Medicus Pharma Ltd S-1, filed May 27, 2025
Medicus Pharma Ltd. (MDCX)
As filed with the U.S. Securities and Exchange Commission on May 27, 2025.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
MEDICUS PHARMA LTD.
(Exact name of Registrant as specified in its charter)
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Ontario, Canada |
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2834 |
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98-1778211 |
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(State or other jurisdiction of |
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(Primary Standard Industrial |
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(I.R.S. Employer |
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incorporation or organization) |
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Classification Code Number) |
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Identification Number) |
300 Conshohocken State Rd., Suite 200
W. Conshohocken, PA 19428
Telephone: (610) 636-0184
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Medicus Pharma Inc.
300 Conshohocken State Road, Suite 200
Conshohocken, PA 19428
Telephone (610) 540-7515
(Name, address, including zip code, and telephone number, including area code,
of agent of service)
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Copies to: |
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Christopher J. Cummings |
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Aaron Sonshine Bennett Jones LLP 3400 One First Canadian Place P.O. Box 130, Toronto, ON M5X 1A4 Telephone: (416) 777-6448 |
M. Ali Panjwani, Esq. |
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Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the Registration Statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion,
dated May 27, 2025
Preliminary Prospectus
1,375,000 Units
Consisting of an Aggregate of
1,375,000 Common Shares
and
1,375,000 Warrants to Purchase One Common Share
1,375,000 Common Shares Issuable upon the Exercise of the Warrants
Medicus Pharma Ltd.
We are offering on a “best efforts” basis 1,375,000 units (each, a "Unit"), each Unit consisting of one common share of Medicus Pharma Ltd. (the "Company", "we", "us"), no par value, and one warrant to purchase one common share (each, a "warrant") at an assumed public offering price of $7.29 per Unit, which was the closing price our common shares on The Nasdaq Capital Market (“Nasdaq”) on May 23, 2025, for an aggregate offering of 1,375,000 common shares and 1,375,000 warrants and gross proceeds of up to approximately $10 million. The public offering price per Unit will be determined between us and the agent (as defined below) based on market conditions at the time of pricing, and may be at a discount to the then-current market price of our common shares. Therefore, the recent market price of our common shares referenced throughout this preliminary prospectus may not be indicative of the final offering price per Unit. Each warrant is immediately exercisable for one of our common shares at an exercise price of $ per share (or 100% of the price of each Unit sold in the offering) and will expire five years from the date of issuance. The Units will not be certificated and the common shares and warrants comprising the Units are immediately separable and will be issued separately in this offering. Pursuant to this prospectus, we are also offering the 1,375,000 common shares issuable from time to time upon the exercise of the warrants offered hereby.
Our common shares and public warrants, with an exercise price of $4.64 and expiration date of November 15, 2029 (the “Public Warrants”) are listed on Nasdaq, under the symbols "MDCX" and "MDCXW," respectively. The warrants offered hereby will not trade on any U.S. securities exchange and we will not apply for listing on any U.S. securities exchange. Therefore, without an active trading market for the warrants, the liquidity of such warrants will be limited.
The closing prices of our common shares and Public Warrants on Nasdaq on May 23, 2025 were $7.29 and $2.41, respectively.
The securities will be offered at a fixed price and are expected to be issued in a single closing. We expect this offering to be completed not later than one business day following the commencement of sales in this offering (after the effective date of the registration statement of which this prospectus forms a part) and that we will deliver all securities to be issued in connection with this offering via delivery versus payment or receipt versus payment, as the case may be, upon receipt of investor funds received by us. Accordingly, neither we nor the agent have made any arrangements to place investor funds in an escrow account or trust account since the placement agent will not receive investor funds in connection with the sale of the securities offered hereunder.
We have engaged Maxim Group LLC (the “agent” or “Maxim”) to act as our exclusive placement agent in connection with this offering. The agent has agreed to use its reasonable best efforts to arrange for the sale of the securities offered by this prospectus. The agent is not purchasing or selling any of the securities we are offering and the agent is not required to arrange the purchase or sale of any specific number of securities or dollar amount. We have agreed to pay to the agent the fees set forth in the table below, which assumes that we sell all of the securities offered by this prospectus. There is no minimum offering requirement as a condition of closing of this offering. We may sell fewer than all of the Units offered hereby, which may significantly reduce the amount of proceeds received by us. Because there is no escrow account and no minimum number of securities or amount of proceeds, investors could be in a position where they have invested in us, but we have not raised sufficient proceeds in this offering to adequately fund the intended uses of the proceeds as described in this prospectus. All proceeds from this offering will become immediately available to us and may be used as they are accepted. Purchasers of the Units will not be entitled to a refund and could lose their entire investments. See “Risk Factors” for more information regarding risks related to this offering. We will bear all costs associated with the offering. This offering will terminate on August 16, 2025, unless we decide to terminate the offering (which we may do at any time in our discretion) prior to that date. See “Plan of Distribution” for more information regarding these arrangements.
We are an "emerging growth company" and a "smaller reporting company" under applicable U.S. Securities and Exchange Commission rules and will be eligible for reduced public company disclosure requirements. See "Prospectus Summary-Implications of Being an Emerging Growth Company" and "Prospectus Summary-Implications of Being a Smaller Reporting Company."
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Investing in our securities involves risks. See "Risk Factors" beginning on page 10 of this prospectus to read about factors you should consider before buying our securities.
| Per Unit | Total | ||
| Public offering price | $ | $ | |
| Placement agent fees(1) | $ | $ | |
| Proceeds, before expenses | $ | $ |
(1) We have engaged Maxim Group LLC (the “agent”) to act as placement agent for this offering, in exchange for a fee of 7.5% of the aggregate offering price of the Units sold in this offering. We have also agreed to reimburse the agent for certain expenses. For additional agent compensation information, see "Plan of Distribution" on page 135.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The agent expects to deliver the common shares and warrants against payment as set forth under "Plan of Distribution" on or about , 2025.
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Maxim Group LLC
The date of this prospectus is , 2025
TABLE OF CONTENTS
Neither we nor the agent has authorized anyone to provide any information or to make any representations other than the information contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we may have referred you. We and the agent take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the agent have not authorized any other person to provide you with different or additional information. Neither we nor the agent is making an offer to sell the common shares or the warrants in any jurisdiction where the offer or sale is not permitted. This offering is being made in the United States and elsewhere solely on the basis of the information contained in this prospectus. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the common shares or the warrants. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy the common shares or the warrants in any circumstances under which such offer or solicitation is unlawful.
For investors outside the United States: Neither we nor the agent has done anything that would permit this offering or the possession or distribution of this prospectus in any jurisdiction where action for those purposes is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, this offering of Units and the distribution of this prospectus outside the United States.
Unless the context otherwise requires, in this prospectus, the term(s) "we", "us", "our", "Company", "our company", "Medicus," and "our business" refer to Medicus Pharma Ltd. and our subsidiaries.
MARKET, INDUSTRY AND OTHER DATA
This prospectus contains estimates, projections and other information concerning our industry, our business, and the markets for our products. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources that we believe to be reasonable and reliable.
In addition, assumptions and estimates of our and our industry's future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors." These and other factors could cause our future performance to differ materially from our assumptions and estimates. See "Cautionary Statement Regarding Forward-Looking Statements."
TRADEMARKS AND TRADE NAMES
We own or have rights to certain trademarks that we use in conjunction with the operations of our business. Each trademark, trade name, service mark or copyright of any other company appearing or incorporated by reference in this prospectus belongs to its holder. Solely for convenience, trademarks, trade names, service marks and copyrights referred to in this prospectus may appear with or without the "©", "®" or "™" symbols, but the inclusion, or not, of such references are not intended to indicate, in any way, that we, or the applicable owner, will not assert, to the fullest extent possible under applicable law, our or their, as applicable, rights to these trademarks, trade names service marks or copyrights. We do not intend our use or display of other companies' trademarks, trade names, service marks or copyrights to imply a relationship with, or endorsement or sponsorship of us by, such other companies.
PRESENTATION OF FINANCIAL INFORMATION
Unless otherwise indicated, the consolidated financial statements and related notes included in this prospectus have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). Our functional currency is U.S. dollars.
EXCHANGE RATE INFORMATION
In this prospectus, all dollar amounts referenced, unless otherwise indicated, are expressed in U.S. dollars and are referred to as "$". Canadian dollars are referred to as "C$". The following table sets out, for the periods indicated, the high, low, and period end indicative rates of exchange for $1.00 expressed in Canadian dollars as published by the Bank of Canada:
| Period ended March 31, 2025 (C$) |
Year ended December 31, 2024 (C$) |
Year ended December 31, 2023 (C$) |
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| As at end of period | 1.4376 | 1.4389 | 1.3226 |
| Low for the period | 1.4166 | 1.3316 | 1.3128 |
| High for the period | 1.4603 | 1.4416 | 1.3875 |
| Average rate for the period | 1.4352 | 1.3698 | 1.3497 |
On May 23, 2025, the daily average exchange rate for Canadian dollars in terms of the U.S. dollar, as quoted by the Bank of Canada, was $1.00 = C$1.3756.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, regulatory process, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words "believe", "anticipate", "intend", "expect", "target", "goal", "estimate", "plan", "assume", "may", "will", "predict", "project", "would", "could" and similar expressions or the negative of such terms are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this prospectus include, but are not limited to, statements about:
• our financial results, including our ability to continue as a going concern, generate earnings and achieve and sustain profitability, which may vary significantly from forecasts and from period to period;
• the progress, timing and completion of our research, development and preclinical studies and clinical trials for our products and product candidates;
• the entry into definitive agreements with respect to the Antev Transaction (as defined below), the consummation of the Antev Transaction and the expected timing thereof;
• our ability to market, commercialize, achieve market acceptance for and sell our products and product candidates;
• our ability to develop, manage and maintain our direct sales and marketing organizations;
• our estimates regarding anticipated operating losses, future revenues, capital requirements and our needs for additional financing;
• market risks regarding consolidation in the healthcare industry;
• the willingness of healthcare providers to purchase our products if coverage, reimbursement and pricing from third party payors for procedures using our products significantly declines;
• our ability to adequately protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
• the fact that product quality issues or product defects may harm our business;
• any product liability claims; and
• the regulatory, legal and certain operating risks that our operations subject us to.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly the factors described in the "Risk Factors" section of this prospectus, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.
You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about us, including those listed in the sections of this prospectus entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this prospectus.
Any forward-looking statement made by us in this presentation is based on information currently available to us and speaks only as of the date on which it is made. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and consolidated financial statements and the related notes thereto included elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our securities. You should read this entire prospectus carefully, including "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus, before making an investment decision.
Overview
Our Company
We are a biotech/life sciences company focused on accelerating the clinical development programs of novel and disruptive therapeutic assets. Currently, we are developing one product, SkinJectTM (the "Product"), with an indication for basal cell carcinoma.
Through our wholly owned subsidiary, SkinJect, Inc. ("SkinJect"), we focus on the development of our in-licensed drug device combination product using novel dissolvable microneedle arrays for the treatment of non-melanoma skin cancers. Our combination product candidate is a doxorubicin tip-loaded D-MNA filed with the U.S. Food and Drug Administration (the "FDA") under an Investigational New Drug Application and is regulated by the Center for Drug Evaluation and Registration (“CDER”), Oncology Division.
Prior to the Company's acquisition of SkinJect, our business was undertaken by SkinJect as a stand-alone entity. References to our business as conducted at a date prior to the completion of the Business Combination (as defined below) relate to the business undertakings of SkinJect.
For information on the Business Combination, see "Corporate History and Information."
We are subject to significant risks and uncertainties, including those related to our limited operating history, our lack of historical earnings, and the fact that the Product is a novel technology for which regulatory approval might not be achieved. For more information, see "Risk Factors."
Our Strategy
Our principal purpose is to advance the clinical development program of the Product, a novel, minimally invasive treatment for basal cell carcinoma and potentially other common forms of non-melanoma skin cancer. We also seek to opportunistically identify, evaluate and acquire accretive assets, properties or businesses.
The Product is considered an Investigational New Drug ("IND") by the FDA. In January 2024, we submitted to the FDA a Phase 2 IND clinical protocol to non-invasively treat basal cell carcinoma of the skin using the Product. The clinical protocol was updated in July 2024.
We may also trial the Product on other forms of skin cancer beyond basal cell carcinoma. Specifically, it may be trialed against squamous cell carcinoma, cutaneous T-cell lymphoma, as well as pre-cancerous lesions, among other clinical indications, subject to the Company having the capital resources available to do so, without any need to amend or expand the scope of the Company's existing licenses.
In addition, our business strategy includes the opportunistic acquisition of other accretive clinical stage life sciences and biotechnology companies.
For additional information regarding the business of the Company and the regulatory environment in which it operates, please refer to the prospectus under the heading "Our Business."
Our Strengths
Our key competitive strengths include:
• A senior management team, led by Dr. Raza Bokhari, that has deep experience in medicine and pharmaceutical science as well as a proven track record in business development and entrepreneurship.
• Successful completion of a Phase 1 study of the Product.
• Potential to treat a range of other common non-melanoma skin cancers as well as pre-cancerous lesions.
