Alpha Compute Corp 6-K/A, filed Oct 13, 2022
Alpha Compute Corp (ALP)
About this 6-K/A
Alpha Compute Corp filed this 6-K/A on October 13, 2022.
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 September 2022
Commission File Number:
(Translation of registrant's name into English)
British Virgin Islands
(Jurisdiction of incorporation or organization)
(Address of principal executive office)
c/o Portage Development Services Inc., Ian Walters, 203.221.7378
61 Wilton Road, Westport, Connecticut 06880
(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 [X] 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): ___
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): ___
Explanatory Note
Item 9.01 Financial Statements and Exhibits.
| (a) |
Financial Statements of the Business Acquired:
In accordance with Item 9.01(a), the audited financial statements of Tarus as of and for the years ended December 31, 2021, 2020 and 2019 are attached hereto as Exhibit 99.1 and are incorporated herein by reference.
In accordance with Item 9.01(a), the unaudited financial statements of Tarus as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 and as of June 30, 2022 and for the six months ended June 30, 2022 and 2021 are attached hereto as Exhibit 99.2 and 99.3, respectively, and are incorporated herein by reference. |
| (b) |
Pro Forma Financial Information:
In accordance with Item 9.01(b), the unaudited pro forma condensed consolidated statements of financial position of the Company as of June 30, 2022 and the unaudited pro forma condensed consolidated statements of operations for the year ended March 31, 2022 and for the three months ended June 30, 2022, giving effect to the Company’s acquisition of Tarus, are attached hereto as Exhibit 99.4 and are incorporated herein by reference. |
| (d) | Exhibits |
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.
| Portage Biotech Inc. | ||
| (Registrant) | ||
| Date: October 12, 2022 | /s/ Ian Walters | |
| Ian Walters | ||
| Chief Executive Officer |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement of Portage Biotech Inc. (“Portage”) on Form F-3 (File No. 333-253468) of our report dated May 6, 2022, with respect to our audits of the financial statements of Tarus Therapeutics, Inc. (“Tarus”) as of and for the years ended December 31, 2021, 2020 and 2019, which report is included in Form 6-K/A of Portage.
Our report on the financial statements contains an explanatory paragraph regarding Tarus' ability to continue as a going concern.
/s/ Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
Saddle Brook, New Jersey
October 12, 2022
Exhibit 99.1
Tarus Therapeutics, Inc.
Financial Statements
December 31, 2021, 2020 and 2019
Tarus Therapeutics, Inc.
Financial Statements for the years ended
December 31, 2021, 2020, and 2019
(U.S. Dollars) Table of Contents
| Page | ||
| Report of Independent Registered Public Accounting Firm | 1 - 2 | |
| Statements of Financial Position | 3 | |
| Statements of Comprehensive Loss | 4 | |
| Statements of Stockholders' Deficit | 5 | |
| Statements of Cash Flows | 6 | |
| Notes to the Financial Statements | 7 - 16 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of Tarus Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying statements of financial position of Tarus Therapeutics, Inc. (the “Company”) as of December 31, 2021, 2020, and 2019, the related statements of comprehensive loss, stockholders’ deficit equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, 2020, and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has experienced losses since inception, net cash outflows from operations, and has primarily relied on the sale of common stock and the issuance of a note payable to fund operations, all of which raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud
| 1 |  |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
We have served as the Company's auditors since 2022.
Saddle Brook, New Jersey
May 6, 2022
| 2 | |
Tarus Therapeutics, Inc.
Statements of Financial Position
(U.S. Dollars)
| December 31, | ||||||||||||||
| Notes | 2021 | 2020 | 2019 | |||||||||||
| Assets | ||||||||||||||
| Current Assets | ||||||||||||||
| Cash | B | $ | 277,502 | $ | 602,390 | $ | 24,119 | |||||||
| Restricted cash | B | 60,000 | 122,403 | - | ||||||||||
| Security deposit | - | - | 5,000 | |||||||||||
| Total Current Assets | 337,502 | 724,793 | 29,119 | |||||||||||
| Total Assets | $ | 337,502 | $ | 724,793 | $ | 29,119 | ||||||||
| Liabilities and Stockholders' Deficit | ||||||||||||||
| Current Liabilities | ||||||||||||||
| Accounts payable | $ | 326,051 | $ | 20,000 | $ | - | ||||||||
| Accrued expenses | C | 1,225,634 | 109,928 | 396,870 | ||||||||||
| Note payable, net of debt discount | D | 2,000,000 | 1,650,721 | - | ||||||||||
| Total Current Liabilities | 3,551,685 | 1,780,649 | 396,870 | |||||||||||
| Commitments and Contingencies | ||||||||||||||
| Stockholders' Deficit | ||||||||||||||
| Common stock | E | 61 | 57 | 49 | ||||||||||
| Additional paid-in capital | 8,384,664 | 5,786,918 | 1,845,401 | |||||||||||
| Accumulated deficit | (11,598,908 | ) | (6,842,831 | ) | (2,213,201 | ) | ||||||||
| Total Stockholders' Deficit | (3,214,183 | ) | (1,055,856 | ) | (367,751 | ) | ||||||||
| Total Liabilities and Stockholders' Deficit | $ | 337,502 | $ | 724,793 | $ | 29,119 | ||||||||
The accompanying notes are an integral part of these financial statements. 3 |
Tarus Therapeutics, Inc.
Statements of Comprehensive Loss
(U.S. Dollars)
| December 31, | ||||||||||||||||
| Notes | 2021 | 2020 | 2019 | |||||||||||||
| Expenses: | ||||||||||||||||
| General and administrative expenses | $ | 2,513,848 | $ | 1,976,767 | $ | 161,293 | ||||||||||
| Research and development | 1,785,681 | 2,098,300 | 2,051,908 | |||||||||||||
| Loss from operations | (4,299,529 | ) | (4,075,067 | ) | (2,213,201 | ) | ||||||||||
| Other expense | ||||||||||||||||
| Interest expense | H | (456,548 | ) | (554,563 | ) | - | ||||||||||
| Loss before provision for income taxes | (4,756,077 | ) | (4,629,630 | ) | (2,213,201 | ) | ||||||||||
| Provision for income taxes | F | - | - | - | ||||||||||||
| Net loss | $ | (4,756,077 | ) | $ | (4,629,630 | ) | $ | (2,213,201 | ) | |||||||
The accompanying notes are an integral part of these financial statements. 4 |
Tarus Therapeutics, Inc.
Statements of Stockholders' Deficit (U.S. Dollars)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders' | |||||||||||||||||||
| Notes | Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||||
Balance, January 1, 2019 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
| Common shares issued at inception | E | 4,000,000 | 40 | (40 | ) | - | - | |||||||||||||||
| Common shares issued in private placement | E | 886,645 | 9 | 1,845,441 | - | 1,845,450 | ||||||||||||||||
| Net Loss | - | - | - | (2,213,201 | ) | (2,213,201 | ) | |||||||||||||||
Balance, December 31, 2019 | 4,886,645 | $ | 49 | $ | 1,845,401 | $ | (2,213,201 | ) | $ | (367,751 | ) | |||||||||||
| Common shares issued in private placement | E | 451,194 | 5 | 2,042,977 | - | 2,042,982 | ||||||||||||||||
| Warrants issued with debt | E | - | - | 404,824 | - | 404,824 | ||||||||||||||||
| Cancellation of warrant | E | - | - | (100,000 | ) | - | (100,000 | ) | ||||||||||||||
| Shares issued with debt | D, E | 157,332 | 2 | 379,168 | - | 379,170 | ||||||||||||||||
| Share-based compensation | E | 171,723 | 1 | 1,214,548 | - | 1,214,549 | ||||||||||||||||
| Net Loss | - | - | - | (4,629,630 | ) | (4,629,630 | ) | |||||||||||||||
| Balance, December 31, 2020 | 5,666,894 | 57 | 5,786,918 | (6,842,831 | ) | (1,055,856 | ) | |||||||||||||||
| Common shares issued in private placement | E | 286,370 | 3 | 1,201,237 | - | 1,201,240 | ||||||||||||||||
| Cancellation of restricted stock | E | (61,921 | ) | - | - | - | - | |||||||||||||||
| Share-based compensation | E | 135,646 | 1 | 1,396,509 | - | 1,396,510 | ||||||||||||||||
| Net Loss | - | - | - | (4,756,077 | ) | (4,756,077 | ) | |||||||||||||||
Balance, December 31, 2021 | 6,026,989 | $ | 61 | $ | 8,384,664 | $ | (11,598,908 | ) | $ | (3,214,183 | ) | |||||||||||
The accompanying notes are an integral part of these financial statements. 5 |
Tarus Therapeutics, Inc.
Statements of Cash Flows
(U.S. Dollars)
| Years Ended December 31, | ||||||||||||||
| Notes | 2021 | 2020 | 2019 | |||||||||||
| Cash Flows From Operating Activities | ||||||||||||||
| Net Loss | $ | (4,756,077 | ) | $ | (4,629,630 | ) | $ | (2,213,201 | ) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||||
| Share-based compensation | E | 1,396,510 | 1,214,549 | - | ||||||||||
| Amortization of debt discount | D | 349,279 | 464,716 | - | ||||||||||
| Interest expense | H | 456,548 | 554,563 | - | ||||||||||
| Change in operating assets and liabilities: | ||||||||||||||
| Security deposit | - | 5,000 | (5,000 | ) | ||||||||||
| Accounts payable | 306,051 | 20,000 | - | |||||||||||
| Accrued expenses | C | 1,113,437 | (286,942 | ) | 396,870 | |||||||||
| Net Cash Used In Operating Activities | (1,134,252 | ) | (2,657,744 | ) | (1,821,331 | ) | ||||||||
| Cash Flows From Financing Activities | ||||||||||||||
| Cancellation of warrant | E | - | (100,000 | ) | - | |||||||||
| Proceeds from note payable, net of costs of $30,000 | D | - | 1,970,000 | - | ||||||||||
| Cash paid for interest | H | (454,279 | ) | (554,563 | ) | - | ||||||||
| Proceeds from the sale of common stock, net of costs of $113,198; $28,000; and $8,000. | E | 1,201,240 | 2,042,981 | 1,845,450 | ||||||||||
| Net Cash Provided By Financing Activities | 746,961 | 3,358,418 | 1,845,450 | |||||||||||
| Net Change in Cash and Restricted Cash | (387,291 | ) | 700,674 | 24,119 | ||||||||||
| Cash and Restricted Cash at Beginning of Year | 724,793 | 24,119 | - | |||||||||||
| Cash and Restricted Cash at End of Year | $ | 337,502 | $ | 724,793 | $ | 24,119 | ||||||||
| NON-CASH FINANCING ACTIVITIES: | ||||||||||||||
| Common stock and warrants issued with notes payable | D, E | $ | - | $ | 783,995 | $ | - | |||||||
The accompanying notes are an integral part of these financial statements. 6 |
Tarus Therapeutics, Inc.
