no transfers between levels of the fair value hierarchy for the three months ended June 30, 2021 and the year ended March 31, 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 condensed consolidated interim statements of financial position.
Cash. Cash is 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 (see Note 22, “Events After the Balance Sheet Date – Installment Note Receivable”).
| F-25 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Cont’d)
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 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.
NOTE 20. CAPITAL DISCLOSURES
The
Company considers the items included in shareholders’ equity as capital. The Company had accounts payable and accrued expenses
of approximately $
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 June 30, 2021, shareholders’ equity attributable to the owners of the company was approximately $127.7 million
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 three months ended June 30, 2021 and 2020.
| F-26 |
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30, 2021)
NOTE 21. NON-CONTROLLING INTEREST
| Schedule of non-controlling interest | ||||||||||||||||||||
| (In thousands) | PGL | SalvaRx | iOx | Saugatuck | Total | |||||||||||||||
| Non-controlling interest as of April 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||
| Net (loss) attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Non-controlling interest as of June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| (In thousands) | PGL | SalvaRx | iOx | Saugatuck | Total | |||||||||||||||
| Non-controlling interest as of April 1, 2020 | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||
| Net income attributable to non-controlling interest | ||||||||||||||||||||
| Non-controlling interest as of June 30, 2020 | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
NOTE 22. EVENTS AFTER THE BALANCE SHEET DATE
Installment Note Receivable
The
installment note receivable of approximately $
F-27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: August 30, 2021 |
PORTAGE BIOTECH INC.
| By: | /s/ Allan Shaw | |
| Allan Shaw | ||
| Chief Financial Officer |
Exhibit 99.2
PORTAGE BIOTECH INC.
THREE MONTHS ENDED JUNE 30, 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
Prepared as of August 30, 2021
Index
| Forward-Looking Statements | 3 |
| Nature of Operations and Overview | 4 |
| Summary of Results | 8 |
| Number of Ordinary Shares and Options | 8 |
| Business Environment - Risk Factors | 8 |
| Our Programs and Technology - Recent Developments | 9 |
| Results of Operations | 12 |
| Liquidity and Capital Resources | 14 |
| Key Contractual Obligations | 16 |
| Off-balance Sheet Arrangements | 16 |
| Transactions with Related Parties | 16 |
| Financial and Derivative Instruments | 17 |
| Use of Estimates and Judgments | 19 |
| New Accounting Standards, Interpretations and Amendments | 19 |
| Internal Controls over Financial Reporting | 19 |
| Public Securities Filings | 20 |
| 2 |
Management Discussion and Analysis
The following discussion and analysis by management of the financial condition and financial results for Portage Biotech Inc. for the three months ended June 30, 2021, should be read in conjunction with the unaudited condensed consolidated interim financial statements for the three months ended June 30, 2020, together with the related Management’s Discussion and Analysis and audited consolidated financial statements for the year ended March 31, 2021, and Annual Report on Form 20-F for the same period.
Forward-Looking Statements
This document 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.
Risks and uncertainties include, but are not limited to:
| ● | our plans and ability to develop and commercialize product candidates and the timing of these development programs; |
| ● | clinical development of our product candidates, including the results of current and future clinical trials; |
| ● | the benefits and risks of our product candidates as compared to others; |
| ● | our maintenance and establishment of intellectual property rights in our product candidates; |
| ● | our need for additional financing and our estimates regarding our capital requirements and future revenues and profitability; |
| ● | our estimates of the size of the potential markets for our product candidates; and |
| ● | our selection and licensing of product candidates. |
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” in the Company’s Annual Report on Form 20-F for the year ended March 31, 2021.
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 document 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,” “Portage,” “we,” “us,” or “our” are used interchangeably in this document and refer to Portage Biotech Inc. and its subsidiaries.
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Nature of Operations and Overview
Portage is a clinical stage immune-oncology company focused on overcoming immune resistance. It currently manages 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.