Summary Risk Factors
Investing in our securities involves risk. Our ability to execute our strategy is also subject to certain risks. The risks described in "Risk Factors" in this prospectus may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the more significant risks include the following:
• our financial results, including our ability to generate earnings and achieve and sustain profitability (as of March 31, 2025, we had an accumulated deficit of approximately $34.0 million), may vary significantly from forecasts and from period to period;
• the progress, timing and completion of our research, development and preclinical studies and clinical trials for our products and product candidates
• we may not complete the Antev Transaction or may be delayed in completing the Antev Transaction;
• our ability to market, commercialize, achieve market acceptance for and sell our products and product candidates, our ability to develop, manage and maintain our direct sales and marketing organizations;
• our ability to continue as a going concern and if we are unable to obtain additional financing from outside sources and/or eventually generate enough revenues, we may be forced to curtail or discontinue our operations;
• our estimates regarding anticipated operating losses, future revenues, capital requirements and our needs for additional financing;
• market risks regarding consolidation in the healthcare industry;
• the willingness of healthcare providers to purchase our products if coverage, reimbursement and pricing from third party payors for procedures using our products significantly declines;
• our ability to adequately protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
• the fact that product quality issues or product defects may harm our business, any product liability claims; and
• the regulatory, legal and certain operating risks that our operations subject us to.
Please see "Risk Factors" for a discussion of these and other factors you should consider before making an investment in our securities.
Corporate Structure
An organizational chart showing our basic corporate structure is set forth below (both subsidiaries are 100% owned by Medicus Pharma Ltd.):
Corporate History and Information
Our company (formerly, Interactive Capital Partners Corporation) was incorporated pursuant to the Business Corporations Act (Ontario) on April 30, 2008 under the name Interactive Capital Partners Corporation. Prior to the Business Combination (as defined below), the Company existed as a shell company and had no business operations.
On September 29, 2023, the Company completed a business combination (the "Business Combination") with SkinJect, a company existing under the laws of Pennsylvania. The Business Combination was completed pursuant to a business combination agreement dated May 12, 2023, as amended, among the Company, SkinJect and RBx Capital, LP ("RBx"), an investment entity owned and managed by Dr. Raza Bokhari, and resulted in a reverse takeover of Interactive Capital Partners Corporation (the Company as it existed prior to the Business Combination) by the former shareholders of SkinJect, with SkinJect becoming a wholly owned operating subsidiary of the Company, and the Company being renamed "Medicus Pharma Ltd." The structure of the Business Combination is commonly used by companies seeking to become reporting issuers in Canada, as it allows the combined entity to be listed on the TSX Venture Exchange (the "TSXV") at relatively low cost while completing a concurrent equity financing. SkinJect and RBx structured the Business Combination as a reverse takeover for these reasons.
On October 11, 2023, the Company (as it exists after the Business Combination) commenced trading on the TSXV. On November 15, 2024, we completed our initial public offering in the United States and our common shares and our outstanding Public Warrants began trading on Nasdaq under the symbols "MDCX" and "MDCXW", respectively. Effective on February 21, 2025, the Company's common shares were voluntarily delisted from the TSXV. The common shares continue to be listed on Nasdaq. Regulation A Offering
On March 10, 2025, the Company completed an offering of 1,490,000 units at $2.80 per unit pursuant to Tier II of Regulation A under the Securities Act, with each unit consisting of one common share and one warrant, each warrant with an exercise price of $2.80 and an expiration date of March 10, 2030 (the “Regulation A Warrants” and, together with the warrants and the Public Warrants, the “Warrants”). The aggregate gross proceeds to the Company from the Offering were $4,172,000.
The Company's registered and head office is located at One First Canadian Place, 100 King Street West, Suite 3400, Toronto, Ontario M5X 1A4, Canada.
We lease U.S. office space in Conshohocken, Pennsylvania to operate the businesses of our U.S. subsidiaries, Medicus Pharma Inc. and SkinJect, Inc.
Our website address is www.medicuspharma.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase our securities.
Recent Developments
On April 21, 2025, the Company announced that the Institutional Review Board approved the increase in the number of patients in its SKNJCT-003 Phase 2 clinical study from 60 to 90. The clinical study will expand from the nine clinical sites in the United States to include an additional site in the United States and two clinical trial sites in Europe. The Company also announced that it has randomized more than 45 participants in the study and is on track to submit the package seeking a Type C meeting with the FDA before the end of the second quarter of 2025.
On April 26, 2025, the Company signed a binding letter of intent to acquire Antev Ltd. (“Antev”), a UK-based late clinical-stage drug development company. The Company is negotiating a definitive agreement with Antev pursuant to which, the Company will acquire all issued and outstanding shares of Antev on a fully diluted basis, in exchange for 2,666,600 (or approximately 19% in aggregate as of the date of the letter of intent) of the Company’s issued and outstanding common shares (the “Antev Transaction”). In addition to resale restrictions prescribed under applicable securities law, any shares issued to Antev shareholders will be subject to a 9-month staggered lock-up and an agreement granting certain voting rights in favor of management of the Company for 36 months. Antev shareholders will be entitled to receive up to $65 million in additional contingent consideration. The Antev Transaction is expected to close by the end of June 2025, subject to the completion of satisfactory due diligence by Medicus, negotiation of definitive agreements, obtaining applicable corporate, regulatory and other third-party approvals and the fulfillment of customary closing conditions. No assurances can be made that the parties will successfully negotiate and enter into a definitive agreement, or that the Antev Transaction will be consummated on the terms or timeframe currently contemplated, or at all.
Antev is developing Teverelix trifluoroacetate (“Teverelix”), a next generation GnRH antagonist, a potentially first in market product for high-risk prostate cancer patients and patients with first acute urinary retention (AUR) episodes due to enlarged prostate. Teverelix is a long-acting gonadotrophin-releasing hormone (GnRH) antagonist. Unlike GnRH agonists, which can cause an initial surge in testosterone levels, Teverelix directly suppresses sex hormone production without this surge, potentially reducing cardiovascular risks. This mechanism is particularly beneficial for patients with existing cardiovascular conditions.
See “Risk Factors—We may not complete the Antev Transaction or may be delayed in completing the Antev Transaction.”
On May 22, 2025, the Company announced that it has received study may proceed approval from the United Arab Emirates Department of Health to commence Phase 2 clinical study (SKNJCT-004) to non-invasively treat BCC of the skin.
On May 2, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Yorkville (as defined herein) in connection with the issuance and sale by the Company of debentures (the "Debentures") issuable in an aggregate principal amount of up to $5,000,000. Yorkville purchased and the Company issued a Debenture in the aggregate principal amount of $1,250,000 upon the signing of the Purchase Agreement, for net proceeds to the company of $1,125,000. An additional $3,750,000 is available to the Company in accordance with the Purchase Agreement at the Company’s election and upon the achievement of certain triggers. The Debentures are guaranteed by each of the Company’s subsidiaries pursuant to a global guaranty agreement (the “Guaranty”). Interest will accrue on the outstanding principal amount of each Debenture at an annual rate of 8.00%, subject to a potential increase to 18.00% per annum upon the occurrence of certain events of default. The Debentures will mature on February 2, 2026. The foregoing descriptions of the Purchase Agreement, Guaranty and Debentures do not purport to be complete and are qualified in their entirety by reference to the full text of such documents, and with respect to the Debentures, a form thereof, which are filed as exhibits hereto and are incorporated herein by reference.
Implications of Being an Emerging Growth Company
As a company with less than $1.235 billion in revenues during our last fiscal year, we qualify as an "emerging growth company" as that term is defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As an emerging growth company we expect to take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies. These reduced reporting requirements include, but are not limited to:
• not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended ("Sarbanes-Oxley Act");
• reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and
• an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or stockholder approval of any golden parachute arrangements.
We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenues exceed $1.235 billion or we issue more than $1 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. As an emerging growth company, we intend to take advantage of an extended transition period for complying with new or revised accounting standards as permitted by the JOBS Act. We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information in this prospectus and that we provide to our shareholders in the future may be different than what you might receive from other public reporting companies in which you hold equity interests.
Implications of Being a Smaller Reporting Company
Additionally, we are a "smaller reporting company," meaning that the market value of our common shares held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this transaction is less than $700 million and our annual revenue is less than $100 million during the most recently completed fiscal year. As such, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies, including, but not limited to, reduced disclosure obligations regarding executive compensation. We may continue to be a smaller reporting company as long as either (i) the market value of our common shares held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our common shares held by non-affiliates is less than $700 million.
THE OFFERING
This summary highlights information presented in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before investing in our securities. You should carefully read this entire prospectus before investing in our securities, including "Risk Factors" and our consolidated financial statements.
| Issuer | Medicus Pharma Ltd. |
| Securities offered | 1,375,000 Units on a “best efforts” basis, with each Unit consisting of one of our common shares and one warrant to purchase one of our common shares. Each warrant will have an exercise price of $ per share (100% of the public offering price of the Units), will be exercisable immediately and will expire five years from the date of issuance. The Units will not be certificated or issued in stand-alone form. The common shares and the warrants comprising the Units are immediately separable upon issuance and will be issued separately in this offering. Pursuant to this prospectus, we are also offering 1,375,000 common shares issuable from time to time upon the exercise of the warrants offered hereby. |
| Assumed public offering price | $7.29 per Unit, which is the assumed public offering price and the closing price of our common shares on Nasdaq on May 23, 2025. |
| Common shares to be outstanding | 14,947,737 common shares (if none of the warrants issued in this offering are exercised). |
| Use of Proceeds | We intend to use the net proceeds from this offering to fund our Phase 2 proof of concept clinical trial for treatment of basal cell carcinoma using our doxorubicin tip loaded dissolvable microarray needle skinpatch. We may also use the net proceeds of this offering to expand our exploratory phase 2 clinical trial to a pivotal trial and/or to expand our trials to cover other non-melanoma skin diseases. We will use any remaining net proceeds for general corporate purposes and working capital. See "Use of Proceeds." |
| Voting rights | Each outstanding common share will be entitled to one vote on all matters submitted to a vote of shareholders. |
| Listings | Our common shares and Public Warrants are listed on Nasdaq under the symbols "MDCX" and "MDCXW," respectively. The warrants offered hereby will not be listed on any U.S. securities exchange. |
| Dividend policy | We do not anticipate that we will declare or pay dividends in the foreseeable future on our common shares. Instead, we anticipate that all of our earnings will be used for the operation and growth of our business. Any future determination to declare cash dividends would be subject to the discretion of our board of directors and would depend upon various factors, including our results of operations, financial condition and liquidity requirements, restrictions that may be imposed by applicable law and our contracts and other factors deemed relevant by our board of directors. |
| Risk factors | See "Risk Factors" and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our common shares and warrants. |
Except as otherwise noted, all information contained in this prospectus assumes:
- no purchase of common shares or warrants in this offering by directors, officers or existing shareholders; and
- no exercise of our outstanding options (as described herein), the Public Warrants, the Regulation A Warrants or the warrants offered in this offering.
The number of common shares that will be outstanding after this offering is based on 13,572,737 common shares outstanding as of May 21, 2025.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth our selected historical consolidated financial information. You should read the selected historical consolidated financial information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.
We have derived the selected consolidated statement of operations for the three months ended March 31, 2025 and 2024 and the selected consolidated balance sheet information as of March 31, 2025 and December 31, 2024 from our interim unaudited consolidated financial statements and audited consolidated financial statements, respectively, included elsewhere in this prospectus. Our consolidated financial statements have been prepared in accordance with GAAP and our consolidated financial statements are presented in U.S. dollars, except where indicated otherwise. Our historical results are not necessarily indicative of the results that should be expected in any future period.
CONSOLIDATED STATEMENT OF OPERATIONS
| Three Months Ended March 31, | ||||||
| 2025 | 2024 | |||||
| Operating expenses | ||||||
| General and administrative | $ | 3,120,060 | $ | 1,385,981 | ||
| Research and development | 2,006,214 | 321,377 | ||||
| Total operating expenses | 5,126,274 | 1,707,358 | ||||
| Loss from operations | (5,126,274 | ) | (1,707,358 | ) | ||
| Other income | ||||||
| Finance income | 23,866 | - | ||||
| Total other income | 23,866 | - | ||||
| Net loss and comprehensive loss for the year | $ | (5,102,408 | ) | $ | (1,707,358 | ) |
| Net loss per share attributable to common shareholders - basic and diluted | $ | (0.42 | ) | $ | (0.21 | ) |
| Weighted average number of common shares outstanding - basic and diluted | 12,240,437 | 8,076,673 | ||||
CONSOLIDATED BALANCE SHEET DATA
| March 31, 2025 | December 31, 2024 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 3,982,430 | $ | 4,164,323 | ||
| Prepaid expenses and other current assets | 1,105,345 | 1,213,984 | ||||
| Total current assets | 5,087,775 | 5,378,307 | ||||
| Operating lease right-of-use assets | 245,091 | 268,571 | ||||
| Deferred issuance costs | 325,000 | - | ||||
| Total assets | $ | 5,657,866 | $ | 5,646,878 | ||
| Liabilities and Shareholder's equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 2,035,364 | $ | 1,284,612 | ||
| Accrued expenses and other current liabilities | 1,062,040 | 762,835 | ||||
| Related party payable | 118,215 | 142,459 | ||||
| Operating lease liability, current | 120,296 | 116,323 | ||||
| Total current liabilities | 3,335,915 | 2,306,229 | ||||
| Operating lease liability, non-current | 174,397 | 205,945 | ||||
| Total liabilities | 3,510,312 | 2,512,174 | ||||
| Shareholders' equity | ||||||
| Common shares, no par value; unlimited shares authorized; 13,417,561 and 11,816,721 shares issued and outstanding at March 31,2025 and December 31, 2024, respectively | 32,908,702 | 30,518,195 | ||||
| Additional paid-in capital | 3,245,163 | 1,520,412 | ||||
| Accumulated deficit | (34,006,311 | ) | (28,903,903 | ) | ||
| Total shareholders' equity | 2,147,554 | 3,134,704 | ||||
| Total liabilities and shareholders' equity | $ | 5,657,866 | $ | 5,646,878 |
RISK FACTORS
You should carefully consider the risks described below and all other information contained in this prospectus before making an investment decision. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our securities could decline, and you may lose part or all of your investment. This prospectus also contains forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risks described below and elsewhere in this prospectus.