Notes to the Financial Statements
December 31, 2021, 2020 and 2019
NOTE A - NATURE OF OPERATIONS
Nature of Operations
Tarus Therapeutics, Inc. (the "Company") was incorporated in the state of Delaware on January 2, 2019. The Company is a privately held biotechnology Company focused on treatment of resistant cancers. The Company’s mailing address is 6A Cove Lane N, North Bergen, NJ 07047. It has no physical office at this time.
These financial statements were authorized for issue by the boards of directors of the Company on May 6, 2022.
Liquidity
The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s current technology.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since inception and has funded its operations primarily through the sale of common stock and the issuance of a note payable. On December 31, 2021, the Company had stockholders’ deficit of approximately $3,214,000, borrowings outstanding, not including accrued interest, of $2,000,000 and a working capital deficit of approximately $1,214,000.
For the years ended December 31, 2021, 2020 and 2019, the Company had net cash outflows from operations of approximately $1,134,000, $2,658,000, and $1,821,000, respectively. Management believes that losses and negative cash flow will continue for at least the next year, from the date these financial statements are being issued. If the Company is unable to obtain sufficient cash resources to fund its operations and repay its notes payable, it may be forced to reduce or discontinue its operations. These conditions raise significant doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its business activities, including its research and development program.
COVID-19
In December 2019, a novel strain of coronavirus (“COVID-19”) was identified and has subsequently spread to other regions of the world, and has resulted in increased travel restrictions, business disruptions and emergency quarantine measures across the world including the United States. These disruptions did not have an effect on the Company's business plan.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), and interpretations of the International Financial Reporting Interpretations Committee. The financial statements have been prepared on a historical cost basis and are presented in U.S. Dollars.
Use of Estimates
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the periods. The estimates affecting the financial statements that are particularly significant include the share-based compensation. Actual results could differ from those estimates.
| 7 |
Tarus Therapeutics, Inc. Notes to the Financial Statements |
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
The Company periodically monitors its positions with, and the credit quality of the financial institutions with which it invests. Periodically, throughout the years, and as of December 31, 2021 and 2020, the Company has maintained balances in excess of federally insured limits. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents as of and during the years ended December 31, 2021, 2020 and 2019.
Cash and Restricted Cash
Amounts included in restricted cash represent those required to be set aside to make interest payments on the outstanding note payable. The following table presents cash and restricted cash reported on the statements of financial position, and the sums presented on the statements of cash flows:
| As of December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Cash | $ | 277,502 | $ | 602,390 | $ | 24,119 | ||||||
| Restricted cash | 60,000 | 122,403 | - | |||||||||
| Total as presented in the statements of cash flows | $ | 337,502 | $ | 724,793 | $ | 24,119 | ||||||
Research and Development
Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are expensed as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically, and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit. During the period of development, the asset is tested for impairment annually. Research and development expenses include all direct and indirect operating expenses supporting the products in development.
For the years ended December 31, 2021, 2020 and 2019, all research and development expenditures were categorized as research and expensed in the period incurred. See Note G - License Agreement.
Deferred Finance Costs
Costs incurred with obtaining and executing debt arrangements are capitalized and amortized over the term of the related debt. Unamortized deferred costs are presented in the balance sheet as an offset to the associated debt.
Income Taxes
Income tax expense is comprised of current and deferred taxes. Income tax expense is recognized in profit and loss except to the extent that it relates to items recognized directly in equity, in which case the tax effect is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
| 8 |
Tarus Therapeutics, Inc. Notes to the Financial Statements |
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes (continued)
The Company accounts for deferred income taxes using the asset and liability method. Under the asset and liability method, deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in a tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company recognizes accrued interest and penalties associated with uncertain tax positions as part of the income tax provision. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to be recognized. Tax positions that meet the more-likely-than-not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate finalization with the taxing authority. There were no uncertain tax positions nor income tax related interest and penalties recorded for the years ended December 31, 2021, 2020 and 2019. The income tax returns of the Company for the year ended December 31, 2019 and subsequent years are subject to examination by the Internal Revenue Service and other taxing authorities, generally for three years after they were filed.
Share-Based Compensation
The Company calculates share-based compensation expense for option awards based on the grant/issue date fair value using the Black-Scholes-Merton option pricing model (“Black-Sholes Model”) and recognize the expense on a straight-line basis over the vesting period. The Company accounts for forfeitures as they occur. The Black- Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the vesting period of the Share-based Award in determining the fair value of Share-based Awards. Although the Company believes the assumptions used to calculate share-based compensation expense are reasonable, these assumptions can involve complex judgments about future events, which are open to interpretation and inherent uncertainty. In addition, significant changes to the assumptions could significantly impact the amount of expense recorded in a given period.
The Company recognizes restricted stock unit expense over the period of vesting or period that services will be provided. Compensation associated with shares of Common Stock issued or to be issued to consultants and other non-employees is recognized over the expected service period beginning on the measurement date, which is generally the time the Company and the service provider enter into a commitment whereby the Company agrees to grant shares in exchange for the services to be provided.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company is a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical data regarding the volatility of a publicly traded set of peer companies. The expected term of stock options granted to nonemployees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
| 9 |
Tarus Therapeutics, Inc. Notes to the Financial Statements |
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
New IFRS standards and interpretations or changes to existing standards with future effective dates are either not applicable or not expected to have a significant impact on the financial statements of the Company.
NOTE C - ACCRUED EXPENSES
Accrued expenses consist of the following:
| As of December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Research and development | $ | 30,978 | $ | - | $ | 280,000 | ||||||
| Professional fees | 192,387 | 109,928 | 116,870 | |||||||||
| Accrued interest | 2,269 | - | - | |||||||||
| Milestone payments (research and development) | 1,000,000 | - | - | |||||||||
| Total accrued expenses | $ | 1,225,634 | $ | 109,928 | $ | 396,870 | ||||||
NOTE D - NOTE PAYABLE
The Company entered into a loan agreement on February 4, 2020 with a financial institution for a $2,000,000 promissory note bearing interest at a floating rate of 2% plus the U.S. Prime Rate, as published in The Wall Street Journal. The average daily interest rate charged to the Company during the years ended December 31, 2021 and 2020 was 5.25% and 5.43%, respectively. The note is secured by all of the Company's assets and has been guaranteed by several members of management. The note was due September 1, 2021 subject to an option by the Company to extend the term for one additional six month period through March 1, 2022 for a fee of $10,000. Furthermore the Company has extended the maturity date of the loan to September 1, 2022. From the initial draw on this facility, $202,500 was held as interest reserve by the Company. As of December 31, 2021 and 2020, the total amount of the note outstanding net of the interest reserve was $1,940,000 and $1,877,597, respectively. Interest expense of $105,000 and $89,847 was recognized for the year ended December 31, 2021 and 2020, respectively.
In connection with obtaining the note, the Company incurred costs of $30,000, issued 157,332 shares of common stock and 304,858 warrants to purchase common stock to the guarantors of the note, and issued 53,802 warrants to the holder of the note. An aggregate fair value of $813,995 was recorded as a debt discount. The balance of the debt discount as of December 31, 2021 and 2020 was $0 and $349,279, respectively. Amortization of debt discount amounted to $349,279 and $464,716 for the years ended December 31, 2021 and 2020, respectively, and was included in interest expense.
| 10 |
Tarus Therapeutics, Inc. Notes to the Financial Statements |
NOTE E - STOCKHOLDERS' DEFICIT
Common Stock
| (a) | Authorized common shares: 10,000,000 common shares with par value of $0.00001 per share. |
| (b) | Following is a roll-forward of ordinary shares as of December 31, 2021, 2020 and 2019: |
| As of December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
| Balance, beginning of year | 5,666,894 | $ | 57 | 4,886,645 | $ | 49 | - | $ | - | |||||||||||||||
| Shares issued in private placement | 286,370 | 3 | 451,194 | 5 | 886,645 | 9 | ||||||||||||||||||
| Shares issued at inception | - | - | - | - | 4,000,000 | 40 | ||||||||||||||||||
| Shares issued to guarantors of note | - | - | 157,332 | 2 | - | - | ||||||||||||||||||
| Shares issued for services | 135,646 | 1 | 171,723 | 1 | - | - | ||||||||||||||||||
| Cancellation of shares | (61,921 | ) | - | - | - | - | - | |||||||||||||||||
| Balance, end of year | 6,026,989 | $ | 61 | 5,666,894 | $ | 57 | 4,886,645 | $ | 49 | |||||||||||||||
Equity Incentive Plan
On July 23, 2020, the Company established the 2020 Equity Incentive Plan (the "Plan"). The number of shares available for grant or option under the Plan shall not exceed 1,415,768 shares. The shares or options granted under this Plan may be either authorized but unissued or reacquired shares. Awards under the Plan may consist of (i) options, (ii) stock awards, and (iii) restricted stock. As of December 31, 2021, there were no stock awards granted and a total of 245,448 shares of restricted stock and 1,170,320 options were granted under the Plan.
The Plan may grant restricted stock to eligible persons which entitle the participants to receive the shares underlying those awards upon vesting or upon the expiration of a designated time period following the vesting of those awards. Restricted stock may, in the discretion of the Plan Administrator, vest in one or more installments over the participant's period of service or upon the attainment of specified performance objectives. Outstanding restricted stock shall automatically terminate, and no shares of common stock shall be issued in satisfaction of those awards, if the performance goals or service requirements established for those awards are not attained or satisfied. The Plan Administrator shall have the discretionary authority to issue vested shares of common stock under one or more outstanding awards of restricted stock as to which the designated performance goals or service requirements have not been attained or satisfied.
Private Placements
During the year ended December 31, 2019, the Company conducted multiple closings of a private placement offering issuing 886,645 shares of the Company’s common stock by entering into subscription agreements with accredited investors for aggregate gross proceeds of approximately $1,853,000. The Company incurred costs of $8,000 which are reflected as a reduction to the proceeds from the shares issued.
During the year ended December 31, 2020, the Company conducted multiple closings of a private placement offering issuing 451,194 shares of the Company’s common stock by entering into subscription agreements with accredited investors for aggregate gross proceeds of approximately $2,071,000. The Company incurred costs of $28,000 which are reflected as a reduction to the proceeds from the shares issued.
| 11 |
Tarus Therapeutics, Inc. Notes to the Financial Statements |
NOTE E - STOCKHOLDERS' DEFICIT (continued)
Private Placements (continued)
During the year ended December 31, 2021, the Company conducted multiple closings of a private placement offering issuing 286,370 shares of the Company’s common stock by entering into subscription agreements with accredited investors for aggregate gross proceeds of approximately $1,314,000. The Company incurred costs of $113,198 which are reflected as a reduction to the proceeds from the shares issued.