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:
| • | Portfolio diversification to mitigate risk and maximize optionality; | |
| • | Capital allocation based on risk-adjusted potential, including staged funding to pre-specified scientific and clinical results; | |
| • | Virtual infrastructure and key external relationships to maintain a lean operating base; | |
| • | Internal development capabilities complemented by external business development; | |
| • | Rigorous asset selection with disciplined ongoing evaluation; and | |
| • | 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:
| • | 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; | |
| • | Expand our pipeline through research collaborations, business development, and internally designed programs; | |
| • | 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 | |
| • | Evaluate strategic opportunities to accelerate development timelines and maximize the value of our portfolio. |
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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 chart below sets forth only as of August 1, 2021, 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 Business Model
We employ a shared service business model to execute our strategy of building a diversified oncology company in a capital efficient manner and to provide us with the flexibility to either advance therapeutic candidates ourselves or through transactions with third parties. Our flat organization consists of a holding company, Portage Biotech Inc. and an operating company, Portage Development Services ("PDS"), which provide human resources, and other services to each operating entity via a shared services agreement. 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 enhance operational efficiency and maintain an optimal cost structure.
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Our business model also enables us to access both internal and external expertise to build and develop our pipeline. 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.
In the figure below, each operating entity reflects its respective technology platform, therapeutic candidates as well as approximate economic ownership, as of June 30, 2021, as a percentage of shares outstanding (excluding stock options) is listed below each circle.
Our Organization
The structure of our financing arrangements with each subsidiary enables us to increase our economic ownership when we provide additional capital.
PDS is our wholly-owned operating subsidiary that contracts all of our team members and incubates discovery programs until we establish an operating subsidiary in which to further advance them. We centralize shared services, including all research and development operations, administrative services, and business development at PDS Management, and allocate employees and resources to each spoke based on the needs and development stage of each therapeutic candidate.
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Our business model is designed to (i) enhance operational efficiency, (ii) maintain an optimal cost structure, (iii) attract leading collaborators, and (iv) promote asset flexibility, as further described below.
| • | 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. | |
| • | 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. | |
| • | 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. | |
| • | 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. |
The Company is a BVI incorporated company with its registered office located at FH Chambers, 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 is a reporting issuer with the United States Securities and Exchange Commission. From October 28, 2013 until April 23, 2021, the Company's ordinary shares were also listed for trading in United States currency on the Canadian Securities Exchange (“CSE”) (formerly, Canadian National Stock Exchange) 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”. The Company voluntarily delisted its common shares from the CSE at the market close on April 23, 2021, since the Company’s shares began trading on NASDAQ.
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Summary of Results
The following table summarizes financial information for the quarter ended June 30, 2021, and the preceding eight quarters (all amounts in 000’US$ except net loss per share, which are actual amounts). All share and per share amounts reflect the 1:100 reverse stock split effected June 5, 2020.
| June 30, | Mar. 31, | Dec. 31, | Sept. 30 | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||||||||||||||
| Quarter ended | 2021 | 2021 | 2020 | 2020 | 2020 | 2020 | 2019 | 2019 | 2019 | |||||||||||||||||||||||||||
| (Revised) | ||||||||||||||||||||||||||||||||||||
| Net (loss) - attributable to the owners of the Company | (3,066 | ) | (11,498 | ) | (1,184 | ) | (2,455 | ) | (696 | ) | (1,302 | ) | (1,316 | ) | (1,273 | ) | (1,442 | ) | ||||||||||||||||||
| Working capital (1) (2) (3) (4) | 28,106 | 1,738 | 2,875 | 25 | 6,293 | 1,226 | 1,977 | 2,500 | 3,604 | |||||||||||||||||||||||||||
| Shareholders’ equity | 127,711 | 101,449 | 104,945 | 102,233 | 102,646 | 96,531 | 98,574 | 98,248 | 98,222 | |||||||||||||||||||||||||||
| Net (loss) per share - Basic | (0.25 | ) | (1.35 | ) | (0.10 | ) | (0.21 | ) | (0.06 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.13 | ) | ||||||||||||||||||
| Net (loss) per share - Diluted | (0.25 | ) | (1.35 | ) | (0.10 | ) | (0.21 | ) | (0.06 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.13 | ) | ||||||||||||||||||