We have a limited operating history, which may make it difficult to evaluation our current business and predict our future performance.
We have a limited operating history and, in particular, no history of earnings; we have not paid any dividends and we are unlikely to pay any dividends in the immediate or foreseeable future. Our success will depend to a large extent on the expertise, ability, judgement, discretion, integrity and good faith of our management.
As we are at an early stage of product development, we have not generated revenues to date. We expect to spend a significant amount of capital to fund research and development and clinical trials. As a result, we expect that our operating expenses will increase significantly and, consequently, we will need to generate significant revenues to become profitable. We cannot predict when, if ever, we will be profitable. Even if we do become profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis. There can be no assurances that our products will be capable of being produced in commercial quantities at reasonable costs, or be successfully marketed.
We have a novel technology with uncertain market acceptance.
The Product is at an early stage of development, with uncertain market acceptance. Product approval, should this be achieved, does not infer that the Product will garner a good market price or be reimbursed by public or private insurers. Further, there are no guarantees that the Product will be positively received by the target patient population. The acceptability of the Product to regulators, payors and patients will depend on the relative risk versus benefit of the Product as proven in clinical trials, the acceptability of the price, and the relative attractiveness as compared to other treatments.
We could also suffer the consequences of non-compliance or breaches by licensors in connection with any license agreements we may enter into in the future. Such non-compliance or breaches by such third parties could in turn result in breaches or defaults under any agreements with other collaboration partners, and we could be found liable for damages or lose certain rights, including rights to develop and/or commercialize the Product. Loss of our rights to any license granted to us in the future, or the exclusivity rights provided therein, could harm our financial condition and operating results.
The University of Pittsburgh may terminate our license agreement in certain circumstances.
The License Agreement (as defined herein) is our main asset and the basis for the development of the Product. The University of Pittsburgh of the Commonwealth System of Higher Education (the "University of Pittsburgh") has the right to terminate the License Agreement if breaches are not cured within 30 days of our receipt of notice thereof from the University of Pittsburgh or in certain insolvency-related situations or if we cease to carry out our business. There can be no assurance that we will be able to comply with the License Agreement going forward or that the University of Pittsburgh will grant any necessary waivers if we are unable to do so. The obligations under the License Agreement principally require the trial of the Product on specified timelines. If the University of Pittsburgh were to terminate the License Agreement our assets would essentially be rendered worthless and it would have a material adverse effect on our ability to pursue our business objective.
We may not complete the Antev Transaction or may be delayed in completing the Antev Transaction.
The Antev Transaction is subject to the completion of satisfactory due diligence by Medicus, negotiation of definitive agreements, obtaining applicable corporate, regulatory and other third-party approvals and the fulfillment of customary closing conditions. There is no certainty and Medicus can provide no assurances that the parties will successfully negotiate and enter into a definitive agreement, or that the Antev Transaction will be consummated on the terms or timeframe currently contemplated, or at all. If the Antev Transaction is not completed as contemplated, Medicus could suffer adverse consequences, including the loss of investor confidence, volatility and a significant decrease in the market prices of our securities and reputational harm. In addition, any delay in completing the Antev Transaction could cause Medicus not to realize some or all of the benefits that it expects to achieve if the Antev Transaction is successfully completed within the expected timeframe.
Our intellectual property is held under third-party licenses.
Our intellectual property is held under a third-party license and we may require additional third-party licenses to effectively develop and manufacture our key products or future technologies. There can be no assurance as to the availability or cost of such additional licenses. A substantial number of patents have already been issued to other biotechnology and pharmaceutical companies. To the extent that valid third-party patent rights cover our products or services, we or our strategic collaborators would be required to seek licenses from the holders of these patents in order to manufacture, use or sell these products and services, and payments under them would reduce our profits from these products and services. It is not possible to predict the extent to which we may wish or be required to acquire rights under such patents, the availability and cost of acquiring such rights, and whether a license to such patents will be available on acceptable terms or at all. There may be patents in the United States or in foreign countries or patents issued in the future that are unavailable to license on acceptable terms. Our inability to obtain such licenses may hinder or eliminate an ability to manufacture and market products.
If we breach any of the agreements under which we license rights to intellectual property, we could lose license rights that are important to our business. Our current license agreement may not provide an adequate remedy for any breach by the licensor.
For information on the License Agreement, see "Our Business - Patents and Proprietary Information."
Our technology may not be successful for its intended use.
Although the SkinJect Phase 1 study indicated that the patch is well-tolerated, there is no guarantee that the Phase 2 study will produce similar results or that the Product will ultimately be brought to market or, if it does, that it will be positively received or obtain favorable pricing, which would have a material adverse effect on our results of operations.
There is substantial doubt about the Company's ability to continue as a going concern and if the Company is unable to obtain additional financing from outside sources and/or eventually generate enough revenues, it may be forced to curtail or discontinue its operations.
The Company's auditor has indicated in its report accompanying the Company's audited annual financial statements that there is substantial doubt about the Company's ability to continue as a going concern. The Company is in the preliminary stages of its planned operations and has not yet determined whether its processes and business plans are economically viable. The continued operations of the Company and the recoverability of amounts shown for certain operational expenses in the Company's audited annual financial statements are dependent upon the ability of the Company to obtain sufficient financing to commercialize its product and to become profitable, all of which are uncertain. Importantly, the inclusion in the Company's financial statements of a going concern opinion may negatively impact the Company's ability to raise future financing and achieve future revenue. If the Company is unable to obtain additional financing from outside sources and/or eventually generate enough revenues, the Company may be forced to cut costs, by among other things, curtailing or discontinuing its operations. These measures could cause significant delays or entirely prevent the Company's continued efforts to commercialize its current or future products, which are critical to the realization of its business plan and the future operations of the Company. If any of these events happens, the Company's investors could lose all or part of their investments. In addition, the Company's financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
Future technology will require regulatory approval, which is costly and we may not be able to obtain it and we may fail to obtain regulatory approvals or only obtain approvals for limited uses or indications.
Market authorization of the Product falls under the regulatory purview of the FDA and other equivalent regulatory bodies worldwide. There can be no assurance that these regulatory bodies will approve the Product in the manner or time frame suggested. Although we intend to work with regulatory consultants and third parties knowledgeable in the area, we cannot ensure that the Product will obtain market authorization in a timely manner, or at all. Market authorization may also be contingent on a less competitive product label, which would negatively impact revenue.
Changes in methods of manufacturing or formulation may result in additional costs or delay.
As the Product is developed through further clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause the Product to perform differently and affect the results of future clinical trials conducted with the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of the Product and jeopardize our ability, or our strategic partners' ability, to commence product sales and generate revenue.
The manufacture of the Product is complex. We or our third-party manufacturers may encounter difficulties in production. If we encounters any such difficulties, our ability to supply the Product for clinical trials or, if approved, for commercial sale could be delayed or halted entirely.
The manufacture of biopharmaceutical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. The process of manufacturing the Product is susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, vendor or operator error, contamination and inconsistency in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered in the Product or in the manufacturing facilities in which the Product is made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. Any adverse developments affecting manufacturing operations for the Product, if any are approved, may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products. We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives.
We rely on external contract research organizations to provide clinical and nonclinical research services and agreements with these organizations of which one agreement is currently in place.
The outsourcing of functions to contract research organizations involves the risk that third party providers may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. If any contract research organization fails to comply with applicable regulatory requirements, the research and data generated may be deemed unreliable to regulatory authorities. Additional pre-clinical and clinical trials may be required before approval of marketing applications will be given. We cannot provide assurance that all third-party providers will meet the regulatory requirements for research and pre-clinical trials. Failure of third-party providers to meet regulatory requirements could result in repeat pre-clinical and clinical trials, which would delay the regulatory approval process or result in termination of pre-clinical and clinical trials. Any of the foregoing could have a material adverse effect on our business, prospects, results of operations and financial condition.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell the Product, if approved, we may be unable to generate any product revenue.
To successfully commercialize the Product, we will need to build out sales and marketing capabilities, either on our own or with others. The establishment and development of our own commercial team or the establishment of a contract field force to market the Product will be expensive and time-consuming and could delay launch. Moreover, we cannot be certain that we will be able to successfully develop this capability. We may seek to enter into collaborations with other entities to use their established marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If any current or future collaborators do not commit sufficient resources to commercialize the Product, or we are unable to develop the necessary capabilities on our own, we may be unable to generate sufficient revenue to sustain our business. We may compete with many companies that currently have extensive, experienced and well-funded marketing and sales operations to recruit, hire, train and retain marketing and sales personnel. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
We rely on key personnel.
Our success depends in large measure on certain key personnel, including our chief executive officer, Dr. Raza Bokhari. The loss of the services of such key personnel could have a material adverse effect on us. The contributions of these individuals to our operations have been, and are expected to continue to be, of central importance. In addition, the competition for qualified personnel in the biotech industry is intense and there can be no assurance that we will be able to continue to attract and retain all personnel necessary for the development and operation of our business. Investors must rely upon the ability, expertise, judgment, discretion, integrity and good faith of our management. Other biotechnology companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than those that we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate of and success with which we can develop and commercialize the Product would be limited.
As a technology-driven company, intellectual input from key management and personnel is critical to achieve our business objectives. Consequently, our ability to retain these individuals and attract other qualified individuals is critical to our success. The loss of the services of key individuals might significantly delay or prevent achievement of our business objectives. In addition, because of a relative scarcity of individuals with the high degree of education and scientific achievement required for our business, competition among biotech companies for qualified employees is intense and, as a result, we may not be able to attract and retain such individuals on acceptable terms, or at all.
SkinJect also has relationships with scientific collaborators at academic and other institutions, some of whom conduct research at SkinJect's request or assist SkinJect in formulating the SkinJect's research and development strategies. These scientific collaborators are not SkinJect employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, even though SkinJect's collaborators are required to sign confidentiality agreements prior to working, they may have arrangements with other companies to assist such other companies in developing technologies that may prove competitive to us.
Incentive provisions for our key executives include base salary and the granting of stock options that vest over time, designed to encourage such individuals to stay with us. However, a low share price could render such agreements of little value to our key executives. In such event, our key executives could be susceptible to being hired away by our competitors who could offer a better compensation package. If we are unable to attract and retain key personnel our business, financial conditions and results of operations may be adversely affected.
We may not be able to successfully execute our business strategy.
The execution of our business strategy poses many challenges and is based on a number of assumptions. If we experience significant regulatory delays, supply chain disruptions, cost overruns on our programs, or if our business plan is more costly than we anticipate, certain research and development activities may be delayed or eliminated, resulting in changes or delays to our commercialization plans, or we may be compelled to secure additional funding (which may or may not be available) to execute our business strategy. We cannot predict with certainty future revenues or results from operations. If the assumptions on which our revenue or expenditure forecasts are based change, the benefits of our business strategy may change as well.
We will require additional financing in the future, which may not be available on favorable terms or at all.
The development of our business is expected to require additional financing. Failure to obtain sufficient financing may result in the delay or indefinite postponement of our business plans. The initial primary source of funding available to us consists of equity financing. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable to us.
The ongoing volatility in global capital markets has generally made the raising of capital by equity or debt financing more difficult. Access to financing has been negatively impacted by ongoing global economic risks and increased inflation. We will require substantial additional funds for further research and development, and the marketing and sale of our technology. We may attempt to raise additional funds for these purposes through public or private equity or debt financing, collaborations with other therapeutic companies, government grants or other sources. There can be no assurance that additional funding or partnerships will be available on terms acceptable to us and which would foster the successful commercialization of the Product. If additional funds are raised through further issuances of equity or convertible debt securities, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences and privileges superior to those of the common shares or terms superior to those of the Warrants. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital or to pursue business opportunities, including potential acquisitions. If adequate funds are not obtained, we may be required to reduce, curtail or discontinue operations.
We have had negative operating cash flows since inception and expect to incur losses for the foreseeable future.
We have had negative cash flow from operating activities and have incurred operating losses since its inception. We anticipate that we will continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates, prepare for and begin to commercialize any approved product candidates and add infrastructure and personnel to support our product development efforts and operations as a public company. The net losses and negative cash flows incurred to date, together with expected future losses, have had, and likely will continue to have, an adverse effect on our shareholders' deficit and working capital. As of March 31, 2025, we had an accumulated deficit of approximately $34.0 million. The amount of future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.
To the extent that we have negative operating cash flow in future periods, we may need to allocate a portion of our cash reserves to fund such negative cash flow. We may also be required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that we will be able to generate positive cash flow from our operations or that additional capital or other types of financing will be available when needed or on terms favorable to us.
We are in a highly competitive industry which is continuously evolving with technological changes.