Options
The following is a summary of the Company's option activity:
Options | Weighted Average Exercise Price | Weighted Average Remaining Life | ||||||||||
| Outstanding, January 1, 2020 | - | - | ||||||||||
| Granted | 867,687 | $ | 2.72 | |||||||||
| Outstanding, December 31, 2020 | 867,687 | 2.72 | 0.51 | |||||||||
| Granted | 302,633 | 4.59 | ||||||||||
| Outstanding, December 31, 2021 | 1,170,320 | 3.21 | 0.70 | |||||||||
| Exercisable, December 31, 2021 | 750,478 | $ | 3.68 | |||||||||
During the year ended December 31, 2020, the Company issued 867,687 options to a member of the board of directors and employees. The options have an average exercise price of $2.72 per share, a term of 10 years, and various vesting schedules ranging from immediate to 3 years. The options have an aggregated fair value of $1,015,207 that was calculated using the Black-Scholes option-pricing model based on the assumptions discussed above in Note B. For the year ended December 31, 2020, the Company recognized share-based compensation related to options of an aggregate of $800,696 in general and administrative expense.
During the year ended December 31, 2021, the Company issued 302,633 options to a member of the board of directors and employees. The options have an average exercise price of $3.96 per share, a term of 10 years, and various vesting schedules ranging from immediate to 3 years. The options have an aggregated fair value of approximately $938,753 that was calculated using the Black-Scholes option-pricing model based on the assumptions discussed above in Note B. For the year ended December 31, 2021, the Company recognized share- based compensation related to options of an aggregate of $296,147 in general and administrative expense. On December 31, 2021, unrecognized share-based compensation was $773,895, which will be recognized over a weighted average period of 1.51 years.
The assumptions used in the Black-Scholes Model are set forth in the table below.
| 2021 | 2020 | |||||||
| Risk-Free Interest Rate | 0.42 - 1.40% | 0.23 - 0.60% | ||||||
| Volatility | 74.29 - 78.23% | 73.18 - 77.01% | ||||||
| Dividend yield | -0-% | -0-% | ||||||
| Term (in Years) | 5.0 - 6.5 | 5.0 - 6.5 | ||||||
| Grant Date Fair Value | $2.86 - $3.16 | $1.33 - $3.10 | ||||||
| 12 |
Tarus Therapeutics, Inc. Notes to the Financial Statements |
NOTE E - STOCKHOLDERS' DEFICIT (continued)
Warrants
As of December 31, 2021, the Company had warrants outstanding to purchase an aggregate of 358,660 shares of Common Stock with a weighted-average contractual remaining life of approximately 9.2 years, and exercise price of $2.79 per share. As of December 31, 2021, no warrants have been exercised.
The following is a summary of the Company's warrant activity:
| Shares Upon Exercise of Warrants | Exercise Price | |||||||
| Outstanding, January 1, 2019 | - | $ | 2.79 | |||||
| Issued | 789,474 | 2.79 | ||||||
| Outstanding, December 31, 2019 | 789,474 | 2.79 | ||||||
| Issued | 358,660 | 2.79 | ||||||
| Cancelled | (789,474 | ) | 2.79 | |||||
| Outstanding, December 31, 2020 | 358,660 | 2.79 | ||||||
| Issued | - | - | ||||||
| Outstanding, December 31, 2021 | 358,660 | $ | 2.79 |
During 2019, the Company issued 789,474 warrants to consultants. During 2020, the Company cancelled the previously issued warrants. In connection with the cancellation, the Company paid the consultants $100,000 and recognized a reduction to additional paid-in capital. During 2020, the Company issued 53,802 warrants to the holder of the Company's note payable. These warrants had an estimated fair value of $59,193 at the time of issuance. The warrants were recorded as a debt discount based on their relative fair value. In addition, the Company issued 304,858 warrants to guarantors of the Company's note payable with a fair value of $345,631, that was calculated using the Black-Scholes option-pricing model based on the assumptions discussed above in Note B.
Restricted Stock Awards
From inception through December 31, 2021, the Company granted 464,701 shares of restricted stock to board members and others, which were fully vested at the dates of grant. Of such shares, 157,332 were issued in connection with obtaining the Company's note payable. These shares had an estimated fair value of $379,169 and were recorded as a debt discount. The Company recognized the estimated fair value of the remaining shares resulting in an expense of $622,615 and $413,852 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, there was no unrecognized compensation cost, related to the restricted stock awards. During the year ended December 31, 2021, the Company cancelled 61,921 shares of fully vested restricted stock which had been granted to an individual who left the Company.
| 13 |
Tarus Therapeutics, Inc. Notes to the Financial Statements |
NOTE E - STOCKHOLDERS' DEFICIT (continued)
Restricted Stock Awards (continued)
The following is a summary of the Company's restricted stock award activity.
| Number of Shares | Weighted Average Fair Value | |||||||
| Nonvested at January 1, 2019 | - | $ | - | |||||
| Granted | - | - | ||||||
| Nonvested at December 31, 2019 | - | - | ||||||
| Granted | 329,055 | 2.41 | ||||||
| Vested | (329,055 | ) | 2.41 | |||||
| Nonvested at December 31, 2020 | - | - | ||||||
| Granted | 135,646 | 4.59 | ||||||
| Vested | (135,646 | ) | 4.59 | |||||
| Nonvested at December 31, 2021 | - | $ | - | |||||
NOTE F - INCOME TAXES
The provision for federal and state income taxes for the years ended December 31, 2021, 2020 and 2019, is as follows:
| 2021 | 2020 | 2019 | ||||||||||
| Federal | ||||||||||||
| Current | $ | - | $ | - | $ | - | ||||||
| Deferred | - | - | - | |||||||||
| State and Local | ||||||||||||
| Current | - | - | - | |||||||||
| Deferred | - | - | - | |||||||||
| Total provision for income taxes | $ | - | $ | - | $ | - |
The Company’s deferred tax assets consisted of the following:
| December 31, | ||||||||||||
| Deferred Tax Assets | 2021 | 2020 | 2019 | |||||||||
| Intangible assets | $ | 1,502,000 | $ | 1,101,000 | $ | 476,000 | ||||||
| Net operating loss carryforwards | 871,000 | 423,000 | 31,000 | |||||||||
| Accounts payable and accrued expenses | 146,000 | 36,000 | 33,000 | |||||||||
| Total deferred tax assets | 2,519,000 | 1,560,000 | 540,000 | |||||||||
| Valuation allowance | (2,519,000 | ) | (1,560,000 | ) | (540,000 | ) | ||||||
| Deferred tax asset, net of valuation allowance | $ | - | $ | - | $ | - | ||||||
| 14 |
Tarus Therapeutics, Inc. Notes to the Financial Statements |
NOTE F - INCOME TAXES (continued)
At December 31, 2021, the Company has available federal net operating loss (“NOL”) carryforwards of approximately $3,100,000 that may be used to offset future taxable income and do not expire.
No tax benefit has been reported in the accompanying financial statements since the Company believes that the realization of its net deferred tax assets at December 31, 2021, 2020 and 2019 was not considered more likely than not based upon the Company’s losses since inception.
The change in the valuation allowance for the years ended December 31, 2021, 2020 and 2019 was $959,000, $1,020,000 and $540,000, respectively.
NOTE G - COMMITMENTS AND CONTINGENCIES
The Company utilizes third party contractors to conduct some of its clinical activities. Such commitments are generally cancellable upon short-term notice.
License Agreement
On October 29, 2019, the Company entered into an exclusive license agreement, or the License Agreement, with Impetis Biosciences Limited ("Impetis"), to grant the Company an exclusive worldwide license to develop and commercialize adenosine receptor antagonists and related assets. The Company's current Chief Science Officer is the former managing director and CEO of Impetis. The License Agreement provides that the Company pay Impetis a total of $1.75 million in connection with the execution of the License Agreement, all of which has been paid as of December 31, 2019.
At any time, during the twelve-month period ending November 20, 2020, the Company had the option to obtain an exclusive sublicensable worldwide license to development or commercialize all of the option assets under the same terms as the license agreement, for a total exercise price of $750,000. The Company exercised the option in 2020.
Under the terms of the License Agreement, the Company is required to reasonably use efforts to achieve certain delineated milestones, including specified clinical development and specified commercialization milestones. In general, upon its achievement of these milestones, the Company will be obligated, in the case of development and commercialization milestones, to make milestone payments to Impetis in specified amounts and, in the case of commercialization milestones, to specified royalties with respect to product sales. In the event the Company fails to make timely payments, payments shall accrue interest at a per annum rate of 1% above monthly LIBOR.
During 2021, the Company has achieved two milestones and is obligated to pay Impetis an aggregate amount of $1.0 million. As of December 31, 2021, the Company has outstanding payments of $1.0 million and has accrued interest of $2,269 which are included in accrued expenses as of December 31, 2021. Please see Note C.
| 15 |
Tarus Therapeutics, Inc. Notes to the Financial Statements |
NOTE H - INTEREST EXPENSE
Interest expense consist of the following:
| For the Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Amortization of debt discount | $ | 349,279 | $ | 464,716 | $ | - | ||||||
| Interest on notes payable | 105,000 | 89,847 | - | |||||||||
| Interest on outstanding milestone payments | 2,269 | - | - | |||||||||
| Total interest expense | $ | 456,548 | $ | 554,563 | $ | - | ||||||
NOTE I - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Chief Scientific Officer, was the former Co-founder and Chief Scientific Officer of Advinus Therapeutics Ltd. during the period of 2015 through 2017. Advinus Therapeutics Ltd. is a wholly-owned subsidiary of Euronfins Advinus. The Company paid Eurofins Advinus approximately $128,000 and $1,628,000 during the years ended December 31, 2021 and 2020, respectively, related to research and development expenses. In addition, and prior to the Officer's employment with the Company, the individual served as a Director for Impetis Biosciences Limited, which was owned by the Tata group.
NOTE J - SUBSEQUENT EVENTS
During February 2022, the Company issued $750,000 aggregate principal amount of convertible notes with maturity dates of February 2024. All of the convertible notes issued by the Company are subject to the same terms. All the notes carry an interest rate of 6%. These notes contain a mandatory conversion feature of which the outstanding principle and unpaid accrued interest shall be converted in to conversion shares, in the event of a reverse merger or related financing transaction that occurs prior to maturity. At such event, the price shall be 70% of the conversion price. At maturity, the outstanding principal and unpaid accrued interest of each note shall be automatically converted into conversion shares. The number of conversion shares to be issued upon a maturity conversion shall be equal to the quotient obtained by dividing (i) the outstanding principal and unpaid accrued interest due on a Note to be converted on the date of the conversion by (ii) the Conversion Price of $4.59.
16
Exhibit 99.2
TARUS THERAPEUTICS, INC.
INDEX TO FINANCIAL STATEMENTS
| Page | ||
| Unaudited Financial Statements | ||
| Statement of Financial Position as of March 31, 2022 | 1 | |
| Statements of Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 | 2 | |
| Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 | 3 | |
| Notes to the Financial Statements | 4 |
TARUS THERAPEUTICS, INC.