| (1) | June 30, 2021 working capital is net of warrant liability of $751 settleable on a non-cash basis. |
| (2) | March 31, 2021 working capital is net of warrant liability of $1,120 settleable on a non-cash basis. |
| (3) | December 31, 2020 working capital is net of warrant liability of $771 settleable on a non-cash basis. |
| (4) | September 30, 2020 working capital is net of accrued equity issuable of $3,972 and warrant liability of $271 settled or settleable on a non-cash basis. |
Number of Ordinary Shares and Warrants
These are as follows:
| As of, | June 30, 2021 | August 25, 2021 | ||||||
| Shares issued and outstanding (a) (b) | 13,326,213 | 13,326,213 | ||||||
| Warrants (c) | 49,701 | 49,701 | ||||||
| (a) | This amount excludes an aggregate 243,000 restricted stock units granted to a director and a consultant on January 13, 2021, which vested immediately on the date of grant. |
| (b) | August 25, 2021 amount excludes 548 shares earned for services rendered in July and accrued as of July 31, 2021 not yet issued. |
| (c) | Warrants are exercisable into equal number of ordinary shares at an average exercise prise of $6.64 and have a remaining contractual life of approximately 1.25 years as of June 30, 2021. |
Business Environment - Risk Factors
Please refer to the Annual Report on Form 20-F for the year ended March 31, 2021 for detailed information as the economic and industry factors that are substantially unchanged as of the date hereof.
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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. We recently dosed the first patient in the IMP-MEL PORT-2 clinical trial, a Phase 1/2 dose escalation and randomized expansion trial. 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 the safety and efficacy after receiving regulatory approval from the Medicines and Healthcare products Regulatory Agency in the United Kingdom and Research Ethics Board at Oxford University.
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).
PORT 3 (IMM65)
PORT-3 is a PLGA-nanoparticle formulation of IMM60 combined with a NY-ESO-1 peptide vaccine and the first patient was dosed in an open-label, dose-escalation and expansion study of its iNKT agonist. 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. This platform is designed to demonstrate proof of concept with NY-ESO-1 as our enrichment factor for patient accrual. 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.
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.
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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 therapies, such as PD-1 checkpoint inhibitors. The market is saturated with 14 approved PD-1 antibodies, and every major pharma company competing 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.
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)
PORT-1 is 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 1/2 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 1/2 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. The company plans on presenting updates from the INVINCIBLE and IT-01 studies at upcoming industry meetings. As a result of exciting preliminary data (ref ASCO 2020, SITC 2020), we have 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. 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.
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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.
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.
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Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
(All Amounts in 000’$)
Results of Operations
The following details major expenses for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.
| Three months ended June 30, | 2021 | 2020 | ||||||
| In 000’$ | In 000’$ | |||||||
| Operating expenses | $ | (3,593 | ) | $ | (973 | ) | ||
| Change in fair value of warrant liability | 369 | – | ||||||
| Share of (loss) income in associates accounted for using equity method | (44 | ) | 440 | |||||
| Interest (expense) | (34 | ) | (122 | ) | ||||
| Loss before provision for income taxes | (3,302 | ) | (655 | ) | ||||
| Income tax benefit | 79 | – | ||||||
| Net (loss) | (3,223 | ) | (655 | ) | ||||
| Unrealized gain on investments | – | 78 | ||||||
| Total comprehensive (loss) for period | $ | (3,223 | ) | $ | (577 | ) | ||
| Comprehensive (loss) income attributable to: | ||||||||
| Owners of the Company | $ | (3,066 | ) | $ | (618 | ) | ||
| Non-controlling interest | (157 | ) | 41 | |||||
| Total comprehensive (loss) for period | $ | (3,223 | ) | $ | (577 | ) | ||
Results of Operations for the Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
The Company generated a net loss and comprehensive loss of approximately $3.2 million in the three months ended June 30, 2021 (“Fiscal 2022 Quarter”), compared to a net loss of approximately $0.7 million and comprehensive loss of approximately $0.6 million in the three months ended June 30, 2020 (“Fiscal 2021 Quarter”), an increase in loss of $2.5 million and $2.6 million, respectively, year over year. Operating expenses, which include research and development and general and administrative expenses, were $3.6 million in the Fiscal 2022 Quarter, compared to $1.0 million in the Fiscal 2021 Quarter, an increase of $2.6 million, which is discussed more fully below. Operating expenses included $2.2 million of non-cash stock-based compensation expense in the Fiscal 2022 Quarter, compared to $0.3 million in the Fiscal 2021 Quarter.