We are engaged in an industry that is highly competitive, evolving and characterized by technological change. As a result, it is difficult for us to predict whether, when and by whom new competing technologies or new competitors may enter the market. We face competition from companies with strong positions in certain markets we are currently targeting, and in new markets and regions we may enter. Some of these companies have significantly greater financial, technical, human, research and development, and marketing resources than us. We cannot assure that we will be able to compete effectively against current and future competitors who may discover and develop products in advance of us that are more effective than those developed by us. As a consequence, our current and future technologies may become obsolete or uncompetitive, resulting in adverse effects on revenue, margins and profitability. In addition, competition or other competitive pressures may result in price reductions, reduced margins or loss of market share, any of which could have a material adverse effect on our business, financial condition or results of operations. To the extent that new or improved pharmaceutical drug treatments are introduced that demonstrate better long-term efficacy and safety, patients and physicians may further delay the introduction of patches, such as the Product, if approved, in the skin cancer treatment continuum. The Product could also face competition from other formulations or devices that deliver chemotherapeutic agents on an extended basis.
Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staffs and experienced commercial and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis drug products or drug delivery technologies that are more effective or less costly than the Product.
We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including:
• the usefulness, ease of use, performance and reliability of our technology compared to our competitors;
• the activity and tolerability of the Product, including relative to marketed products and product candidates in development by third parties;
• the ability to distinguish safety and efficacy from existing, alternative therapies;
• the timing for the Product to complete clinical development and receive market approval;
• acceptance of the Product by patients, physicians and other health providers,
• our ability to monetize our technology;
• the selection of licensing partners for our technology with the necessary skills and resources to drive uptake;
• our marketing and selling efforts;
• our financial condition and results of operations;
• the ability to maintain a good relationship with regulatory authorities;
• the price of our future products, including in comparison to branded or generic competitors;
• whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans,
• acquisitions or consolidations within our industry, which may result in more formidable competitors;
• our ability to protect our intellectual property rights,
• our ability to attract, retain and motivate talented employees;
• our ability to cost-effectively manage and grow our operations; and
• our reputation and brand strength relative to that of our competitors.
Our future success will depend on our ability to continually enhance and develop the Product.
There is a broad pipeline of potential new therapies for skin cancer. The market is characterized by rapid technological change and the possibility of frequent new product introductions. Accordingly, our future success depends upon our ability to enhance the Product and to develop, introduce and sell the most accurate products at competitive prices. The development of new technologies and products involves time, substantial costs and risks. Our ability to successfully develop new technologies depends in large measure on our ability to maintain a technically skilled research and development staff and to adapt to technological changes and advances in the industry.
The success of new product introductions depends on a number of factors including the efficacy and safety as demonstrated in clinical trials, the ability to demonstrate the impact of real world evidence, timely and successful product development, the timing and market introduction of competitive products, market acceptance, the effective management of purchase commitments and inventory levels in line with anticipated product demand, the availability of pharmaceutical components in appropriate quantities and costs to meet anticipated demand, the risk that new products may have quality or other defects in the early stages of introduction and our ability to manage distribution and production issues related to new product introductions, the clinical indications for which the product is approved, acceptance by physicians, the medical community and patients of the product as a safe and effective treatment, the ability to distinguish safety and efficacy from existing, less expensive alternative therapies, the convenience of prescribing, administrating and initiating patients on the product, the potential and perceived advantages and/or value of the product over alternative treatments, the cost of treatment in relation to alternative treatments, including any similar generic treatments, the availability of coverage and adequate reimbursement by third-party payors and government authorities to support the product's pricing, the prevalence and severity of adverse side effects and the effectiveness of sales and marketing efforts.
If we are unable, for any reason, to enhance, develop, introduce and sell new products in a timely manner, or at all, in response to changing market conditions or customer requirements or otherwise, our business would be harmed.
If we are unable to differentiate the Product from existing therapies for treatment of skin cancer, or if the FDA or other applicable regulatory authorities approve generic products that compete with the Product, the ability to successfully commercialize the Product would be adversely affected.
Although the Phase 1 study provides preliminary evidence of complete clinical response, it is possible that we will receive data from additional clinical trials or in a post marketing setting from physician and patient experiences with the commercial product that does not continue to support such interpretations. It is also possible that the FDA, physicians and healthcare payers will not agree with our interpretation of existing and future clinical trial data. If we are unable to demonstrate the value of the Product based on clinical data, patient experience, as well as real world evidence, the opportunity for the Product to maintain premium pricing and be commercialized successfully would be adversely affected.
Additionally, the FDA or other applicable regulatory authorities may approve other generic products that could compete with the Product if we cannot adequately protect it with our patent portfolio. For example, in the US, once an NDA is approved, the product covered thereby becomes a "listed drug" which can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application ("ANDA"). The Federal Food, Drug, and Cosmetic Act (the "FDCA"), FDA regulations and other applicable regulations and policies provide incentives to manufacturers to create modified, non-infringing versions of a drug to facilitate the approval of an ANDA or other application for generic substitutes. These manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredient(s), dosage form, strength, route of administration, conditions of use, or labeling as our product candidate and that the generic product is bioequivalent to us, meaning it is absorbed in the body at the same rate and to the same extent as the Product. These generic equivalents, which must meet the same quality standards as branded pharmaceuticals, would be significantly less costly than ours to bring to market and companies that produce generic equivalents are generally able to offer their products at lower prices. Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product is typically lost to the generic product. Accordingly, competition from generic equivalents to our products would materially adversely impact our ability to successfully commercialize the Product.
A variety of risks associated with potential international business relationships could materially adversely affect our business.
We may enter into agreements with third parties for the development and commercialization of the Product in international markets. If we do so, we would be subject to additional risks related to entering into international business relationships, including:
● differing regulatory requirements in other countries including, among others, marketing approval, pricing, reimbursement and sales and marketing practices;
● potentially reduced protection for intellectual property rights;
● potential for so-called parallel importing, which is when a local seller, faced with higher local prices, opts to import goods from a foreign market with lower prices, rather than buying them locally;
● unexpected changes in tariffs, trade barriers and regulatory requirements, including the imposition of new tariffs by the U.S. government on imports to the U.S. and/or the imposition of retaliatory tariffs by foreign countries;
● economic weakness, including inflation, or political instability in foreign economies and markets;
● compliance with tax, employment, immigration and labor laws for employees traveling and working abroad;
● foreign taxes;
● foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other risks incident to doing business in another country;
● workforce uncertainty in countries where labor unrest is more common than in Canada or the United States;
● production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad or supply chain disruptions; and
● business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes, typhoons, floods, tsunamis, hurricanes and fires.
These and other risks may materially adversely affect our ability to develop and commercialize products in international markets and may harm our business.
Collaboration arrangements we may enter into in the future may not be successful.
We may seek future partnerships, collaborations and other strategic transactions to maximize the commercial potential of the Product. We may enter into such arrangements on a selective basis depending on the merits of retaining commercialization rights for ourself as compared to entering into selective collaboration arrangements with leading pharmaceutical or biotechnology companies, both in the United States and internationally. We face competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, document and implement. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements should we choose to enter into such arrangements. The terms of any collaborations or other arrangements that we may establish may not be favorable to us.
Any future collaborations that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators.
Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations.
Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters could lead to delays in the development process or commercialization of our product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority.
Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration could adversely affect us financially and could harm our business reputation.
We may acquire businesses or products, or form strategic alliances in the future, and we may not realize the benefits of such acquisitions or alliances.
We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction. In addition, we may require significant additional funds to either acquire such businesses or products or to commercialize them, which may result in significant dilution to shareholders or the incurrence of significant indebtedness by us.
We do not have any customer commitments.
We may negotiate clinical and/or commercial supply agreements for the Product or product sub-components. At the time of this prospectus, there are no commitments from customers for the Product. Because we do not have any contracts for the Product, management may not accurately predict future revenue streams and there may be no assurance that customers would continue to use our products, or that we would be able to replace departing potential customers with new potential customers that provide us with comparable revenue.
Our business and operations would suffer in the event of computer system failures, cyberattacks, or a deficiency in our cyber security.
Despite the implementation of security measures, our internal computer systems, and those of the third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our commercialization or further development of our technology. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development or the commercialization of our products could be delayed or disrupted.
We may fail to manage growth successfully which may adversely impact operating results.
Our failure to manage our growth successfully may adversely impact our operating results. Our ability to manage growth will require us to continue to build our operational, financial and management controls, contracting relationships, marketing and business development plans and controls and reporting systems and procedures. Our ability to manage our growth will also depend in large part upon a number of factors, including the ability for us to rapidly:
• expand our internal and operational and financial controls significantly so that we can maintain control over operations;
• attract and retain qualified technical personnel in order to continue to develop reliable and flexible products and provide services that respond to evolving customer needs;
• build a sales team to keep customers and channel partners informed regarding the technical features issues and key selling points of our products and services;
• develop support capacity for customers as sales increase; and
• build a channel network to create an expanding presence in the evolving marketplace for our products and services.
An inability to achieve any of these objectives could harm our business, financial condition and results of operations.
Any products we develop will be subject to extensive, lengthy and uncertain regulatory requirements, which could adversely affect the ability to obtain regulatory approval in a timely manner, or at all.
It is understood that pharmacologic therapies are subject to an extensive, lengthy and unpredictable regulatory approval process by the FDA and equivalent regulatory bodies in other countries. This entails significant investment in time and resources, with no guarantee on the outcome or timeframe. We may encounter significant delays or excessive costs in our efforts to secure necessary market authorizations. Even if approved, the different regulatory bodies have numerous regulations governing the manufacturing, labeling, distributing, marketing, promotion and advertising after product approval. The regulatory requirements governing new technologies might be subject to change, and the products themselves may be subject to substantial review by the FDA and/or other governmental regulatory authorities that could prevent or delay approval of these products. Regulatory constraints ultimately imposed on our products, if approved, could limit our ability to commercialize, thus impacting on our financial condition and results.
Manufacture and marketing of the Product is subject to government regulation. In most countries, we will be required to complete extensive non-clinical studies and clinical trials to demonstrate the safety and efficacy of the Product in order to apply for regulatory approval to market the product. Prior to marketing approval in the United States, required steps include non-clinical (animal and laboratory) testing; performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the Product in the intended target population; performance of a consistent and reproducible manufacturing process intended for commercial use; and successful filing and approval of an NDA. These processes are costly and the timeframe and success are uncertain and may be out of our control. We also have no control over the extent of approval, which can be restricted to specific jurisdictions and/or conditions on the product label and limit our revenues.
Once approved, we will be subjected to continuing regulatory review, including adverse event reporting requirements and the FDA's general prohibition against promoting products for unapproved uses. We may also have other forms of post approval commitments, such as clinical trials or enhanced safety reporting and commitments. Failure to comply with any post-approval requirements can have consequences including warning letters, product seizures, recalls, substantial fines, injunctions, withdrawal of approvals, operating restrictions and criminal prosecutions. Any of these enforcement actions, any unanticipated changes in existing regulatory requirements or the adoption of new requirements, or any safety issues that arise with any approved products, could negatively impact on our ability to market products and generate revenues and thus our ability to continue our operations.
We also may be restricted or prohibited from marketing or manufacturing a product, even after obtaining product approval, if previously unknown problems with the product or our manufacturer are subsequently discovered. Moreover, we cannot provide assurance that newly discovered or developed safety issues will not arise following any regulatory approval. If our product is used by a large patient population, serious adverse events may occur from time to time that initially may seem unconnected to the treatment, and only when it repeatedly occurs over a period of time does the treatment become suspect as having a causal relationship to the adverse event. Any safety issues could cause us to suspend or cease marketing of our approved products, possibly subject us to substantial liabilities, and adversely affect our ability to generate revenues.
We may not be able to obtain marketing approval.
Even if we complete the necessary non-clinical studies and clinical trials, the marketing approval process is expensive, time-consuming, and uncertain and may prevent us from obtaining approvals for the commercialization of the Product. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing, the Product, and our ability to generate revenue will be materially impaired.
We rely on the protection of intellectual property rights.
Our commercial success depends to a significant degree upon our ability to develop new or improved technologies, instruments and products, and to obtain patents or other intellectual property rights or statutory protection for these technologies and products in Canada, the United States and other countries, such as the countries in the European Union and Asia. We intend to patent concepts, components, processes, industrial designs and methods, and other inventions and technologies that we considers to have commercial value or that will likely give us a competitive advantage. Despite devoting resources to the research and development of proprietary technology, we may not be able to develop new technology that is patentable or protectable. Further, patents issued to us, if any, could be challenged, held invalid or unenforceable, or be circumvented and may not provide us with necessary or sufficient protection or a competitive advantage.
In addition, despite our efforts to protect and maintain our patents competitors and other third parties may be able to design around our patents, if so awarded, or develop products similar to our products that are not within the scope of such patents. Finally, patents provide certain statutory protection only for a limited period of time that varies depending on the jurisdiction and type of patent. The statutory protection term of our patents expire between 2030 and 2035 and, thereafter, the underlying technology of such patents will be allowed to be used by any third party, including our competitors. Moreover, the inventions covered by patents may be free to be used in countries for which there is no patent protection. A number of our competitors and other third parties have been issued patents, or may have filed patent applications, or may obtain additional patents or other intellectual property rights for technologies similar to those that we have developed, used or commercialized, or may develop, use or commercialize, in the future. As certain patent applications in the United States and other countries are maintained in secrecy for a period of time after filing, and as publication or public awareness of new technologies often lags behind actual discoveries, we cannot be certain that we have been the first to develop the technology covered by our pending patent applications. In addition, the disclosure in our patent applications, including in respect of the utility of our claimed inventions, may not be sufficient to meet the statutory requirements for patentability in all cases. As a result, we can provide no assurance that our patent applications will result in valid or enforceable patents.