Statement of Financial Position
(U.S. Dollars)
(Unaudited)
| Notes | March 31, 2022 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash | B | $ | 695,167 | |||
| Restricted cash | B | 53,750 | ||||
| Total current assets | 748,917 | |||||
| Total assets | $ | 748,917 | ||||
| Liabilities and Stockholders’ Deficit | ||||||
| Current liabilities | ||||||
| Accounts payable | $ | 479,026 | ||||
| Accrued expenses | 1,299,323 | |||||
| Note payable | C, F | 2,000,000 | ||||
| Total current liabilities | 3,778,349 | |||||
| Non-current liabilities | ||||||
| Convertible notes payable (including accrued interest), net of debt issuance costs of $52,143 | H | 703,652 | ||||
| Total non-current liabilities | 703,652 | |||||
| Total liabilities | 4,482,001 | |||||
| Commitments and Contingencies | ||||||
| Stockholders’ Deficit | ||||||
| Common stock | D | 62 | ||||
| Additional paid-in capital | 8,467,008 | |||||
| Accumulated deficit | (12,200,154 | ) | ||||
| Total stockholders’ deficit | (3,733,084 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 748,917 | ||||
See accompanying notes to financial statements.
| 1 |
TARUS THERAPEUTICS, INC.
Statements of Comprehensive Loss
(U.S. Dollars)
(Unaudited)
| Notes | Three months ended March 31, | |||||||||
| 2022 | 2021 | |||||||||
| Expenses | ||||||||||
| General and administrative expenses | $ | 469,846 | $ | 1,197,788 | ||||||
| Research and development expenses | 78,118 | 119,435 | ||||||||
| Loss from operations | (547,964 | ) | (1,317,223 | ) | ||||||
| Other expense | ||||||||||
| Interest expense | F | (43,073 | ) | (113,570 | ) | |||||
| Loss before provision for income taxes | (591,037 | ) | (1,430,793 | ) | ||||||
| Income tax benefit | – | – | ||||||||
| Net loss | $ | (591,037 | ) | $ | (1,430,793 | ) | ||||
See accompanying notes to financial statements.
| 2 |
TARUS THERAPEUTICS, INC.
Statements of Cash Flows
(U.S. Dollars)
(Unaudited)
| Notes | Three Months Ended March 31, | |||||||||
| 2022 | 2021 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net loss for the period | $ | (591,037 | ) | $ | (1,430,793 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
| Share-based compensation expense | D | 82,346 | 1,026,992 | |||||||
| Amortization of debt issuance costs | F, H | 7,857 | – | |||||||
| Interest expense | F | 35,216 | 26,250 | |||||||
| Amortization of debt discount | – | 87,320 | ||||||||
| Change in operating assets and liabilities: | ||||||||||
| Accounts payable and accrued expenses | 213,283 | 17,469 | ||||||||
| Net cash used in operating activities | (252,335 | ) | (272,762 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Proceeds from the issuance of convertible notes payable | H | 750,000 | – | |||||||
| Debt issuance costs | H | (60,000 | ) | – | ||||||
| Cash paid for interest | F | (26,250 | ) | (26,250 | ) | |||||
| Proceeds from the issuance of common stock, net | – | 983,268 | ||||||||
| Net cash provided by financing activities | 663,750 | 957,018 | ||||||||
| Net increase in cash and restricted cash | 411,415 | 684,256 | ||||||||
| Cash and restricted cash at beginning of period | 337,502 | 724,793 | ||||||||
| Cash and restricted cash at end of period | B | $ | 748,917 | $ | 1,409,049 | |||||
See accompanying notes to financial statements.
| 3 |
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
March 31, 2022 and 2021
NOTE A - NATURE OF OPERATIONS
Nature of Operations
Tarus Therapeutics, Inc. (the "Company") was incorporated in the state of Delaware on January 2, 2019. The Company is a privately held biotechnology Company focused on treatment of resistant cancers. The Company’s mailing address is 6A Cove Lane N, North Bergen, NJ 07047. It has no physical office at this time.
These financial statements were authorized for issue by the Board of Directors on October 12, 2022.
Liquidity
The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s current technology.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since inception and has funded its operations primarily through the sale of common stock and the issuance of a note payable. On March 31, 2022, the Company had stockholders’ deficit of approximately $3.7 million, borrowings outstanding, not including accrued interest, of approximately $2.7 million and a working capital deficit of approximately $3.0 million.
For each of the three months ended March 31, 2022 and 2021, the Company had net cash outflows from operations of approximately $0.3 million. Management believes that losses and negative cash flow will continue for at least the next year, from the date these financial statements are being issued. If the Company is unable to obtain sufficient cash resources to fund its operations and repay its notes payable, it may be forced to reduce or discontinue its operations. These conditions raise significant doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its business activities, including its research and development program (see Note I(a), “Events After the Balance Sheet Date – Merger Agreement”).
COVID-19
In December 2019, a novel strain of coronavirus (“COVID-19”) was identified and has subsequently spread to other regions of the world, and has resulted in increased travel restrictions, business disruptions and emergency quarantine measures across the world including the United States. These disruptions did not have an effect on the Company's business plan.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared in accordance with IAS 34, “Interim Financial Statements.” The financial statements have been prepared on a historical cost basis and are presented in U.S. Dollars.
These financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2021.
Use of Estimates
The preparation of financial statements in conformity with International Financial Reporting Standards (“IFRS”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the periods. The estimates affecting the financial statements that are particularly significant include the share-based compensation. Actual results could differ from those estimates.
| 4 |
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
March 31, 2022 and 2021
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
The Company periodically monitors its positions with, and the credit quality of the financial institutions with which it invests. Periodically, throughout the years, and as of March 31, 2022, the Company has maintained balances in excess of federally insured limits. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents as of and during the three months ended March 31, 2022 and 2021.
Cash and Restricted Cash
Amounts included in restricted cash represent those required to be set aside to make interest payments on the outstanding note payable. The following table presents cash and restricted cash reported on the statement of financial position as of March 31, 2022 and the sums presented on the statements of cash flows as of March 31, 2022 and 2021:
| As of March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash | $ | 695,167 | $ | 1,312,896 | ||||
| Restricted cash | 53,750 | 96,153 | ||||||
| Total as presented in the statements of cash flows | $ | 748,917 | $ | 1,409,049 | ||||
Research and Development
Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are expensed as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically, and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit. During the period of development, the asset is tested for impairment annually. Research and development expenses include all direct and indirect operating expenses supporting the products in development. For the three months ended March 31, 2022 and 2021, all research and development expenditures were categorized as research and expensed in the period incurred. See Note F, “Commitments and Contingencies – License Agreement” for a further discussion.
Deferred Finance Costs
Costs incurred with obtaining and executing debt arrangements are capitalized and amortized over the term of the related debt. Unamortized deferred costs are presented in the balance sheet as an offset to the associated debt.
Income Taxes
The Company recorded no income tax expense for the three months ended March 31, 2022 and 2021 because the estimated annual effective tax rate was zero. As of March 31, 2022, the Company continued to provide a valuation allowance against its net deferred assets since the Company believes it is more likely than not that the deferred tax assets will not be realized.
Share-Based Compensation
The Company calculates share-based compensation expense for option awards based on the grant/issue date fair value using the Black-Scholes-Merton option pricing model (“Black-Sholes Model”) and recognize the expense on a straight-line basis over the vesting period. The Company accounts for forfeitures as they occur. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the vesting period of the Share-based Award in determining the fair value of Share-based Awards. Although the Company believes the assumptions used to calculate share-based compensation expense are reasonable, these assumptions can involve complex judgments about future events, which are open to interpretation and inherent uncertainty. In addition, significant changes to the assumptions could significantly impact the amount of expense recorded in a given period.
The Company recognizes restricted stock unit expense over the period of vesting or period that services will be provided. Compensation associated with shares of Common Stock issued or to be issued to consultants and other non-employees is recognized over the expected service period beginning on the measurement date, which is generally the time the Company and the service provider enter into a commitment whereby the Company agrees to grant shares in exchange for the services to be provided.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company is a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical data regarding the volatility of a publicly traded set of peer companies. The expected term of stock options granted to nonemployees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
Recent Accounting Pronouncements
New IFRS standards and interpretations or changes to existing standards with future effective dates are either not applicable or not expected to have a significant impact on the financial statements of the Company.
| 5 |
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
March 31, 2022 and 2021
NOTE C - NOTE PAYABLE
The Company entered into a loan agreement on February 4, 2020 with a financial institution for a $2,000,000 promissory note bearing interest at a floating rate of 2% plus the U.S. Prime Rate, as published in The Wall Street Journal. The average daily interest rate charged to the Company was 5.25% during the three months ended March 31, 2021 and 5.25% to March 17, 2022, when it increased to 5.62%. In connection with obtaining the note, the Company incurred costs of $30,000, issued 157,332 shares of common stock and 304,858 warrants to purchase common stock to the guarantors of the note, and issued 53,802 warrants to the holder of the note. $813,995 was recorded as a debt discount, which was fully amortized at December 31, 2021. The note was secured by all of the Company's assets and was guaranteed by several members of management. The note was originally due September 1, 2021 subject to a Company option to extend the term for one additional six-month period to March 1, 2022 for a fee of $10,000, which was exercised. The Company then extended the maturity date of the loan to September 1, 2022. From the initial draw on this facility, $202,500 was held as interest reserve by the Company. As of March 31, 2022, the total amount of the note outstanding, net of the interest reserve, was $2.0 million (see Note I(c), “Events After the Balance Sheet Date – Note Payable”). Interest expense of $26,250 and $113,570 (including amortization of related debt discount of $87,320) was recognized for the three months ended March 31, 2022 and 2021, respectively.
NOTE D - STOCKHOLDERS' DEFICIT
Common Stock
(a) Authorized common shares: 10,000,000 common shares with par value of $0.00001 per share.
(b) Following is a roll-forward of ordinary shares as of March 31, 2022:
| As of March 31, 2022 | ||||||||
| Shares | Amount | |||||||
| Balance, January 1, 2022 | 6,026,989 | $ | 61 | |||||
| Shares issued for services (1) | 59,577 | 1 | ||||||
| Balance, March 31, 2022 | 6,086,566 | $ | 62 | |||||
| (1) | 59,577 shares with an aggregate fair value of $160,085 were issued to four individuals for certain advisory and research and development services during the three months ended March 31, 2022. |
See Note I(a), “Events After the Balance Sheet Date – Merger Agreement” for a further discussion.
Equity Incentive Plan
On July 23, 2020, the Company established the 2020 Equity Incentive Plan (the "Plan"). The number of shares available for grant or option under the Plan shall not exceed 1,415,768 shares. The shares or options granted under this Plan may be either authorized but unissued or reacquired shares. Awards under the Plan may consist of (i) options, (ii) stock awards and (iii) restricted stock. As of March 31, 2022, there were no stock awards granted and a total of 245,448 shares of restricted stock and 1,170,320 options were granted under the Plan.