The Company’s other items of income and expense were substantially non-cash in nature, and were approximately $0.3 million net income in each of the Fiscal 2022 Quarter and the Fiscal 2021 Quarter. Other items of income and expense in the Fiscal 2022 Quarter were:
| · | a gain of $0.4 million representing the change in the fair value of the warrants issued with respect to the SalvaRx settlement; |
| · | a small loss generated by Stimunity accounted for under the equity method in the Fiscal 2022 Quarter, compared to $0.4 million gain in the Fiscal 2021 Quarter; and |
| · | interest expense of $0.03 million in the Fiscal 2022 Quarter, compared to $0.1 million in the Fiscal 2021 Quarter. The prior year period reflects interest expense on the SalvaRx Notes, which were repaid in Fiscal 2021. The current year period reflects interest on the iOx Notes and the financing of the insurance premium obligation. |
Additionally, the Company reflected a net income tax benefit of approximately $0.1 million in the Fiscal 2022 Quarter, attributable to recoverable research and development tax credits generated in the U.K., partially offset by the foreign currency exchange rate effect on deferred tax liability.
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Operating Expenses
The overall analysis of the operating expenses is as follows:
| Three months ended June 30, | 2021 | 2020 | ||||||
| In 000’$ | In 000’$ | |||||||
| Research and development | $ | 1,546 | $ | 452 | ||||
| General and administrative expenses | 2,047 | 521 | ||||||
| Total operating expenses | $ | 3,593 | $ | 973 | ||||
Research and Development Costs
These costs comprised the following:
| Three months ended June 30, | 2021 | 2020 | ||||||
| In 000’$ | In 000’$ | |||||||
| Consultants - scientists and researchers | $ | 1,329 | $ | 452 | ||||
| Legal regarding Patents’ registration | 42 | 83 | ||||||
| Other outside services - lab testing, peptide handling, etc. | 6 | 414 | ||||||
| Research and development services and storage | 169 | 73 | ||||||
| 1,546 | 1,022 | |||||||
| Proceeds from a legal settlement with a vendor | – | (570 | ) | |||||
| Total research and development costs | $ | 1,546 | $ | 452 | ||||
Research & development ("R&D") costs increased by approximately $1.0 million, from approximately $0.5 million during the three months ended June 30, 2020, to approximately $1.5 million during the three months ended June 30, 2021. The increase was primarily attributable to non-cash stock-based compensation expense (included in consultants - scientists and researchers) associated with grants made under the 2021 Equity Incentive Plan of $1.0 million, partially offset by a decrease in iOx related stock-based compensation expense of $0.2 million and a decrease of $0.4 in other R&D costs relating to outside services. Additionally, the three months ended June 30, 2020 was impacted by the receipt of a $0.6 million cash settlement for a legal dispute the Company had with a vendor while developing one of its products, which reduced R&D costs, as well as a general slow down in expenditures resulting from the pandemic.