Prosecution and protection of the rights sought in patent applications and patents can be costly and uncertain, often involve complex legal and factual issues and consume significant time and resources. In addition, the breadth of claims allowed in our future patents, their enforceability and our ability to protect and maintain them cannot be predicted with any certainty. The laws of certain countries may not protect intellectual property rights to the same extent as the laws of Canada or the United States Even if our patents are held to be valid and enforceable in a certain jurisdiction, any legal proceedings that we may initiate against third parties to enforce such patents will likely be expensive, take significant time and divert management's attention from other business matters. We can provide no assurance that any of our pending patent applications will provide any protectable, maintainable or enforceable rights or competitive advantages to it.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
Once granted, patents may remain open to invalidity challenges including opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked or may lose the allowed or granted claims altogether.
In addition, the degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:
● others may be able to make product that is similar to product candidates we intend to commercialize that is not covered by the patents that we own;
● we, or any collaborators might not have been the first to make or reduce to practice the inventions covered by the issued patents or pending patent applications that we own;
● we or any collaborators might not have been the first to file patent applications covering certain of our inventions;
● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
● it is possible that our pending patent applications will not lead to issued patents;
● issued patents that we own may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges;
● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; and we may not develop additional proprietary technologies that are patentable;
● third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license;
● parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property;
● we may not develop additional proprietary technologies that are patentable;
● we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and
● the patents of others may harm our business.
Should any of these events occur, they could significantly harm our business and results of operations. We can provide no assurance that we will be successful in protecting, maintaining or enforcing our intellectual property rights. If we are not successful in protecting, maintaining or enforcing our intellectual property rights, then our business, operating results and financial condition could be materially adversely affected.
We may not be able to enforce our intellectual property rights throughout the world.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of Canada and the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to life sciences.
To the extent that we have obtained or are able to obtain patents or other intellectual property rights in any foreign jurisdictions, it may be difficult for us to stop the infringement of our patents or the misappropriation of other intellectual property rights. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the availability of certain types of patent rights and enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.
Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be compelled under specified circumstances to grant licenses to third parties. In those countries, we may have limited remedies if patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.
Guidelines and recommendations published by various organizations can reduce the use of products that we may commercialize.
Government agencies promulgate regulations and guidelines directly applicable to us and our products. In addition, professional societies, practice management groups, private health and science foundations and organizations involved in various diseases from time to time may also publish guidelines or recommendations to the healthcare and patient communities with respect to specific products. Recommendations of government agencies or these other groups or organizations may relate to such matters as usage, dosage, route of administration and use of concomitant therapies. Recommendations or guidelines that do not recognize our future products, suggest limitations or inadequacies of our future products, or suggest the use of competitive or alternative products as the standard of care to be followed by patients and healthcare providers, could result in decreased use or adoption of our future products.
Patent reform legislation in the United States.
On September 16, 2011, the Leahy-Smith America Invents Act (the "Leahy-Smith Act") was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a "first to file" system in which the first inventor to file a patent application will be entitled to the patent.
Further, the Leahy-Smith Act also includes significant changes in the way patent applications will be prosecuted and may also affect patent litigation. These include allowing third parties to submit prior art during patent prosecution by the U.S. Patent and Trademark Office ("USPTO"), and additional procedures to attack the validity of a patent in post-grant proceedings including opposition, derivation, re-examination, inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position.
Patent reform legislation in the United States, including the Leahy-Smith Act, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith Act was signed into law on September 16, 2011, and includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. These include allowing third -party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. After March 15, 2013, under the Leahy-Smith Act, the United States transitioned to a first inventor to file system in which, assuming that the other statutory requirements are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications, our ability to obtain future patents, and the enforcement or defense of our issued patents, all of which could harm our business, financial condition, results of operations and prospects.
Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our owned patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. The statutory protection term of our patents expire between 2030 and 2035 and, thereafter, the underlying technology of such patents will be allowed to be used by any third party, including our competitors. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Without patent protection for our current or future product candidates, we may be open to competition from generic versions of such products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we do not obtain protection under the Hatch-Waxman Amendments by obtaining data exclusivity, our business may be harmed.
Our commercial success will largely depend on our ability to obtain market exclusivity in the United States and other countries with respect to our drug candidates and their target indications. Depending upon the timing, duration and specifics of FDA marketing approval of our drug candidates, certain of our product candidates may be eligible for marketing exclusivity. The FDCA provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages, dosage forms or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and prohibits the FDA from approving an ANDA, or a 505(b)(2) NDA submitted by another company with overlapping conditions associated with the new clinical investigations for the three-year period. Clinical investigation exclusivity does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. The three-year exclusivity will not delay the submission or approval of an NDA for the same drug. However, an applicant submitting an NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
If we are unable to obtain such marketing exclusivity for our product candidates, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data to obtain approval of competing products and launch their product earlier than might otherwise be the case.
Risk of reduced or eliminated patent protection from non-compliance with regulatory requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance can result in unenforceability, invalidity, abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in unenforceability, invalidity, abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or any future licensors fail to maintain the patents and patent applications covering the Product, our competitive position would be adversely affected.
We may infringe the intellectual property rights of others.
Our commercial success depends, in part, upon it not infringing or violating intellectual property rights owned by others. The industry in which we compete has participants that own, or claim to own, intellectual property. We cannot determine with certainty whether any existing third-party patents, or the issuance of any new third-party patents, would require us to alter our technologies or products, obtain licenses or cease certain activities, including the sale of certain products.
We may in the future receive claims from third parties asserting infringement and other related claims. Litigation may be necessary to determine the scope, enforceability and validity of third-party intellectual property rights or to protect, maintain and enforce our intellectual property rights. Some of our competitors have, or are affiliated with companies having, substantially greater resources than we have, and these competitors may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we can. Regardless of whether claims that it is infringing or violating patents or other intellectual property rights have any merit, those claims could:
● adversely affect our relationships with current or future distributors and dealers of our products;
● adversely affect our reputation with customers;
● be time-consuming and expensive to evaluate and defend;
● cause product shipment delays or stoppages; divert management's attention and resources;
● subject us to significant liabilities and damages;
● require us to enter into royalty or licensing agreements; or
● require us to cease certain activities, including the sale of products.
If it is determined that we have infringed, violated or is infringing or violating a patent or the intellectual property right of any other person or if we are found liable in respect of any other related claim, then, in addition to being liable for potentially substantial damages, we may be prohibited from developing, using, distributing, selling or commercializing certain of our technologies and products unless we obtain a license from the holder of the patent or other intellectual property right. We can provide no assurance that we will be able to obtain any such license on a timely basis or on commercially favorable terms, or that any such licenses will be available, or that workarounds will be feasible and cost-efficient. If we do not obtain such a license or find a cost-efficient workaround, our business, operating results and financial condition could be materially adversely affected and we could be required to cease related business operations in some markets and restructure our business to focus on our continuing operations in other markets.
Our general liability insurance expires on October 11, 2025. There can be no assurance that we will be able to renew our liability insurance on favorable terms or at all.
We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might harm our ability to develop and market our products.
We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is or may be relevant to or necessary for the commercialization of our product candidates in any jurisdiction. Patent applications in the United States and elsewhere are not published until approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. In addition, U.S. patent applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Therefore, patent applications covering our products could have been filed by others without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use of our products.
The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent's prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our products. We may incorrectly determine that our products are not covered by a third-party patent or may incorrectly predict whether a third party's pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, and our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products.
If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our products that are held to be infringing. We might, if possible, also be forced to redesign products or services so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
We may become involved in lawsuits to protect or enforce our patents or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. As a result, we cannot predict with certainty how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court. Further, even if we prevail against an infringer in U.S. district court, there is always the risk that the infringer will file an appeal and the district court judgment will be overturned at the appeals court and/or that an adverse decision will be issued by the appeals court relating to the validity or enforceability of our patents. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or lack of written description or statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex parte reexaminations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future product candidates.
We may not be able to detect or prevent misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could harm the price of our securities.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities and have a harmful effect on the success of our business.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could adversely impact the price of our securities. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to continue our clinical trials and internal research programs. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development collaborations that would help us commercialize our product candidates, if approved.
Because of the expense and uncertainty of litigation, we may not be in a position to enforce our intellectual property rights against third parties.
Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our issued patent, any patents that may be issued as a result of our pending or future patent applications or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our shareholders. In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution.
We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
The issuance of a patent does not give us the right to practice the patented invention. A third party may hold intellectual property, including patent rights, that are important or necessary to the development of our product candidates. Third parties may also have blocking patents that could prevent us from marketing our products or practicing our own patented technology. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our drug candidates, in which case we would be required to obtain a license from these third parties on commercially reasonable terms. Such a license may not be available, or it may not be available on commercially reasonable terms, in which case our business would be harmed.
The risks described elsewhere pertaining to our intellectual property rights also apply to any intellectual property rights that we may in-license, and any failure by us or our potential licensors to obtain, maintain, defend and enforce these rights could harm our business. In some cases we may not have control over the prosecution, maintenance or enforcement of the patents that we may license, and may not have sufficient ability to provide input into the patent prosecution, maintenance and defense process with respect to such patents, and our potential licensors may fail to take the steps that we believe are necessary or desirable in order to obtain, maintain, defend and enforce the licensed patents.
We may be subject to claims arising from consultants or contractors misappropriating intellectual property.
Many of our consultants and contractors were previously or are concurrently employed at or engaged by biotechnology companies, and/or other pharmaceutical companies, including our competitors or potential competitors, or academic research institutions. Some of these consultants and contractors, including each member of our senior management or our other employees, may have executed proprietary rights, nondisclosure and non-competition agreements in connection with such previous or concurrent employment. We may be subject to claims that we or our consultants and contractors have used or disclosed the intellectual property and other proprietary information or know-how or trade secrets of others in their work for us. Litigation may be necessary to defend against these claims. We are not aware of any threatened or pending claims related to these matters or concerning agreements with our senior management, or other of our employees, consultants and contractors, but litigation may be necessary in the future to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, or personnel or access to consultants and contractors. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
In addition, while our policy is to require our consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Because we expect to rely on third parties to manufacture our product candidates, and we expect to continue to collaborate with third parties on the development of our product candidates, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Any disclosure, either intentional or unintentional, by our employees, the employees of third parties with whom we share our facilities or third-party consultants and vendors that we engage to perform research, clinical trials or manufacturing activities, or misappropriation by third parties (such as through a cybersecurity breach) of our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological achievements, thus eroding our competitive position in our market. Further, adequate remedies may not exist in the event of unauthorized use or disclosure. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor's discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may harm our business and results of operations.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Policing unauthorized use of our intellectual property is difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use. Moreover, enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor's discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
We use hazardous chemicals and biological materials in their business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.
Our product manufacturing, research and development, and testing activities involve the controlled use of hazardous materials, including chemicals and biological materials. We cannot eliminate the risks of accidental contamination or the accidental discharge of these materials, or any resulting injury from such an event. We may be subjected to litigation for any injury that results from our use or the use by third parties of these materials, and our liability may exceed our insurance coverage and our total assets. Our use, manufacture, storage, handling and disposal of these hazardous materials and specified waste products, as well as the discharge of pollutants into the environment and human health and safety matters, are governed by federal, state, provincial and local legislation. We are also subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices. Our operations may require that environmental permits and approvals be issued by applicable government agencies, which can be costly and time-consuming to attain. These regulations and legislation can change, or new ones come into place, due to future legislative or administrative actions. These events could cause us to incur additional expense or restrict our operations. Compliance with environmental laws and regulations, current or future, may be expensive and prohibitive for our research, development or production efforts. Failure to comply could incur substantial costs and liabilities, including civil or criminal fines and penalties, clean-up costs or capital expenditures to achieve and maintain compliance.
If product liability lawsuits are brought against us then we may incur substantial liabilities and may be required to limit commercialization of the Product, if approved, and any other future products.
We face a potential risk of product liability as a result of distribution of our product candidate for testing and commercialization of the Product. For example, we may face claims if use of the Product allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in product quality, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourself against product liability claims, we may incur substantial liabilities or be required to limit commercialization of the product subject to such claims. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
● decreased demand for current and future products;
● injury to our reputation;
● costs to defend any related litigation;
● diversion of management's time and our resources;
● product recalls, withdrawals or labeling, marketing or promotional restrictions;
● loss of revenue;
● inability to commercialize the Product and other products, if approved;
● decline in our share price; and
● exposure to adverse publicity.
Although we currently have general liability insurance in place, we do not know whether the limits of the insurance will be sufficient to satisfy any claims should they arise. We may not have sufficient resources to pay for any liabilities resulting from a claim excluded from or beyond the limits of, our insurance coverage. If we cannot successfully defend ourselves against a product liability claim, we may incur substantial liabilities.
Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading, which could significantly harm our business.
We are exposed to the risk that employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in fraudulent or other illegal activity, fraud or other misconduct. Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates: (i) the law and regulations of the FDA and non-U.S. regulators, including those laws that require the reporting of true, complete and accurate information to the FDA and non-U.S. regulators, (ii) healthcare fraud and abuse laws and regulations in the United States and elsewhere and (iii) laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct in violation of these laws may also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by our executives, employees, consultants and other third parties, and any precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourself or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in national healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We rely on trade secrets to protect our proprietary technological advances and know-how, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our consultants, contractors, outside scientific collaborators, sponsored researchers and other advisors, including the third parties we rely on to manufacture the product, to protect our trade secrets and other proprietary information. However, any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets.
Accordingly, these agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. In addition, others may independently discover our trade secrets and proprietary information. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that compete with our products or cause additional, material adverse effects upon our competitive business position and financial results.