The Plan may grant restricted stock to eligible persons which entitle the participants to receive the shares underlying those awards upon vesting or upon the expiration of a designated time period following the vesting of those awards. Restricted stock may, in the discretion of the Plan Administrator, vest in one or more installments over the participant's period of service or upon the attainment of specified performance objectives. Outstanding restricted stock shall automatically terminate, and no shares of common stock shall be issued in satisfaction of those awards, if the performance goals or service requirements established for those awards are not attained or satisfied. The Plan Administrator shall have the discretionary authority to issue vested shares of common stock under one or more outstanding awards of restricted stock as to which the designated performance goals or service requirements have not been attained or satisfied.
| 6 |
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
March 31, 2022 and 2021
NOTE D - STOCKHOLDERS' DEFICIT (continued)
Options
The following is a summary of the Company's option activity (see Note I(e), “Events After the Balance Sheet Date – Stock Options”):
| Weighted | Weighted | |||||||||||
| Average | Average | |||||||||||
| Options | Exercise Price | Life | ||||||||||
| Outstanding, January 1, 2021 | 1,170,320 | $ | 3.21 | 0.70 | ||||||||
| Outstanding, March 31, 2022 | 1,170,320 | $ | 3.21 | 0.45 | ||||||||
The Company recognized share-based compensation expense of $82,346 and $1,026,992 for the three months ended March 31, 2022 and 2021, respectively. The expense was included in general and administrative expenses in the respective statements of comprehensive loss included herein.
Warrants
As of March 31, 2022, the Company had warrants outstanding to purchase an aggregate of 358,660 shares of Common Stock with a weighted-average contractual remaining life of approximately 8.9 years, and an exercise price of $2.79 per share. As of March 31, 2022, no warrants have been exercised (see Note I(b), “Events After the Balance Sheet Date – Warrant Exercises”).
The following is a summary of the Company's warrant activity:
| Shares Upon | ||||||||
| Exercise | ||||||||
| of Warrants | Exercise Price | |||||||
| Outstanding, January 1, 2022 | 358,660 | $ | 2.79 | |||||
| Outstanding, March 31, 2022 | 358,660 | $ | 2.79 | |||||
Restricted Stock Awards
From inception through March 31, 2022, the Company granted 524,278 shares of restricted stock to board members and others, which were fully vested at the dates of grant. Of such shares, 157,332 shares with an estimated fair value of $379,169 were issued in connection with obtaining the Company's note payable and were recorded as a debt discount. 61,921 shares of restricted stock originally granted were forfeited and the balance of 462,357 shares of restricted stock granted are included in common shares issued and outstanding at March 31, 2022.
| 7 |
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
March 31, 2022 and 2021
NOTE E - COMMITMENTS AND CONTINGENCIES
The Company utilizes third party contractors to conduct some of its clinical activities. Such commitments are generally cancellable upon short-term notice.
License Agreement
On October 29, 2019, the Company entered into an exclusive license agreement, or the License Agreement, with Impetis Biosciences Limited ("Impetis"), to grant the Company an exclusive worldwide license to develop and commercialize adenosine receptor antagonists and related assets. The Company's current Chief Science Officer is the former managing director and CEO of Impetis. The License Agreement provides that the Company pay Impetis a total of $1.75 million in connection with the execution of the License Agreement.
At any time, during the twelve-month period ending November 20, 2020, the Company had the option to obtain an exclusive sublicensable worldwide license to develop or commercialize all of the option assets under the same terms as the license agreement, for a total exercise price of $750,000. The Company exercised the option in 2020.
Under the terms of the License Agreement, the Company is required to reasonably use efforts to achieve certain delineated milestones, including specified clinical development and specified commercialization milestones. In general, upon its achievement of these milestones, the Company will be obligated, in the case of development and commercialization milestones, to make milestone payments to Impetis in specified amounts and, in the case of commercialization milestones, to specified royalties with respect to product sales. In the event the Company fails to make timely payments, payments shall accrue interest at a per annum rate of 1% above monthly LIBOR.
During 2021, the Company achieved two milestones and is obligated to pay Impetis an aggregate amount of $1.0 million. Such amount is included in accrued liabilities at March 31, 2022. See Note I(d), “Events After the Balance Sheet Date – Impetis Payment” for a further discussion.
| 8 |
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
March 31, 2022 and 2021
NOTE F - INTEREST EXPENSE
Interest expense was comprised of the following amounts:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Interest on note payable | $ | 26,250 | $ | 26,250 | ||||
| Debt issuance costs – Convertible Notes payable (1) | 7,857 | – | ||||||
| Interest on Convertible Notes (1) | 5,794 | – | ||||||
| Interest on outstanding milestone payments | 3,172 | – | ||||||
| Amortization of debt discount | – | 87,320 | ||||||
| Total interest expense | $ | 43,073 | $ | 113,570 | ||||
(1) These costs are related to the Convertible Notes payable discussed in Note H, “Convertible Notes.”
NOTE G - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Chief Scientific Officer was the former Co-founder and Chief Scientific Officer of Advinus Therapeutics Ltd. during the period of 2015 through 2017. Advinus Therapeutics Ltd. is a wholly-owned subsidiary of Euronfins Advinus. The Company paid Eurofins Advinus approximately $2,500 and $100,000 during the three months ended March 31, 2022 and 2021, respectively, related to research and development expenses. In addition, and prior to the Officer's employment with the Company, the individual served as a Director for Impetis Biosciences Limited, which was owned by the Tata group.
NOTE H - CONVERTIBLE NOTES
During February 2022, the Company issued $750,000 aggregate principal amount of convertible notes (the “Convertible Notes”) originally scheduled to mature in February 2024. The Convertible Notes carried an interest rate of 6% and contain a mandatory conversion feature of which the outstanding principal and unpaid accrued interest would be converted into conversion shares, in the event of a reverse merger or related financing transaction that occurs prior to maturity based on a formula. At maturity, the outstanding principal and unpaid accrued interest of each note would be automatically converted into conversion shares. See Note I(f), “Events After the Balance Sheet Date – Convertible Notes”. The Company incurred $60,000 of expenses associated with this issuance, which was recorded as debt issuance costs. The Company recorded amortization of debt issuance costs of $7,857 in the three months ended March 31, 2022, which was included in interest expense in the statement of comprehensive loss. No such amount was recorded in the prior year period. The Company had $52,143 of unamortized debt issuance costs, which is offset against Convertible Notes payable (including accrued interest) on the accompanying balance sheet.
| 9 |
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
March 31, 2022 and 2021
NOTE I - EVENTS AFTER THE BALANCE SHEET DATE
| (a) | Merger Agreement |
On July 1, 2022, the Company and Portage Biotech Inc. (the “Buyer” or “Portage”) entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). Under the structure of the Merger Agreement, Tarus Therapeutics, Inc. was ultimately merged into a wholly-owned subsidiary of the Buyer with the surviving entity renamed Tarus Therapeutics, LLC. The Tarus merger entitles the Buyer to the rights, know-how and/or ownership related to the assets developed by Tarus (the “Adenosine Compounds”), including:
| 1. | All rights and obligations related to the License Agreement between the Company and Impetis Biosciences Limited, dated October 29, 2019, and the Call Option under the License Agreement, which was exercised on November 5, 2020. |
| 2. | All intellectual property and related documents owned or controlled by the Company, including issued or pending patents, patent applications and trade secrets. Additionally, any draft submissions and/or correspondence with patent authorities. |
| 3. | All documents and supplies related to Adenosine Compounds including inventory, reagents, data, assays, reports, vendor agreements and other information related to the preclinical development. |
| 4. | All clinical supplies, manufacturing know-how, batch records, regulatory documents pertaining to the Adenosine Compounds, certain reservations for manufacturing campaigns and any related agreements. |
| 5. | All regulatory documents and correspondence pertaining to the Adenosine Compounds. |
| 6. | All CRO agreements and protocol related documents for Adenosine Compounds. |
| 7. | All current documents related to market research, forecasting, budgets and competitive intelligence. |
| 8. | Rights to the use of Tarus Therapeutics name for regulatory purposes. |
As consideration for the Company, Portage issued to the Company’s shareholders an aggregate of 2,425,999 ordinary shares of Portage, calculated on the basis of $18M divided by the 60-day Volume Weighted Average Price per share in exchange for the 6,704,343 outstanding shares of the Company. The shares are unregistered and subject to lock-ups for terms ranging from six to twelve months. Additionally, milestone payments of up to $32 million in cash or Portage ordinary shares would be triggered upon achievement of future development and sales milestones. As a result of the transaction:
| · | Portage also assumed $2M short-term debt held by the Company and deferred license milestones obligations ($1M plus interest). The short-term debt was repaid by Portage in July 2022. |
| · | Upon enrolling the first patient in a Phase 2 clinical trial, Portage will pay an additional one-time milestone payment of $15M. Payment will be in the form of cash or PRTG stock (at the discretion of Portage). The remaining $17 million milestone is based on targeted commercial sales. |
| 10 |
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
March 31, 2022 and 2021
NOTE I - EVENTS AFTER THE BALANCE SHEET DATE (continued)
| (b) | Warrant Exercises |
In May 2022, warrant holders exercised 170,051 warrants for proceeds totaling of $474,442. In July 2022, 188,609 warrants expired unexercised.
| (c) | Note Payable |
The $2,000,000 note payable, plus accrued interest and early payment penalty totaling $33,216, was repaid on July 1, 2022 by Portage.
| (d) | Impetis Payment |
The $1,000,000 milestone payment, plus interest, was repaid in August 2022 by Portage.
| (e) | Stock Options |
In June 2022, 10,000 options to purchase common stock were exercised and an additional 299,606 options were exercised on a net basis (29,553 net shares), resulting in total shares issued pursuant to stock options exercises aggregating 39,553 shares. In connection with the merger with Portage, 860,714 options to purchase common stock expired unexercised.
| (f) | Convertible Notes |
The Convertible Notes, plus accrued unpaid interest of $17,100, were converted to 408,166 conversion shares in June 2022.
11
Exhibit 99.3
TARUS THERAPEUTICS, INC.
INDEX TO FINANCIAL STATEMENTS
| Page | ||
| Unaudited Financial Statements | ||
| Statement of Financial Position as of June 30, 2022 | 1 | |
| Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021 | 2 | |
| Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 | 3 | |
| Notes to the Financial Statements | 4 |
TARUS THERAPEUTICS, INC.