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General and Administrative Expenses
Key components of general and administrative expenses are:
| Three months ended June 30, | 2021 | 2020 | ||||||
| In 000’$ | In 000’$ | |||||||
| Consulting fees | $ | 506 | $ | 139 | ||||
| Directors’ fees | 729 | 222 | ||||||
| D&O insurance | 413 | 4 | ||||||
| Professional fees | 351 | 75 | ||||||
| Office and general expenses | 48 | 81 | ||||||
| Total general and administrative expenses | $ | 2,047 | $ | 521 | ||||
General and administrative ("G&A") expenses increased by approximately $1.5 million, from approximately $0.5 million during the three months ended June 30, 2020, to approximately $2.0 million during the three months ended June 30, 2021. The principal reason for the increase in the Fiscal 2022 Quarter was the $1.1 million of non-cash stock-based compensation expense associated with the Company’s 2021 Equity Incentive Plan, of which $0.7 million is associated with Directors’ compensation, and $0.4 million is associated with management compensation, partially offset by a decrease in iOx related stock-based compensation expense of $0.2 million. No stock-based compensation expense under the 2021 Equity Incentive Plan was incurred during the three months ended June 30, 2020. Additionally, the Company incurred an increase of $0.3 million in professional fees relating to initiatives associated with a corporate restructuring and public relations / business development. Finally, D&O insurance premiums increased $0.4 million in the current year period due to market rate increases in the cost of coverage.
Liquidity and Capital Resources
On June 16, 2020, the Company closed a private placement of ordinary shares (the “Offering”) for gross proceeds of approximately $6.98 million through the issuance of 698,145 ordinary shares (the “Ordinary Shares”) at a price of $10.00 per Ordinary Share. The Company incurred costs of $248,000 in connection with the Offering, which was offset against the gross proceeds. The net proceeds from the Offering are being used to finance operating expenses and accelerate pipeline development/execution and will enable management to pursue new opportunistic value creation. A portion of the proceeds was used to settle the SalvaRx notes.
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.
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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, 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 Company was added to the Russell 2000 Index effective after the U.S. market opened on June 28, 2021.
Liquidity
The accompanying condensed consolidated interim 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 condensed consolidated interim 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 June 30, 2021, the Company had cash and cash equivalents of approximately $28.6 million and total current liabilities of approximately $2.5 million (inclusive of approximately $0.7 million warrant liability settleable on a non-cash basis). For the three months ended June 30, 2021, the Company is reporting a net loss of approximately ($3.2) million and cash used in operating activities of approximately $1.6 million. As of July 31, 2021, we had approximately $28.0 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). 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. The Company will use the net proceeds raised to fund its research and development activities and support operations. The amount raised is sufficient to fund operations through September 2022. Funds may be used to accelerate development activities to advance the Company’s product portfolio, working capital and general corporate purposes.
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.
Cash Flows Used In Operating Activities
During the three months ended June 30, 2021, the Company used cash of approximately $1.6 million to fund operating activities, compared to $0.7 million used during the three months ended June 30, 2020. Operations in the three months ended June 30, 2021 were funded by existing cash. Operations during the three months ended June 30, 2020 were funded by existing cash plus a portion of the net proceeds from the private placement of approximately $6.7 million, net of offering costs, which closed in June 2020.
The Company does not currently have any contractual commitments to fund further research and development at its subsidiaries.
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.
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The Company's cash at June 30, 2021 of approximately $28.6 million will be sufficient to fund the Company’s current research and development activities, as well as expansion of its operating infrastructure. The Company will need additional funds in the future to fund its operations and development plans, which if not obtained when needed may require the Company to adjust its plans and curtail or delay parts of its overall business plans.
Cash Flows Used In Investing Activities
During the three months ended June 30, 2021, the Company did not use any cash for investing activities. During the three months ended June 30, 2020, the Company used cash of $1.0 million to fund investing activities.
On June 1, 2020, the Company made an additional $1.0 million investment in Stimunity upon Stimunity's achievement of certain agreed milestones, increasing its equity share in Stimunity to 44%.
Cash Flows Provided By Financing Activities
During the three months ended June 30, 2021, the Company generated cash from financing activities of $27.4 million, compared to $6.7 million during the three months ended June 30, 2020.
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.
Key Contractual Obligations
Details of contractual obligations, commitments and contingent liabilities are provided in Note 17, “Commitments and Contingent Liabilities,” to the unaudited condensed consolidated interim financial statements for the three months ended June 30, 2021.
Off-balance Sheet Arrangements
As of June 30, 2021 and 2020, the Company did not have any off-balance sheet arrangements, including any relationships with unconsolidated entities or financial partnership to enhance perceived liquidity.