Lawsuits relating to intellectual property infringement will be costly and time consuming.
We may be required to initiate litigation to enforce or defend our intellectual property rights. These lawsuits can be very time consuming and costly. There is a substantial amount of litigation involving patent and other intellectual property rights in the pharmaceutical industry generally. Such litigation or proceedings could substantially increase our operating expenses and reduce the resources available for development activities or any future sales, marketing or distribution activities.
In infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information and trade secrets could be compromised by disclosure during litigation. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are resolved. Further, any claims we assert against a perceived infringer could provoke these parties to assert counterclaims against us alleging that we have infringed their patents. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
In addition, our patents and patent applications could face other challenges, such as interference proceedings, opposition proceedings, reissue, inter partes review, re-examination proceedings, third-party submissions of prior art, and other forms of post-grant review. Any of these challenges, if successful, could result in the invalidation of, or in a narrowing of the scope or preventing the issuance of, any of our patents and patent applications subject to challenge. Any of these challenges, regardless of their success, would likely be time consuming and expensive to defend and resolve and would divert our management and scientific personnel's time and attention.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the market price of our securities.
Intellectual property disputes could distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our securities. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings.
Our directors may serve as directors of other biotech companies and may have conflicts of interest.
Certain of our directors and executive officers may, from time to time, be employed by or affiliated with organizations which have entered into agreements or will enter into agreements with us. As disputes may arise between these organizations and us, or certain of these organizations may undertake or have undertaken research with our competitors, there exists the possibility for such persons to be in a position of conflict. We cannot assure that any decision or recommendation made by these persons involving us will be made in accordance with his or her duties and obligations to deal fairly and in good faith with us and such other organizations.
Our business is affected by macroeconomic conditions.
Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates and foreign currency exchange rates, tariffs and trade sanctions on goods, and overall economic conditions and uncertainties, including those resulting from political instability and the current and future conditions in the global financial markets. For instance, if inflation or other factors were to significantly increase our business costs, it may not be feasible to pass through price increases to patients. Interest rates, the liquidity of the credit markets and the volatility of the capital markets could also affect the value of our investments and our ability to liquidate our investments in order to fund our operations, if necessary.
Interest rates and the ability to access credit markets could also adversely affect the ability of payors and distributors to purchase, pay for and effectively distribute our products if and when approved. Similarly, these macroeconomic factors could affect the ability of our current or potential future contract manufacturers, sole-source or single-source suppliers, or licensees to remain in business or otherwise manufacture or supply our products. Failure by any of them to remain in business could affect our ability to manufacture our products.
We may be responsible for corruption and anti-bribery law violations.
Our business activities are subject to the to the U.S. Foreign Corrupt Practices Act (the "FCPA") and other anti-bribery and anti-corruption laws of the United States and other countries in which we operate, as well as U.S. and certain foreign export controls and trade sanctions which generally prohibit companies and company employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.
Our employees or other agents may, without our knowledge and despite our efforts, engage in prohibited conduct under our policies and procedures and the FCPA or other anti-bribery laws for which we may be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
We are subject to foreign exchange risks.
As we grow and do business in foreign markets, including the United States and Europe, it is quite possible that transactions will take place in foreign currencies. At this point we do not participate in hedging activities. Although we cannot predict the effect of possible foreign exchange losses in the future, if such losses occurred, they could have a material adverse effect on our business, results of operation, and financial condition. In addition, fluctuations in exchange rates could affect the pricing of our products and negatively influence customer demand.
We are subject to taxation risks and changing rules by different tax authorities.
Tax examinations are often complex as tax authorities may disagree with the treatment of items reported by us, the result of which could have a material adverse effect on our financial condition and results of operations.
We believe that we will be treated as a U.S. corporation for U.S. federal income tax purposes.
As discussed more fully under "U.S. Federal Income Tax Considerations," we believe that, pursuant to Section 7874 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), even though we are organized as a corporation under the laws of Ontario, Canada, the Company will be treated as a U.S. domestic corporation for all purposes of the Code. The Company will therefore be taxed as a U.S. domestic corporation for U.S. federal income tax purposes. As a result, the Company will be subject to U.S. federal income tax on its worldwide income. The Company is also subject to tax in Canada. It is unclear how the foreign tax credit rules under the Code will operate in certain circumstances, given our treatment as a U.S. domestic corporation for U.S. federal income tax purposes and the taxation of the Company in Canada. Accordingly, it is possible that we will be subject to double taxation with respect to all or part of our taxable income.
In addition, if the Company pays dividends to a Non-U.S. Holder, as defined in the discussion under the heading "U.S. Federal Income Tax Considerations," it will be required to withhold U.S. income tax at the rate of 30%, or such lower rate as may be provided in an applicable income tax treaty. Each investor is urged to consult its own tax adviser regarding the U.S. federal income tax position of the Company and the tax consequences of holding our securities.
We are subject to a number of risks and hazards, of which not all of them may be sufficiently insured for.
Our business will be subject to a number of risks and hazards generally, including general liability. Such occurrences could result in damage to property, inventory, facilities, personal injury or death to end-customers or operators, damage to our properties or the properties of others, monetary losses and possible legal liability. Although we maintain insurance to protect against certain risks in such amounts as we consider to be reasonable, our insurance will not cover all the potential risks associated with our operations. We may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. We might also become subject to liability which may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations.
Risks related to health epidemics and pandemics.
Unfavorable global conditions, including as a result of health and safety concerns related to global pandemics, could adversely affect our business, financial condition or results of operations. Our operations could be adversely affected by general conditions in the global economy, including conditions that are outside of our control, such as the impact of health and safety concerns from global pandemics like the coronavirus (COVID-19) outbreak. The most recent global financial crisis caused by the coronavirus outbreak has resulted in extreme volatility and disruptions in the capital and credit markets. A weak or declining economy could also strain our supply channels.
Risks Related to Marketing, Reimbursement, Healthcare Regulations and Ongoing Regulatory Compliance
Coverage and reimbursement may be limited or unavailable in certain market segments for the Product, which could make it difficult for us to sell the Product profitably.
The success of the Product, if approved, depends on the availability of adequate coverage and reimbursement from third-party payors, including government agencies. There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. Coverage may be more limited than the purposes for which a therapeutic is approved by the FDA or comparable regulatory authorities in other jurisdictions.
In the United States and some other jurisdictions, patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States and commercial payors are critical to new product acceptance.
Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (“CMS”), an agency within the United States Department of Health and Human Services. CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare, and private payors often follow CMS' coverage decisions. Other jurisdictions have agencies, such as the National Institute for Health and Care Excellence in the United Kingdom, that evaluate the use and cost effectiveness of therapies, which impact the utilization and price of the medicine in such jurisdiction.
In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. As a result, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time consuming and costly process that could require Medicus to provide to each payor supporting scientific, clinical and cost effectiveness data for the use of products on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if Medicus obtains coverage for a given product, the resulting reimbursement payment rates might not be adequate for Medicus to maintain pricing sufficient to achieve or sustain profitability or may require copayments that patients find unacceptably high.
Medicus intends to seek approval to market the Product in different jurisdictions, which could include Canada and other selected foreign jurisdictions in addition to the United States. If Medicus obtains approval in any of these jurisdictions for the Product, Medicus will be subject to rules and regulations in those jurisdictions. Market acceptance and sales of the Product will depend significantly on the availability of adequate coverage and reimbursement from third party payors for the Product and may be affected by existing and future health care reform measures.
Our relationship with healthcare providers and physicians and third-party payors will be subject to applicable antikickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors in the United States, Canada, and elsewhere play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. If we obtain FDA approval for any product candidates and begin commercializing those products in the United States, our current and future arrangements with healthcare providers, third-party payors, customers, and others may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. In particular, the research of product candidates, as well as the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business or financial arrangements.
The applicable U.S. federal, state and other healthcare laws and regulations laws that may affect our ability to operate include, but are not limited to:
● the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual, or the purchase, lease, order, arrangement, or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The term remuneration has been interpreted broadly to include anything of value. Further, courts have found that if "one purpose" of renumeration is to induce referrals, the federal Anti-Kickback statute is violated. Violations are subject to significant civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs. In addition, a claim submitted for payment to any federal healthcare program that includes items or services that were made as a result of a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution;
● the federal civil and criminal false claims laws, including the FCA, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs; knowingly making, using, or causing to be made or used, a false record or statement material to a false, fictitious or fraudulent claim or an obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. A claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. The FCA also permits a private individual acting as a "whistleblower" to bring qui tam actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery or settlement. When an entity is determined to have violated the FCA, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;
● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false fictitious or fraudulent statement or entry in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA fraud provisions without actual knowledge of the statute or specific intent to violate it;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose, among other things, certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their respective "business associates," those independent contractors or agents of covered entities that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions. In addition, there are additional federal, state and non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;
● the federal Physician Payments Sunshine Act, created under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the Affordable Care Act, and its implementing regulations, which require manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to CMS information related to direct or indirect payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain non-physician providers such as physician assistants and nurse practitioners;
● federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and
● analogous U.S. state, local and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers and may be broader in scope than their federal equivalents; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and other relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing; state and local laws that require the registration of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information, some of which may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018) in certain circumstances, and may differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time-and resource-consuming, costly, and can divert a company's attention from the business.
It is possible that governmental and enforcement authorities will conclude that our business practices, including our arrangements with physicians and other healthcare providers, may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to significant sanctions, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, reputational harm, exclusion from participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to similar penalties. Any action for violation of these laws, even if successfully defended, could cause a pharmaceutical manufacturer to incur significant legal expenses and divert management's attention from the operation of the business. In addition, the approval and commercialization of any product candidate in other countries will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws. All of these could harm our ability to operate our business and our financial results.
Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations.
Changes in U.S., Canadian, and foreign regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.
In the United States and in some foreign jurisdictions, there have been, and likely will continue to be, a number of legislative initiatives and regulatory changes regarding the healthcare system directed at broadening the availability of healthcare, improving the quality of healthcare, and containing or lowering the cost of healthcare. For example, in March 2010, the ACA was enacted, which substantially changed the way health care is financed by both governmental and private insurers, and significantly impacted the U.S. pharmaceutical industry. The ACA, among other things, subjects biological products to potential competition by lower-cost biosimilars, expands the types of entities eligible for the 340B drug discount program; introduced a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations; established annual fees and taxes on manufacturers of certain branded prescription drugs; and created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, or BBA, effective as of January 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and our expects there will be additional challenges and amendments to the ACA in the future. For example, various portions of the ACA are currently undergoing legal and constitutional challenges in the U.S. Supreme Court. Additionally, the Trump Administration has issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA. We cannot predict what affect further changes to the ACA would have on our business.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, on August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs, including aggregate reductions of Medicare payments to providers of up to 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, unless additional Congressional action is taken. However, pursuant to the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, and subsequent legislation, these Medicare sequester reductions are suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, the BBA, among other things, amended the ACA, effective January 1, 2019, by increasing the point-of-sale discount (from 50% under the ACA to 70%) that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole."
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their products. Such scrutiny has resulted in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. For example, at the federal level, the Trump administration's budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent "principles" for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out of pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. HHS has solicited feedback on some of these measures and has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule that would allow Medicare Advantage Plans the option of using step therapy, a type of prior authorization, for Part B drugs beginning January 1, 2020. This final rule codified CMS' policy change that was effective January 1, 2019.
Several regulations have also been proposed partly in response to several executive orders issued by President Trump related to prescription drug pricing that seek to implement several of the administration's proposals. For example, on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model regulations mandate participation by identified Part B providers and will apply in all U.S. states and territories for a seven-year period beginning January 1, 2021, and ending December 31, 2027. The Interim Final Rule has not been finalized and is subject to revision and challenge. Additionally, on November 20, 2020, HHS finalized a regulation removing the safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. While some of these and other measures may require additional authorization to become effective, and the Biden administration may reverse or otherwise change these measures, Congress has indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Several bills have been introduced in both chambers, but due to increased focus on COVID-19 relief efforts, it is not clear when, and if any, proposed legislation regarding drug costs will advance.
At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biologic product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions on coverage or access could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for the Product or put pressure on product pricing.
Our expects that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the extent to which state and federal governments cover particular healthcare products and services and could limit the amounts that the federal and state governments will pay for healthcare products and services. This could result in reduced demand for the Product or could result in additional pricing pressures.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, the Product may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.
Risks Relating to this Offering and our Securities
We may experience fluctuations in market value.
The market price of publicly-traded securities is affected by many variables not directly related to our corporate performance, including the markets in which we are traded, the strength of the economy generally, the global economic situation and outlook, the availability and attractiveness of alternative investments, and the breadth of the public market for the securities. The effect of these and other factors on the market price of our securities in the future cannot be predicted.
Our securities could be subject to large price and volume volatility.
Market prices for the securities of biotechnology companies have historically been highly volatile. Our securities have and may continue to experience extreme price and volume volatility that may result in losses to shareholders. Accordingly, the trading price of our securities could be subject to wide fluctuations in response to a variety of factors including announcement of material events such as changes relating to new or improved technology, drug safety concerns and other general and industry-specific economic conditions.
Additionally, the securities markets in the United States have recently experienced a high level of price and volume volatility. It is expected that such fluctuations in volume and price will continue to occur which may make it difficult for a shareholder to sell our securities at a price equal to or above the price at which they were purchased.