Statement of Financial Position
(U.S. Dollars)
(Unaudited)
| Notes | June 30, 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | B | $ | 377,278 | |||||
| Restricted cash | B | 33,216 | ||||||
| Other current assets | 15,482 | |||||||
| Total current assets | 425,976 | |||||||
| Total assets | $ | 425,976 | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 377,278 | ||||||
| Accrued expenses | 1,015,648 | |||||||
| Note payable | C, F | 2,000,000 | ||||||
| Total current liabilities | 3,392,926 | |||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock | D | 69 | ||||||
| Additional paid-in capital | 9,958,431 | |||||||
| Accumulated deficit | (12,925,450 | ) | ||||||
| Total stockholders’ deficit | (2,966,950 | ) | ||||||
| Total liabilities and stockholders’ deficit | $ | 425,976 | ||||||
See accompanying notes to financial statements.
1
TARUS THERAPEUTICS, INC.
Statements of Comprehensive Loss
(U.S. Dollars)
(Unaudited)
| Notes | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| Expenses | ||||||||||||||||||||
| General and administrative expenses | $ | 675,039 | $ | 1,594,594 | $ | 1,144,885 | $ | 2,792,382 | ||||||||||||
| Research and development expenses | (55,706 | ) | 531,152 | 22,412 | 650,587 | |||||||||||||||
| Loss from operations | (619,333 | ) | (2,125,746 | ) | (1,167,297 | ) | (3,442,969 | ) | ||||||||||||
| Other expense | ||||||||||||||||||||
| Interest expense | F | (105,963 | ) | (113,570 | ) | (149,036 | ) | (227,140 | ) | |||||||||||
| Loss before provision for income taxes | (725,296 | ) | (2,239,316 | ) | (1,316,333 | ) | (3,670,109 | ) | ||||||||||||
| Income tax benefit | – | – | – | – | ||||||||||||||||
| Net loss | $ | (725,296 | ) | $ | (2,239,316 | ) | $ | (1,316,333 | ) | $ | (3,670,109 | ) | ||||||||
See accompanying notes to financial statements.
2
TARUS THERAPEUTICS, INC.
Statements of Cash Flows
(U.S. Dollars)
(Unaudited)
| Notes | Six Months Ended June 30, | |||||||||
| 2022 | 2021 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net loss for the period | $ | (1,316,333 | ) | $ | (3,670,109 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
| Share-based compensation expense | D | 308,375 | 1,155,471 | |||||||
| Amortization of debt issuance costs | C, F | 60,000 | – | |||||||
| Interest expense | C, F | 89,036 | 52,500 | |||||||
| Amortization of debt discount | C, F | – | 174,640 | |||||||
| Change in operating assets and liabilities: | ||||||||||
| Other current assets | (15,482 | ) | – | |||||||
| Accounts payable and accrued expenses | (187,614 | ) | 1,323,709 | |||||||
| Net cash used in operating activities | (1,062,018 | ) | (963,789 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Proceeds from the issuance of convertible notes payable | H | 750,000 | – | |||||||
| Proceeds from the exercise of common stock warrants | D | 498,302 | – | |||||||
| Debt issuance costs | H | (60,000 | ) | – | ||||||
| Cash paid for interest | C, F | (53,292 | ) | (52,500 | ) | |||||
| Proceeds from the issuance of common stock, net | – | 1,201,240 | ||||||||
| Net cash provided by financing activities | 1,135,010 | 1,148,740 | ||||||||
| Net increase in cash and restricted cash | 72,992 | 184,951 | ||||||||
| Cash and restricted cash at beginning of period | B | 337,502 | 724,793 | |||||||
| Cash and restricted cash at end of period | $ | 410,494 | $ | 909,744 | ||||||
| Non-cash activities: | ||||||||||
| Conversion of notes payable and accrued interest to common stock | D, H | $ | 767,100 | $ | – | |||||
See accompanying notes to financial statements.
3
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
June 30, 2022 and 2021
NOTE A - NATURE OF OPERATIONS
Nature of Operations
Tarus Therapeutics, Inc. (the "Company") was incorporated in the state of Delaware on January 2, 2019. The Company is a privately held biotechnology Company focused on treatment of resistant cancers. The Company’s mailing address is 6A Cove Lane N, North Bergen, NJ 07047. It has no physical office at this time.
These financial statements were authorized for issue by the Board of Directors on October 12, 2022.
Liquidity
The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s current technology.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since inception and has funded its operations primarily through the sale of common stock and the issuance of a note payable. On June 30, 2022, the Company had stockholders’ deficit of approximately $3.0 million, borrowings outstanding, not including accrued interest, of $2.0 million and a working capital deficit of approximately $3.0 million.
For the six months ended June 30, 2022 and 2021, the Company had net cash outflows from operations of approximately $1.1 million and $1.0 million, respectively. Management believes that losses and negative cash flow will continue for at least the next year, from the date these financial statements are being issued. If the Company is unable to obtain sufficient cash resources to fund its operations and repay its notes payable, it may be forced to reduce or discontinue its operations. These conditions raise significant doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its business activities, including its research and development program (see Note I(a), “Events After the Balance Sheet Date – Merger Agreement”).
COVID-19
In December 2019, a novel strain of coronavirus (“COVID-19”) was identified and has subsequently spread to other regions of the world, and has resulted in increased travel restrictions, business disruptions and emergency quarantine measures across the world including the United States. These disruptions did not have an effect on the Company's business plan.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared in accordance with IAS 34, “Interim Financial Statements.” The financial statements have been prepared on a historical cost basis and are presented in U.S. Dollars.
These financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2021.
Use of Estimates
The preparation of financial statements in conformity with International Financial Reporting Standards ("IFRS") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the periods. The estimates affecting the financial statements that are particularly significant include the share-based compensation. Actual results could differ from those estimates.
4
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
June 30, 2022 and 2021
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
The Company periodically monitors its positions with, and the credit quality of the financial institutions with which it invests. Periodically, throughout the years, and as of June 30, 2022, the Company has maintained balances in excess of federally insured limits. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents as of and during the six months ended June 30, 2022 and 2021.
Cash and Restricted Cash
Amounts included in restricted cash represent those required to be set aside to make interest payments on the outstanding note payable. The following table presents cash and restricted cash reported on the statement of financial position as of June 30, 2022, and the sums presented on the statements of cash flows as of June 30, 2022 and 2021:
| As of June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash | $ | 377,278 | $ | 839,841 | ||||
| Restricted cash | 33,216 | 69,903 | ||||||
| Total as presented in the statements of cash flows | $ | 410,494 | $ | 909,744 | ||||
Research and Development
Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are expensed as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically, and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit. During the period of development, the asset is tested for impairment annually. Research and development expenses include all direct and indirect operating expenses supporting the products in development. For the six months ended June 30, 2022 and 2021, all research and development expenditures were categorized as research and expensed in the period incurred. See Note F, “Commitments and Contingencies – License Agreement” for a further discussion.
Deferred Finance Costs
Costs incurred with obtaining and executing debt arrangements are capitalized and amortized over the term of the related debt. Unamortized deferred costs are presented in the balance sheet as an offset to the associated debt.
Income Taxes
The Company recorded no income tax expense for the six months ended June 30, 2022 and 2021, because the estimated annual effective tax rate was zero. As of June 30, 2022, the Company continues to provide a valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.
| 5 |
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Share-Based Compensation
The Company calculates share-based compensation expense for option awards based on the grant/issue date fair value using the Black-Scholes-Merton option pricing model (“Black-Sholes Model”) and recognize the expense on a straight-line basis over the vesting period. The Company accounts for forfeitures as they occur. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the vesting period of the Share-based Award in determining the fair value of Share-based Awards. Although the Company believes the assumptions used to calculate share-based compensation expense are reasonable, these assumptions can involve complex judgments about future events, which are open to interpretation and inherent uncertainty. In addition, significant changes to the assumptions could significantly impact the amount of expense recorded in a given period.
The Company recognizes restricted stock unit expense over the period of vesting or period that services will be provided. Compensation associated with shares of Common Stock issued or to be issued to consultants and other non-employees is recognized over the expected service period beginning on the measurement date, which is generally the time the Company and the service provider enter into a commitment whereby the Company agrees to grant shares in exchange for the services to be provided.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company is a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical data regarding the volatility of a publicly traded set of peer companies. The expected term of stock options granted to nonemployees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
Recent Accounting Pronouncements
New IFRS standards and interpretations or changes to existing standards with future effective dates are either not applicable or not expected to have a significant impact on the financial statements of the Company.
6
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
June 30, 2022 and 2021
NOTE C - NOTE PAYABLE
The Company entered into a loan agreement on February 4, 2020 with a financial institution for a $2,000,000 promissory note bearing interest at a floating rate of 2% plus the U.S. Prime Rate, as published in The Wall Street Journal. The average daily interest rate charged to the Company during the six months ended June 30, 2021 was 5.25%, and 5.25% until March 17, 2022, when it changed to 5.62%. The average daily interest rate increased to 6.12% on May 5, 2022 and 6.87% on June 16, 2022. The note is secured by all of the Company's assets and has been guaranteed by several members of management. The note was originally due September 1, 2021 subject to a Company option to extend the term for one additional six-month period to March 1, 2022 for a fee of $10,000, which was exercised. The Company then extended the maturity date of the loan to September 1, 2022. From the initial draw on this facility, $202,500 was held as interest reserve by the Company. As of June 30, 2022, the total amount of the note outstanding, net of the interest reserve, was $2 million (see Note I(b), “Events After the Balance Sheet Date – Note Payable”). Interest expense of $37,208 and $26,250 was recognized for the three months ended June 30, 2022 and 2021, respectively, and $63,458 and $52,500 was recognized for the six months ended June 30, 2022 and 2021, respectively. See Note F, “Interest Expense.”
In connection with obtaining the note, the Company incurred costs of $30,000, issued 157,332 shares of common stock and 304,858 warrants to purchase common stock to the guarantors of the note, and issued 53,802 warrants to the holder of the note. $813,995 was recorded as a debt discount, which was fully amortized at December 31, 2021. Amortization of debt discount amounted to $87,320 and $174,640 for the three and six months ended June 30, 2021, respectively, and was included in interest expense. No such amount was recorded in the three and six months ended June 30, 2022. See Note F, “Interest Expense.”
NOTE D - STOCKHOLDERS' DEFICIT
Common Stock
(a) Authorized common shares: 10,000,000 common shares with par value of $0.00001 per share.
(b) Following is a roll-forward of ordinary shares as of June 30, 2022:
| As of June 30, 2022 | ||||||||
| Shares | Amount | |||||||
| Balance, January 1, 2022 | 6,026,989 | $ | 61 | |||||
| Shares issued for services (1) | 59,577 | 1 | ||||||
| Shares issued on conversion of Convertible Notes Payable and accrued interest | 408,166 | 4 | ||||||
| Shares issued on exercise of stock warrants | 170,051 | 2 | ||||||
| Shares issued on exercise of options to purchase common stock, net of shares retained | 39,553 | 1 | ||||||
| Other | 7 | – | ||||||
| Balance, June 30, 2022 | 6,704,343 | $ | 69 | |||||
| (1) | 59,577 shares with an aggregate fair value of $160,085 were issued to four individuals for certain advisory and research and development services during the three months ended June 30, 2022. |
See Note I(a), “Events After the Balance Sheet Date – Merger Agreement” for a further discussion.