Transactions with Related Parties
Significant related party transactions are detailed in Note 18, “Related Party Transactions,” to the unaudited condensed consolidated interim financial statements for the three months ended June 30, 2021.
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Financial and Derivative Instruments
The Company’s financial instruments recognized in the Company’s condensed consolidated interim statements of financial position consist of the following:
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 June 30, 2021 and March 31, 2021:
| As of June 30, 2021 | As of March 31, 2021 | |||||||||||||||
| (In thousands) | Amortized Cost | Fair Value through Other Comprehensive Income (FVTOCI) | Amortized Cost | FVTOCI | ||||||||||||
| Financial assets | ||||||||||||||||
| Cash and cash equivalents | $ | 28,617 | $ | – | $ | 2,770 | $ | – | ||||||||
| Prepaid expenses and other receivables | $ | 1,995 | $ | – | $ | 2,176 | $ | – | ||||||||
| Investments | $ | – | $ | 9,100 | $ | – | $ | 9,144 | ||||||||
| Amortized Cost | Fair Value through Profit or Loss (FVTPL) | Amortized Cost | FVTPL | |||||||||||||
| Financial liabilities | ||||||||||||||||
| Accounts payable and accrued liabilities | $ | 1,605 | $ | – | $ | 1,938 | $ | – | ||||||||
| Unsecured notes payable | $ | 150 | $ | – | $ | 150 | $ | – | ||||||||
| Warrant liability | $ | – | $ | 751 | $ | – | $ | 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, 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.
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The following methods and assumptions were used to estimate their fair values:
Investment in Biohaven: Fair value was based on a quoted market price of $34.03 per share as of March 31, 2020 (Level 1). The investment was sold in August 2020.
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).
Warrant Liability: The fair value is estimated using a Black Scholes model (Level 3).
There have been no transfers between levels of the fair value hierarchy for the three months ended June 30, 2021 and the year ended March 31, 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 condensed consolidated interim statements of financial position.
Cash. Cash is 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 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.
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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 22, “Events After the Balance Sheet Date,” for a discussion of the Company’s share offering.
Use of Estimates and Judgments
The preparation of the condensed consolidated interim financial statements in conformity with International Financial Reporting Standards (“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.
New Accounting Standards, Interpretations and Amendments
The Company is also unaware of any applicable but not-yet-adopted standards that are expected to materially affect the financial statements of future periods.
Internal Controls Over Financial Reporting
The management of the Company, including the CEO and CFO, is responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company's internal control system was designed to provide reasonable assurance to the Company's management and the board of directors regarding the reliability of financial reporting and preparation and fair presentation of published financial statements for external purposes in accordance with IFRS. Internal control over financial reporting includes those policies and procedures that:
| 1. | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| 2. | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
| 3. | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. |
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
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Management assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2021. In making this assessment, it used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation under these criteria, management identified material weaknesses in the Company's internal controls over financial reporting, and as a result, management concluded that the Company's internal control over financial reporting was not effective as of June 30, 2021.
Management identified the following material weaknesses set forth below in our internal control over financial reporting.
| · | Management was unable to perform an effective risk assessment or monitor internal controls over financial reporting; |
| · | The management of the Company lacks the number of skilled persons it requires given the complexity of the reporting requirements it has to make, which more specifically include the staff and expertise (i) to properly segregate duties and perform oversight of work performed and to perform compensating controls over the finance and accounting functions, (ii) to establish and perform fair value estimates or subsequently monitor fluctuations in fair value estimates, and (iii) to apply complex accounting principles, including those relating to business combination accounting, income taxes and fair value estimates; and |
| · | There are insufficient written policies and procedures in place to ensure the correct application of accounting and financial reporting with respect to the current requirements of IFRS and SEC disclosure requirements, some of which specifically relate to investment accounting and fair value measures, assessment of in-process research and development assets, share based payments, carrying amounts of goodwill and intangible assets and business combination accounting. |
Public Securities Filings
Additional information, including the Company’s annual information in the Annual Report on Form 20-F, is filed with the Canadian Securities Administrators at www.sedar.com and with the United States Securities and Exchange Commission at www.edgar.com.
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