Due to the small size of our public float, our securities may experience extreme price volatility unrelated to our actual or expected operating performance, financial condition, or prospects, making it difficult for prospective investors to assess the rapidly changing value of our securities.
In addition to the risks described elsewhere in this prospectus, we may be subject to extreme volatility that is unrelated to the underlying performance of our business. Recently, there have been instances of extreme share price run-ups followed by rapid price declines and strong share price volatility with a number of recent initial public offerings, especially among companies with relatively smaller public floats. We have a relatively small public float due to our relatively small public float on Nasdaq and the ownership percentage of our executive officers, directors and significant shareholders. As a relatively small-capitalization company with a relatively small public float, we may experience greater share price volatility, extreme price run-ups, lower trading volume, and less liquidity than large-capitalization companies. In particular, our securities may be subject to rapid and substantial price volatility, low volumes of trades, and large spreads in bid and ask prices. Such volatility, including any stock run-up, may be unrelated to our actual or expected operating performance, financial condition, or prospects, making it difficult for prospective investors to assess the rapidly changing value of our securities.
In addition, if the trading volumes of our securities are low, persons buying or selling in relatively small quantities may easily influence prices of our securities. This low volume of trades could also cause the price of our securities to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our securities may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our securities. As a result of this volatility, investors may experience losses on their investment in our securities. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future. No assurance can be given that an active U.S. market in our securities will develop or be sustained. If a more active market does not develop, holders of our securities may be unable to readily sell the securities they hold or may not be able to sell their securities at all.
This is a “best efforts” offering; no minimum amount of Securities is required to be sold, and we may not raise the amount of capital we believe is required for our business.
There is no required minimum number of Units that must be sold as a condition to completion of this offering. Because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth in this prospectus. We may sell fewer than all of the Units offered hereby, which may significantly reduce the amount of proceeds received by us, and investors in this offering will not receive a refund in the event that we do not sell an amount of Units sufficient to pursue the business goals outlined in this prospectus. Thus, we may not raise the amount of capital we believe is required for our business and may need to raise additional funds, which may not be available or available on terms acceptable to us. Despite this, any proceeds from the sale of the Units offered by us will be available for our immediate use, and because there is no escrow account and no minimum offering amount in this offering, investors could be in a position where they have invested in us, but we are unable to fulfill our objectives due to a lack of interest in this offering.
We will need to raise additional financing in the future which may dilute our share capital.
Our articles permit the issuance of an unlimited number of common shares. This offering along with any future issuances of our common shares will result in dilution to the existing shareholders. Additionally, future sales of our common shares into the public market may lower the market price for our securities, which may result in losses to our shareholders. Sales of substantial amounts of our common shares into the public market, or even the perception by the market that such sales may occur, may lower the market price of our securities.
We have no history of dividends.
To date, we have not paid any dividends on our outstanding common shares. We currently intend to retain future earnings to finance the operation, development and expansion of our business. We do not anticipate paying cash dividends on our common shares in the foreseeable future. Any decision to pay dividends on our shares will be made at the discretion of our board of directors and will depend on our earnings, financial requirements and other conditions existing at such time. See "Dividend Policy."
Future sales of our common shares by our existing shareholders could cause the price of our securities to decline.
Subject to compliance with applicable securities laws, our officers, directors and significant shareholders may sell some or all of their common shares in the future. No prediction can be made as to the effect, if any, such future sales of our common shares will have on the market price of our securities prevailing from time to time. However, the future sale of a substantial number of common shares by such persons or the perception that such sales could occur, could cause the price of our securities to decline.
We may issue, without shareholder approval, preferred shares that have rights and preferences potentially superior to those of our common shares.
Our articles permit the issuance of an unlimited number of preferred shares (the "Medicus Preferred Shares") in one or more series. Medicus Preferred Shares are entitled to priority over our common shares with respect to the distribution of our assets in the event of any liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary. Subject to any applicable regulatory approvals, our board of directors may set the rights and preferences of any series of Medicus Preferred Shares in its sole discretion without shareholder approval. The rights and preferences of those Medicus Preferred Shares may be superior to those of our common shares. Accordingly, the issuance of Medicus Preferred Shares may adversely affect the rights of holders of our common shares.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common shares, the price of our securities could decline.
The trading market for our securities could be influenced by research and reports that industry and/or securities analysts may publish about us, our business, the market or our competitors. We do not have any control over these analysts and cannot assure that such analysts will cover us or provide favorable coverage. If any of the analysts who may cover our business change their recommendation regarding our common shares adversely, or provide more favorable relative recommendations about our competitors, the share price would likely decline. If any analysts who may cover our business were to cease coverage or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the share price or trading volume to decline.
An investment in this offering may result in uncertain or adverse U.S. federal income tax consequences.
An investment in this offering may result in uncertain or adverse U.S. federal income tax consequences. For instance, the allocation an investor makes with respect to the purchase price of a unit between the common share and the warrant included in each Unit could be challenged by the U.S. Internal Revenue Service (the "IRS") or courts. Furthermore, the U.S. federal income tax consequences of a cashless exercise of warrants and distributions on warrants are unclear under current law, and the adjustment to the exercise price of the warrants could give rise to dividend income to investors without a corresponding payment of cash. See "U.S. Federal Income Tax Considerations" for a summary of the U.S. federal income tax considerations of an investment in our securities. Prospective investors are urged to consult their own tax advisors with respect to these and other tax consequences when purchasing, holding or disposing of our securities.
Risks Relating to New Securities
There is no public market for the warrants being offered hereby, and we do not expect one to develop to provide you with adequate liquidity.
The warrants offered hereby will not be listed on any Canadian or U.S. securities exchange. Consequently, there is no public trading market for the warrants, and we do not expect a market to develop. Accordingly, investors may find it difficult to dispose of, or to obtain accurate quotations as to the market value of, the warrants. This lack of a trading market could result in investors being unable to liquidate their investment in the warrants or to sell them at a price that reflects their value.
Risks Related to Being a Public Company
As a result of recently becoming a public company in the United States, we are subject to additional regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act, and if we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
Our management team may not successfully or effectively manage our transition to a U.S. public company that will be subject to significant regulatory oversight and reporting obligations under U.S. and Canadian securities laws. Our limited experience in dealing with the increasingly complex laws pertaining to U.S. and Canadian public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the post-combination company. We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies in the United States and Canada.
As a public company listed on Nasdaq, the Sarbanes-Oxley Act requires, among other things that we assess the effectiveness of our internal control over financial reporting at the end of each fiscal year. We anticipate being first required to issue management's assessment of internal control over financial reporting pursuant to Section 404(a) of the Sarbanes-Oxley Act in connection with issuing our consolidated financial statements as of and for the fiscal year ending December 31, 2025.
We have started the process of designing, implementing and testing our internal control over financial reporting required to comply with Section 404(a) of the Sarbanes-Oxley Act. This process is time-consuming, costly and complicated. Our management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable to us as a public company listed on Nasdaq. If we fail to maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company listed in the United States, our business and reputation may be harmed, the accuracy and timeliness of our financial reporting may be adversely affected, and the price of our shares may decline.
In addition, unless we still qualify as a non-accelerated filer, our independent registered public accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting beginning with our annual report following the date on which we are no longer an "emerging growth company," which may be up to five fiscal years following the date of our initial public offering in the United States.
If we are unable for any reason to meet the continued listing requirements of Nasdaq, such action or inaction could result in a delisting of our common shares and our Public Warrants, as applicable.
If we fail to satisfy the continued listing requirements of Nasdaq (for example, Nasdaq corporate governance requirements or the minimum closing bid price requirement), such exchanges may take steps to delist our common shares and our Public Warrants, as applicable. Such a delisting would likely have a negative effect on the price of our common shares and our Public Warrants and would impair your ability to sell or purchase our common shares and our Public Warrants, as applicable, when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common shares and our Public Warrants, as applicable, to become listed again, stabilize the market price or improve the liquidity of our common shares and our Public Warrants, as applicable, prevent such securities from dropping below any minimum bid price requirement or prevent future non-compliance with Nasdaq's listing requirements.
There is a risk that we will fail to maintain an effective system of internal controls and our ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected. We have identified material weaknesses in our internal controls over financing reporting as of December 31, 2024, which we may not be able to remedy in a timely manner.
As a U.S. public company, we operate in an increasingly demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act, the regulations of Nasdaq, the rules and regulations of the SEC and Canadian securities regulators, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. Prior to the closing of our initial public offering in the United States, we have never been required to test our internal controls within a specified period and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.
We anticipate that the process of building our accounting and financial functions and infrastructure may require significant additional professional fees, internal costs and management efforts. We may need to enhance and/or implement a new internal system to combine and streamline the management of our financial, accounting, human resources and other functions. However, the enhancement and/or implementation of a system may result in substantial costs. Any disruptions or difficulties in implementing or using such a system could adversely affect our controls and harm our business. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management's attention. In addition, we may discover additional weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
If we do not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed, investors could lose confidence in our reported financial information and we could be subject to sanctions or investigations by Nasdaq, the SEC, Canadian securities regulators or other regulatory authorities.
Our management has identified material weaknesses in our internal control over financial reporting related to lack of degree of precision in the review of materials used to record transactions in accordance with US GAAP, and lack of formalized or documented policies related to the overall IT system environment. Our management has concluded that, due to such material weakness, our disclosure controls and procedures were not effective as of December 31, 2024. To address our material weaknesses, we are in the process of planning to implement measures designed to improve our internal control over financial reporting and remediate the control deficiencies that led to the material weaknesses. Such changes may not, however, be effective in establishing the adequacy of our internal control over financial reporting. If the material weaknesses are not adequately remediated, or if we identify further material weaknesses in our internal controls, our failure to establish and maintain effective internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our business, results of operations, financial condition and the trading price of our securities. In addition, investors' perceptions that our internal control over financial reporting is inadequate or that we are unable to produce accurate financial statements may materially adversely affect the price of our securities, which in turn could make it more difficult for us to obtain financing on favorable terms or at all.
We have and will continue to incur increased costs as a result of our operation as a dual U.S.-Canadian reporting company, and our management will be required to devote substantial time and resources to employing new compliance initiatives in order to comport with the regulatory requirements applicable to public companies.
In connection with recently becoming a public company in the US, we have and will continue to incur significant legal, accounting and other expenses that we did not previously incur. As a dual U.S.-Canadian public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC, Canadian securities regulators and Nasdaq. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be forced to accept reduced policy limits or incur substantially higher costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our securities may be volatile, and in the past companies that have experienced volatility in the market price of their shares have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management's attention and resources, which could adversely impact our business. Any adverse determination in litigation could also subject us to significant liabilities.
As we are organized under the laws of a Canadian province and certain of our directors and officers reside in Canada or the provinces thereof, it may be difficult for U.S. shareholders to effect service on us to realize on judgments obtained in the United States. Similarly, it may be difficult for Canadian investors to enforce civil liabilities against our directors and officers residing outside of Canada.
We are governed by the Business Corporations Act (Ontario), as now enacted or as the same may from time to time be amended, re-enacted or replaced ("OBCA"), certain of our directors and officers reside or are organized outside of the United States and a portion of our assets or the assets of these persons may be located outside the United States. Consequently, it may be difficult for investors who reside in the United States to effect service of process in the United States upon us or upon such persons who are not residents of the United States, or to realize upon judgments of courts of the United States predicated upon the civil liability provisions of the U.S. federal securities laws. A judgment of a U.S. court predicated solely upon such civil liabilities may be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. Investors should not assume that Canadian courts: (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or blue sky laws of any state within the United States, or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue sky laws. Similarly, some of our directors and officers are residents of countries other than Canada and all or a substantial portion of the assets of such persons are located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these persons. In addition, it may not be possible for Canadian investors to collect from these persons judgments obtained in courts in Canada predicated on the civil liability provisions of securities legislation of certain of the provinces and territories of Canada. It may also be difficult for Canadian investors to succeed in a lawsuit in the United States based solely on violations of Canadian securities laws.
DIVIDEND POLICY
We do not anticipate that we will declare or pay dividends in the foreseeable future on our common shares. Instead, we anticipate that all of our earnings will be used for the operation and growth of our business. Any future determination to declare cash dividends would be subject to the discretion of our board of directors and would depend upon various factors, including our results of operations, financial condition and liquidity requirements, restrictions that may be imposed by applicable law and our contracts and other factors deemed relevant by our board of directors.
CAPITALIZATION
The following table sets forth our consolidated capitalization as of March 31, 2025:
- on an actual basis, as determined in accordance with GAAP; and
- on an adjusted basis to reflect the net proceeds from our sale of 1,375,000 Units in this offering at the assumed offering price of $7.29 per Unit, after deducting the underwriting discounts and commissions and the estimated offering expenses.
This table should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Use of Proceeds" sections, as well as our audited financial statements, included elsewhere in this prospectus.
| As of March 31, 2025 | ||||||
| Actual | Adjusted | |||||
| Cash | $ | 3,982,430 | $ | 13,004,399 | ||
| Liabilities | 3,510,312 | 3,510,312 | ||||
| Shareholders' equity: | ||||||
| Share capital | 32,908,702 | 41,930,671 | ||||
| Additional paid-in capital | 3,245,163 | 3,245,163 | ||||
| Deficit | (34,006,311 | ) | (34,006,311 | ) | ||
| Total shareholders' equity | 2,147,554 | 11,169,523 | ||||
| Total capitalization | $ | 5,657,866 | $ | 14,679,835 | ||
USE OF PROCEEDS
We estimate that the net proceeds to us from this offering will be approximately $9.0 million, assuming an offering price of $7.29 per Unit, which is the closing price of our common shares on Nasdaq on May 23, 2025, after deducting placement agent fees of approximately $750,000 and estimated offering expenses payable by us of approximately $250,000.