Equity Incentive Plan
On July 23, 2020, the Company established the 2020 Equity Incentive Plan (the "Plan"). The number of shares available for grant or option under the Plan shall not exceed 1,415,768 shares. The shares or options granted under this Plan may be either authorized but unissued or reacquired shares. Awards under the Plan may consist of (i) options, (ii) stock awards and (iii) restricted stock. As of June 30, 2022, there were no stock awards granted and a total of 245,448 shares of restricted stock and 1,170,320 options were granted under the Plan.
The Plan may grant restricted stock to eligible persons which entitle the participants to receive the shares underlying those awards upon vesting or upon the expiration of a designated time period following the vesting of those awards. Restricted stock may, in the discretion of the Plan Administrator, vest in one or more installments over the participant's period of service or upon the attainment of specified performance objectives. Outstanding restricted stock shall automatically terminate, and no shares of common stock shall be issued in satisfaction of those awards, if the performance goals or service requirements established for those awards are not attained or satisfied. The Plan Administrator shall have the discretionary authority to issue vested shares of common stock under one or more outstanding awards of restricted stock as to which the designated performance goals or service requirements have not been attained or satisfied.
7
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
June 30, 2022 and 2021
NOTE D - STOCKHOLDERS' DEFICIT (continued)
Options
The following is a summary of the Company's option activity:
| Weighted | Weighted | |||||||||||
| Average | Average | |||||||||||
| Options | Exercise Price | Life | ||||||||||
| Outstanding, January 1, 2021 | 1,170,320 | $ | 3.21 | 0.70 | ||||||||
| Exercised | (309,606 | ) | 3.21 | – | ||||||||
| Outstanding, June 30, 2022 | 860,714 | $ | 3.21 | 0.20 | ||||||||
The Company recognized share-based compensation expense of $65,943 and $128,479 for the three months ended June 30, 2022 and 2021, respectively, and $148,290 and $1,155,471 for the six months ended June 30, 2022 and 2021, respectively.
In June 2022, 309,606 options to purchase common stock were exercised resulting in 39,553 net shares issued. In July 2022, in connection with the merger with Portage Biotech, Inc. (“Portage”), 860,714 options to purchase common stock expired unexercised.
Warrants
As of January 1, 2022, the Company had warrants outstanding to purchase an aggregate of 358,660 shares of Common Stock with a weighted-average contractual remaining life of approximately 9.2 years, and an exercise price of $2.79 per share.
In May 2022, warrant holders exercised 170,051 warrants for proceeds totaling of $474,442. In July 2022, in connection with the merger with Portage, 188,609 warrants expired unexercised.
The following is a summary of the Company's warrant activity:
| Shares Upon | ||||||||
| Exercise | ||||||||
| of Warrants | Exercise Price | |||||||
| Outstanding, January 1, 2022 | 358,660 | $ | 2.79 | |||||
| Exercised (May 2022) | (170,051 | ) | $ | 2.79 | ||||
| Outstanding, June 30, 2022 | 188,609 | $ | 2.79 | |||||
Restricted Stock Awards
From inception through June 30, 2022, the Company granted 524,278 shares of restricted stock to board members and others, which were fully vested at the dates of grant. Of such shares, 157,332 shares with an estimated fair value of $379,169 were issued in connection with obtaining the Company's note payable and were recorded as a debt discount. 61,921 shares of restricted stock originally granted were forfeited and the balance of 462,357 shares of restricted stock granted are included in common shares issued and outstanding at June 30, 2022.
In May 2022, the Company granted 59,577 vested shares of the Company to four consultants for services provided. The fair value of the shares was $2.68 per share, which was based on a 409A independent value study of the Company’s common shares. Accordingly, the Company recorded $160,085 share-based compensation expense in the three months ended June 30, 2022.
8
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
June 30, 2022 and 2021
NOTE D - STOCKHOLDERS' DEFICIT (continued)
Below is a table reflecting share-based compensation expense incurred during the three and six months ended June 30, 2022 and 2021.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Share-based compensation expense: | ||||||||||||||||
| Stock options | $ | 65,944 | $ | 128,479 | $ | 148,290 | $ | 1,155,471 | ||||||||
| Restricted stock | 160,085 | – | 160,085 | – | ||||||||||||
| Total share-based compensation expense | $ | 226,029 | $ | 128,479 | $ | 308,375 | $ | 1,155,471 | ||||||||
The expenses above were included in general and administrative expenses in the respective statements of comprehensive loss included herein.
NOTE E - COMMITMENTS AND CONTINGENCIES
The Company utilizes third party contractors to conduct some of its clinical activities. Such commitments are generally cancellable upon short-term notice.
License Agreement
On October 29, 2019, the Company entered into an exclusive license agreement, or the License Agreement, with Impetis Biosciences Limited ("Impetis"), to grant the Company an exclusive worldwide license to develop and commercialize adenosine receptor antagonists and related assets. The Company's current Chief Science Officer is the former managing director and CEO of Impetis. The License Agreement provides that the Company pay Impetis a total of $1.75 million in connection with the execution of the License Agreement.
At any time, during the twelve-month period ending November 20, 2020, the Company had the option to obtain an exclusive sublicensable worldwide license to develop or commercialize all of the option assets under the same terms as the license agreement, for a total exercise price of $750,000. The Company exercised the option in 2020.
Under the terms of the License Agreement, the Company is required to reasonably use efforts to achieve certain delineated milestones, including specified clinical development and specified commercialization milestones. In general, upon its achievement of these milestones, the Company will be obligated, in the case of development and commercialization milestones, to make milestone payments to Impetis in specified amounts and, in the case of commercialization milestones, to specified royalties with respect to product sales. In the event the Company fails to make timely payments, payments shall accrue interest at a per annum rate of 1% above monthly LIBOR.
During 2021, the Company has achieved two milestones and is obligated to pay Impetis an aggregate amount of $1.0 million. Such amount is included in accrued liabilities at June 30, 2022. See Note I(c), “Events After the Balance Sheet Date – Impetis Payment” for a further discussion.
9
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
June 30, 2022 and 2021
NOTE F - INTEREST EXPENSE
Interest expense was comprised of the following amounts:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Debt issuance costs – Convertible Notes payable (1) | $ | 52,143 | $ | – | $ | 60,000 | $ | – | ||||||||
| Interest on note payable | 37,208 | 26,250 | 63,458 | 52,500 | ||||||||||||
| Interest on Convertible Notes (1) | 11,306 | – | 17,100 | – | ||||||||||||
| Interest on outstanding milestone payments | 5,306 | – | 8,478 | – | ||||||||||||
| Amortization of debt discount | – | 87,320 | – | 174,640 | ||||||||||||
| Total interest expense | $ | 105,963 | $ | 113,570 | $ | 149,036 | $ | 227,140 | ||||||||
(1) These costs are related to the Convertible Notes payable discussed in Note H, “Convertible Notes.”
NOTE G - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Chief Scientific Officer was the former Co-founder and Chief Scientific Officer of Advinus Therapeutics Ltd. during the period of 2015 through 2017. Advinus Therapeutics Ltd. is a wholly-owned subsidiary of Euronfins Advinus. The Company paid Eurofins Advinus $0 and $26,000 during the three months ended June 30, 2022 and 2021, respectively, and approximately $2,500 and $126,000 during the six months ended June 30, 2022 and 2021, respectively, related to research and development expenses. In addition, and prior to the Officer's employment with the Company, the individual served as a Director for Impetis Biosciences Limited, which was owned by the Tata group.
NOTE H - CONVERTIBLE NOTES
During February 2022, the Company issued $750,000 aggregate principal amount of convertible notes (the “Convertible Notes”) originally scheduled to mature in February 2024. The Convertible Notes carried an interest rate of 6% and contained a mandatory conversion feature of which the outstanding principal and unpaid accrued interest would be converted into conversion shares, in the event of a reverse merger or related financing transaction that occurs prior to maturity based on a formula. The Convertible Notes, plus accrued unpaid interest of $17,100, were converted to 408,166 shares in June 2022.
The Company incurred $60,000 of expenses associated with this issuance, which was fully amortized as a result of the conversion.
The Company recorded $52,143 and $60,000 amortization of debt issuance costs in the three and six months ended June 30, 2022, which was included in interest expense in the relevant statements of comprehensive loss included herein. No such amount was recorded in the prior year periods.
10
TARUS THERAPEUTICS, INC.
Notes to the Financial Statements
June 30, 2022 and 2021
NOTE I - EVENTS AFTER THE BALANCE SHEET DATE
| (a) | Merger Agreement |
On July 1, 2022, the Company and Portage Biotech Inc. (the “Buyer” or “Portage”) entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). Under the structure of the Merger Agreement, Tarus Therapeutics, Inc. was ultimately merged into a wholly-owned subsidiary of the Buyer with the surviving entity renamed Tarus Therapeutics, LLC. The Tarus merger entitles the Buyer to the rights, know-how and/or ownership related to the assets developed by Tarus (the “Adenosine Compounds”), including:
| 1. | All rights and obligations related to the License Agreement between the Company and Impetis Biosciences Limited, dated October 29, 2019, and the Call Option under the License Agreement, which was exercised on November 5, 2020. |
| 2. | All intellectual property and related documents owned or controlled by the Company, including issued or pending patents, patent applications and trade secrets. Additionally, any draft submissions and/or correspondence with patent authorities. |
| 3. | All documents and supplies related to Adenosine Compounds including inventory, reagents, data, assays, reports, vendor agreements and other information related to the preclinical development. |
| 4. | All clinical supplies, manufacturing know-how, batch records, regulatory documents pertaining to the Adenosine Compounds, certain reservations for manufacturing campaigns and any related agreements. |
| 5. | All regulatory documents and correspondence pertaining to the Adenosine Compounds. |
| 6. | All CRO agreements and protocol related documents for Adenosine Compounds. |
| 7. | All current documents related to market research, forecasting, budgets and competitive intelligence. |
| 8. | Rights to the use of Tarus Therapeutics name for regulatory purposes. |
As consideration for the Company, Portage issued to the Company’s shareholders an aggregate of 2,425,999 ordinary shares of Portage, calculated on the basis of $18M divided by the 60-day Volume Weighted Average Price per share in exchange for the 6,704,343 outstanding shares of the Company. The shares are unregistered and subject to lock-ups for terms ranging from six to twelve months. Additionally, milestone payments of up to $32 million in cash or Portage ordinary shares would be triggered upon achievement of future development and sales milestones. As a result of the transaction:
| · | Portage also assumed $2M short-term debt held by the Company and deferred license milestones obligations ($1M plus interest). The short-term debt was repaid by Portage in July 2022. |
| · | Upon enrolling the first patient in a Phase 2 clinical trial, Portage will pay an additional one-time milestone payment of $15M. Payment will be in the form of cash or PRTG stock (at the discretion of Portage). The remaining $17 million milestone is based on targeted commercial sales. |
| (b) | Note Payable |
The $2,000,000 note payable, plus accrued interest and penalty totaling $33,216, was repaid on July 1, 2022 by Portage.
| (c) | Impetis Payment |
The $1,000,000 milestone payment, plus interest, was repaid in August 2022 by Portage.
11
Exhibit 99.4
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated financial
statements for the periods indicated below give effect to our acquisition of Tarus Therapeutics, Inc. (“Tarus”), which
we consummated on July 1, 2022. The unaudited pro forma condensed consolidated statements of operations for the year ended March 31,
2022 and for the three months ended June 30, 2022 give effect to the acquisition of Tarus as if it had occurred on April 1,
2021. The unaudited pro forma condensed consolidated statements of financial position as of June 30, 2022 give effect to the
acquisition of Tarus as if it had occurred on June 30, 2022.
The unaudited pro forma condensed consolidated statements of operations and comprehensive loss for the year ended March 31, 2022 have been prepared by combining Portage Biotech Inc.’s historical condensed consolidated statement of operations and comprehensive loss for the year ended March 31, 2022 with the historical condensed statement of operations of Tarus for the year ended December 31, 2021. The interim unaudited pro forma condensed consolidated statements of operations for the three months ended June 30, 2022 have been prepared by combining Portage's historical condensed consolidated statement of operations for the three months ended June 30, 2022 with Tarus' historical condensed statement of operations for the three months ended June 30, 2022. Appropriate pro forma adjustments have been applied to the historical accounts.
The unaudited pro forma condensed consolidated financial information is presented for informational purposes only and it is not necessarily indicative of the financial position and results of operations that would have been achieved had the acquisition been completed as of the dates indicated and is not necessarily indicative of our future financial position or results of operations.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical financial statements of Portage and Tarus, respectively, including related notes thereto, which are included elsewhere in this Form 6-K.
Tarus Therapeutics, Inc. Merger Agreement
On July 1, 2022, the Company, its wholly-owned subsidiary, Tarus Acquisition Inc., and Tarus Therapeutics, Inc., a Delaware Corporation advancing adenosine receptor agonists for the treatment of solid tumors, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). Under the structure of the Merger Agreement, Tarus Therapeutics, Inc. was ultimately merged into a wholly-owned subsidiary of the Company with the surviving entity renamed Tarus Therapeutics, LLC. The (“Tarus”) merger entitles the Company to the rights, know-how and/or ownership related to the assets developed by Tarus (the “Adenosine Compounds”), including:
| 1. | All rights and obligations related to the License Agreement between Tarus and Impetis, dated October 29, 2019, and the Call Option under the License Agreement, which was exercised on November 5, 2020. |
| 2. | All intellectual property and related documents owned or controlled by Tarus, including issued or pending patents, patent applications and trade secrets. Additionally, any draft submissions and/or correspondence with patent authorities. |
| 3. | All documents and supplies related to Adenosine Compounds including inventory, reagents, data, assays, reports, vendor agreements and other information related to the preclinical development. |
| 4. | All clinical supplies, manufacturing know-how, batch records, regulatory documents pertaining to the Adenosine Compounds, certain reservations for manufacturing campaigns and any related agreements. |
| 1 |
| 5. | All regulatory documents and correspondence pertaining to the Adenosine Compounds. |
| 6. | All CRO agreements and protocol related documents for Adenosine Compounds. |
| 7. | All current documents related to market research, forecasting, budgets and competitive intelligence. |
| 8. | Rights to the use of Tarus Therapeutics name for regulatory purposes. |
As consideration for Tarus, the Company issued to Tarus shareholders an aggregate of 2,425,999 ordinary shares of Portage, calculated on the basis of $18M divided by the 60-day Volume Weighted Average Price per share. The shares are unregistered and subject to lock-ups for terms ranging from six to twelve months. Additionally, milestone payments of up to $32 million in cash or Portage ordinary shares would be triggered upon achievement of future development and sales milestones. As a result of the transaction:
| · | The Company also assumed $2M short-term debt held by Tarus and deferred license milestones obligations ($1M plus interest). The short-term debt was repaid by the Company in July 2022. |
| · | Upon enrolling the first patient in a Phase 2 clinical trial, Portage will pay an additional one-time milestone payment of $15M. Payment will be in the form of cash or PRTG stock (at the discretion of Portage). The remaining $17 million milestone is based on targeted commercial sales. |
Purchase Accounting
Under purchase accounting as of July 1, 2022 (the Acquisition Date), the assets and liabilities of Tarus Therapeutics, Inc., will be recorded at their respective fair values and the excess of the acquisition consideration will be goodwill. The purchase was in the form of a merger in which Tarus Therapeutics, Inc. was merged into Tarus Therapeutics, LLC., which is a wholly-owned subsidiary of Portage Biotech Inc. All of the consideration for Tarus Therapeutics, LLC was paid or assumed by Portage Biotech Inc. and Portage Biotech Inc. will control the voting rights, the Board of Directors and the operations of Tarus Therapeutics, LLC.
Basis of Presentation
These unaudited pro forma condensed consolidated financial statements included herein show the impact of the acquisition of Tarus Therapeutics, Inc., which was completed on July 1, 2022. The unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only. The historical combined financial information has been adjusted to reflect factually supportable items that are directly attributable to the acquisition and with respect to the statement of operations only, expected to have a continuing impact on combined results of operations.
| 2 |
PORTAGE BIOTECH INC.
Unaudited Pro Forma Condensed Consolidated Statements of Financial Position
As of June 30, 2022
(U.S. Dollars in thousands)
| Historical | Pro Forma | |||||||||||||||
| Portage | Tarus | Adjustments | Combined | |||||||||||||
| Assets | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents (including restricted cash) | $ | $ | $ | ( | ) (2) | $ | ||||||||||
| Prepaid expenses and other receivables | ||||||||||||||||
| Total current asset | ( | ) | ||||||||||||||
| Long-term assets | ||||||||||||||||
| Investment in associate | ||||||||||||||||
| Investments in private companies | ||||||||||||||||
| Goodwill | (1) | |||||||||||||||
| In-process research and development | (1) | |||||||||||||||
| Other assets | ||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities and Equity | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Accounts payable and accrued liabilities | $ | $ | $ | (1) | $ | |||||||||||
| Warrant liabilities | ||||||||||||||||
| Notes payable | ( | ) (2) | ||||||||||||||
| Total current liabilities | ( | ) | ||||||||||||||
| Non-current liabilities | ||||||||||||||||
| Deferred tax liability | ||||||||||||||||
| Deferred purchase consideration | (1) | |||||||||||||||
| Total non-current liabilities | ||||||||||||||||
| Total liabilities | ||||||||||||||||
| Shareholders’ Equity | ||||||||||||||||
| Capital stock | (1) | |||||||||||||||
| Stock option reserve | ||||||||||||||||
| Accumulated other comprehensive income | ||||||||||||||||
| Accumulated deficit | ( | ) | ( | ) | (1) | ( | ) | |||||||||
| Total equity attributed to owners of the Company | ( | ) | ||||||||||||||
| Non-controlling interest | ||||||||||||||||
| Total equity | ( | ) | ||||||||||||||
| Total liabilities and equity | $ | $ | $ | $ | ||||||||||||
| Commitments and Contingent Liabilities | ||||||||||||||||
| 3 |
PORTAGE BIOTECH INC.
Unaudited Pro Forma Condensed Consolidated Statements of Comprehensive Loss
For the Three Months Ended June 30, 2022
(U.S. Dollars in thousands, except per share amounts)
| Historical | Pro Forma | |||||||||||||||
| Portage | Tarus | Adjustments | Combined | |||||||||||||
| Expenses | ||||||||||||||||
| Research and development | $ | $ | ( | ) | $ | (5) | $ | |||||||||
| General and administrative expenses | ( | )(4-6) | ||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Share of loss in associate accounted for using equity method | ( | ) | ( | ) | ||||||||||||
| Change in fair value of warrant liability | ||||||||||||||||
| Foreign exchange transaction loss | ( | ) | ( | ) | ||||||||||||
| Interest income | ||||||||||||||||
| Interest (expense) | ( | ) | (3) | ( | ) | |||||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax benefit | ||||||||||||||||
| Net loss and other comprehensive loss | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Net (loss) income attributable to: | ||||||||||||||||
| Owners of the Company | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Non-controlling interest | ||||||||||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Comprehensive (loss) income attributable to: | ||||||||||||||||
| Owners of the Company | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Non-controlling interest | ||||||||||||||||
| Total comprehensive (loss) income for period | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Loss per share | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||||||||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic and diluted | (12) | |||||||||||||||
| 4 |
PORTAGE BIOTECH INC.
Unaudited Pro Forma Condensed Consolidated Statements of Comprehensive Loss
For the Year Ended March 31, 2022
(U.S. Dollars in thousands, except per share amounts)
| Historical | Pro Forma | |||||||||||||||
| Portage | Tarus (7) | Adjustments | Combined | |||||||||||||
| Expenses | ||||||||||||||||
| Research and development | $ | $ | $ | (11) | $ | |||||||||||
| General and administrative expenses | ( | ) (9-11) | ||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Change in fair value of warrant liability | ||||||||||||||||
| Share of (loss) in associate accounted for using equity method | ( | ) | ( | ) | ||||||||||||
| Foreign exchange transaction gain | ||||||||||||||||
| Interest (expense) | ( | ) | ( | ) | (8) | ( | ) | |||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||
| Net loss and other comprehensive loss | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Net loss attributable to: | ||||||||||||||||
| Owners of the Company | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Comprehensive loss attributable to: | ||||||||||||||||
| Owners of the Company | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Total comprehensive (loss) income for period | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Loss per share | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||||||||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic and diluted | (12) | |||||||||||||||
| 5 |
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
As of June 30, 2022
(U.S. Dollars in thousands)
| 1. |
| Below is a preliminary summary of the purchase price allocation at July 1, 2022: |
| Assets: | ||||
| Identifiable intangible assets | $ | 28,034 | ||
| Goodwill | 1,504 | |||
| $ | 29,538 | |||
| Consideration: | ||||
| Fair value of shares issued | $ | 18,000 | ||
| Liabilities assumed | 3,000 | |||
| Deferred purchase consideration at fair value | 8,538 | |||
| $ | 29,538 | |||
| Included in the $12,808 adjustment to retained earnings is an accrual of $150 for Tarus acquisition expenses incurred in July and August 2022. |
| 2. |
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
For the Three Months Ended June 30, 2022
| 3. |
| 4. |
| 5. |
| 6. |
| 6 |
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Year Ended March 31, 2022
| 7. |
| 8. |
| 9. |
| 10. |
| 11. | Reflects the reclassification of Tarus expenditures totaling approximately $235 from general and administrative to research and development to be consistent with classifications at Portage. |
| 12. |
7