In addition, we would receive up to an aggregate of approximately $ million from the exercise of the warrants, assuming the exercise in full of all such warrants for cash.
We intend to use the net proceeds from this offering to fund our Phase 2 proof of concept clinical trial for treatment of basal cell carcinoma using our doxorubicin tip loaded dissolvable microarray needle skinpatch. We may also use the net proceeds of this offering to expand our exploratory phase 2 clinical trial to a pivotal trial and/or to expand our trials to cover other non-melanoma skin diseases. We will use any remaining net proceeds for general corporate purposes and working capital.
The amounts and timing of our actual expenditures will depend on numerous factors, the timing and success of any clinical trials and preclinical studies we may commence in the future, the timing of regulatory submissions, the status of our sales and marketing efforts, the amounts of proceeds actually raised in this offering and the amount of cash generated by our operations. Because we operate in a very dynamic and highly competitive industry, the actual use of proceeds may differ substantially from the ranges indicated above. Our management will have broad discretion to allocate the net proceeds from this offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that impact our business. In particular, we encourage you to review the risks and uncertainties described in "Risk Factors" in this prospectus. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this prospectus, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law. All amounts are expressed in United States dollars unless otherwise stated.
Company Overview
The Company is a clinical stage, multi-strategy holding company focused on investing in and accelerating novel life sciences and bio-technology companies through FDA approved clinical trials. Utilizing a thesis driven collaborative process, the Company attempts to acquire and advance clinical stage assets through clinical development and commercialization. The Company looks into opportunities across all therapeutics areas where an unmet need exists for improved patient safety and efficacy. The Company is actively exploring to expand its drug development pipeline through qualified and accretive acquisitions and partnerships.
The Company has two wholly owned subsidiaries, Medicus Pharma Inc., a company incorporated in the state of Delaware on October 12, 2023, and SkinJect.
SkinJect is focused on the development of a novel drug delivery system using dissolvable microneedle arrays ("MNAs") for the treatment of certain skin cancers. To that end, the Company licensed certain technology co-developed by the University of Pittsburgh and Carnegie Mellon University. The Company established and validated fabrication processes relative to the MNAs, completed pre-clinical testing and secured approval to proceed with clinical trials activity from the Food and Drug Administration.
The Company then completed a dose escalation study ("'SKNJCT-001") that assessed the safety of MNA patch in patients with BCC. There were no serious adverse events nor any demonstrated alterations in any clinical measurements during the trial. The conclusion of the study was that MNA patch was well tolerated with no evidence of dose limiting toxicity.
The Company had initiated a clinical study ("SKNJCT-002") aimed at evaluating clinical efficacy. The first part involved the enrollment of 15 healthy volunteers and was designed to study the penetration of placebo-containing Dynamic Mechanical Allodynia ("DMA") patches at five different anatomic locations. After the first seven health volunteers were enrolled, due to the variability of array application observed by the investigator, SkinJect made the decision to pause the trial. The study was never resumed, and it was ultimately closed without further enrollment. There were no adverse events reported in the enrolled subjects.
In January 2024, the Company submitted the clinical design for a randomized, double-blinded, placebo-controlled ("P-MNA"), multi-center study ("SKNJCT-003") enrolling up to 60 subjects presenting with nodular type BCC of the skin. The FDA responded in March 2024 and requested additional clinical information. A final protocol was submitted to the FDA in July 2024, which included the information requested by the FDA, along with updated CMC, stability and sterility data. On July 31, 2024, the FDA responded to the latest submission and requested certain additional information and clarification. The Company has responded to the FDA on August 2, 2024. On August 13, 2024, the Company commenced activating its clinical trial sites and had enrolled over 25% of the 60 expected patients by December 2024.
The Share Consolidation
On June 25, 2024, the Company's shareholders approved an amendment to the Company's articles of incorporation to provide for the Share Consolidation, or reverse stock split, of the Company's issued and outstanding common shares at such a consolidation ratio to be determined by the Company's board of directors in its sole discretion, to permit the Company to satisfy all conditions and necessary regulatory approvals to list the common shares on a U.S. national securities exchange as the Company's board of directors may determine in its sole direction. Our board of directors approved the Share Consolidation on October 15, 2024, and the Share Consolidation was completed by the Company on October 28, 2024, at the ratio of 1-for-2.
After the completion of the Share Consolidation, the number of the Company's issued and outstanding common shares decreased from 21,693,560 to 10,846,721. The par value of the Company's common shares remains unchanged at $0 per share after the Share Consolidation. The Share Consolidation was completed in preparation for a U.S. listing.
Initial Public Offering
On November 14, 2024, the Company completed the sale of 970,000 Units, with each Unit consisting of one common share and one warrant to purchase one common share at the price of $4.125 per Unit. In addition, the underwriters exercised an option to purchase 145,500 warrants (the "Overallotment Warrants") at a price of $0.01 per warrant.
Total gross proceeds from the IPO were $4,002,705, including the proceeds from the Overallotment Warrants. The Company incurred total issuance costs of $2,218,014, including underwriter fees, and legal and other professional fees incurred directly related to the issuance.
Regulation A Offering
On March 10, 2025, the Company completed an offering of 1,490,000 units at $2.80 per unit pursuant to Tier II of Regulation A under the Securities Act, with each unit consisting of one common share and one Regulation A Warrant. The Regulation A Warrants have an exercise price of $2.80 and expire on March 10, 2030. The aggregate gross proceeds to the Company from the Offering were $4,172,000.
Results of Operations
The following table outlines our statements of loss and comprehensive loss for the three months ended March 31, 2025 and 2024:
| Three months ended March 31, | ||||||||||
| 2025 | 2024 | |||||||||
| $ | $ | Change | ||||||||
| General and administrative | 3,120,060 | 1,385,981 | 1,734,079 | |||||||
| Research and development | 2,006,214 | 321,377 | 1,684,837 | |||||||
| Total operating expenses | 5,126,274 | 1,707,358 | 3,418,916 | |||||||
| Loss from operations | (5,126,274 | ) | (1,707,358 | ) | (3,418,916 | ) | ||||
| Other income : | ||||||||||
| Finance income | 23,866 | - | 23,866 | |||||||
| Total other income | 23,866 | - | 23,866 | |||||||
| Net loss and comprehensive loss | (5,102,408 | ) | (1,707,738 | ) | (3,395,050 | ) | ||||
| Net loss per common share (basic and diluted) | (0.42 | ) | (0.21 | ) | ||||||
General and administrative
General and administrative expenses for the three months ended March 31, 2025 and 2024 are comprised of:
| Three months ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| $ | $ | Change | |||||||||
| Professional fees | 1,360,680 | 438,302 | 922,378 | ||||||||
| Consulting fees | 284,946 | 455,814 | (170,868 | ) | |||||||
| Salaries, wages and benefits | 357,517 | 201,016 | 156,501 | ||||||||
| General office, insurance and administration expenditures | 539,696 | 177,810 | 361,886 | ||||||||
| Business development and investor relations | 464,944 | 77,086 | 387,858 | ||||||||
| Stock-based compensation | 112,277 | 35,953 | 76,324 | ||||||||
| 3,120,060 | 1,385,981 | 1,734,079 | |||||||||
Professional fees increased by $922,378 for the three months ended March 31, 2025, compared to the equivalent period in the prior year. The increase was primarily due to increases in legal and accounting fees related to the Company's operations. Professional fees include fees incurred for legal and accounting services that fluctuate from period to period based on the nature of the transactions the Company undertakes. The primary reason for the increase is due to increased regulatory requirements following the Company’s initial public offering and transition to U.S. domestic issuer status.
Consulting fees decreased by $170,968 for the three months ended March 31, 2025, compared to the equivalent period in the prior year. Consulting fees include fees paid to individuals and professional firms who provide advisory services to the Company and fluctuate from period to period based on the nature of the transactions the Company undertakes. The primary reason for the increase is due to decreased business activity in the current year compared to the prior year when the Company was focused on completing the initial public offering.
Salaries, wages and benefits increased by $156,501 for the three months ended March 31, 2025, compared to the equivalent period in the prior year. The increase was primarily due to an increase in headcount from the previous year.
General office, insurance and administration expenditures increased by $361,886 for the three months ended March 31, 2025, compared to the equivalent period in the prior year. The increase was primarily due to the Company now incurring more significant insurance related expenses and general office related expenditures in support of expanded operations.
Business development and investor relations expenses increased by $387,858 for the three months ended March 31, 2025, compared to the equivalent period in the prior year. Business development and investor relations expenses for the three months ended March 31, 2025, were primarily incurred as a result of increased marketing efforts in the current year as a result of the Company being a listed public entity on the Nasdaq.
Stock-based compensation increased by $76,324 for the three months ended March 31, 2025, compared to the equivalent period in the prior year. Stock-based compensation changes based on the variability in the number of options granted, vesting periods of the options and the grant date fair value. During the three months ended March 31, 2025, the stock-based compensation expense relates to the vesting of share options granted during the second half of 2024.
There is an expected increase in general and administrative expenses associated with being a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with applicable securities law requirements; additional director and officer insurance costs; and investor and public relations costs.
Research and development ("R&D")
Research and development ("R&D") costs include costs incurred under agreements with third-party contract research organizations, contract manufacturing organizations and other third parties that conduct preclinical and clinical activities on our behalf and manufacture our product candidates, and other costs associated with our R&D programs, including laboratory materials and supplies.
R&D expenses increased by $1,684,837 for the three months ended March 31, 2025, compared to the equivalent periods in the prior year. This increase is primarily due to costs incurred related to SKNJCT-003 which had minimal activity during the three months ended March 31, 2024.
As of March 20, 2025, the Company has commenced activating its clinical trial sites and has randomized more than 50% of the 60 patients expected to be enrolled in the study. Subsequent to March 31, 2025, the Company announced on April 21, 2025 that the Institutional Review Board approved the increase in the number of patients in the study from 60 to 90, that the clinical study will expand from the nine clinical sites in the United States to include an additional site in the United States and two clinical trial sites in Europe and that the Company has randomized more than 45 participants in the study.
We expect our R&D expenses to increase substantially for the foreseeable future as we continue with the SKNJCT-003 study and trials.
The principal risks related to the Company's future performance are that the trials are unsuccessful, the Company does not receive FDA approval to proceed with the next stage of its research and development, or the Company is unsuccessful in obtaining future funding needed to continue its research and development. These are customary risks for a development stage pharmaceutical Company and are less acute than for a Company with a less advanced product. Nevertheless, there can be no assurance that the Company will be able to complete its trials of the MNA, that the trials will be successful, or that the product will ultimately reach commercialization.
Other income:
Finance income was $23,866 and $0 for the three months ending March 31, 2025 and 2024, respectively. Finance income for the three months ended March 31, 2025 relates to interest income earned on short-term money market investments.
The following table outlines our statements of loss and comprehensive loss for the years ended December 31, 2024 and 2023:
| Years ended December 31, | ||||||||||
| 2024 $ |
2023 $ |
Change | ||||||||
| General and administrative | 7,653,116 | 4,536,367 | 3,116,749 | |||||||
| Research and development | 3,527,786 | 193,578 | 3,334,208 | |||||||
| Total operating expenses | 11,180,902 | 4,729,945 | 6,450,957 | |||||||
| Loss from operations | (11,180,902 | ) | (4,729,945 | ) | (6,450,957 | ) | ||||
| Finance (income) expense, net | (25,386 | ) | 584,820 | (610,206 | ) | |||||
| Net loss and comprehensive loss | (11,155,516 | ) | (5,314,765 | ) | 5,840,751 | |||||
| Net loss per common share (basic and diluted) | (1.16 | ) | (1.53 | ) | ||||||
General and administrative
General and administrative expenses for the years ended December 31, 2024 and 2023 are comprised of:
| Years ended December 31, | ||||||
| 2024 $ |
2023 $ |
|||||
| Professional fees | 1,910,801 | 735,234 | ||||
| Consulting fees | 1,917,573 | 957,967 | ||||
| Salaries, wages and benefits | 1,445,812 | 143,284 | ||||
| General office, insurance and administration expenditures | 1,150,054 | 432,204 | ||||
| Business development and investor relations | 824,585 | 97,513 | ||||
| Stock-based compensation | 404,291 | 98,585 | ||||
| Listing fees | - | 2,071,580 | ||||
| 7,653,116 | 4,536,367 | |||||
Professional fees increased by $1,175,567 or 160% for the year ended December 31, 2024, compared to the equivalent period in the prior year. The increase was primarily due to increases in legal and accounting fees related to the Company's operations. Professional fees include fees incurred for legal and accounting services that fluctuate from period to period based on the nature of the transactions the Company undertakes. The primary reason for the increase is due to increased business activity in the current year compared to the prior year when the Company was focused on completing the RTO transaction.
Consulting fees increased by $959,606 or 100% for the year ended December 31, 2024, compared to the equivalent period in the prior year. Consulting fees include fees paid to individuals and professional firms who provide advisory services to the Company and fluctuate from period to period based on the nature of the transactions the Company undertakes. The primary reason for the increase is due to increased business activity in the current year compared to the prior year when the Company was focused on completing the RTO.
Salaries, wages and benefits increased by $1,302,528 or 909% for the year ended December 31, 2024, compared to the equivalent period in the prior year. The increase was primarily due to the Company not having employees throughout the majority of the equivalent period in the prior year.
General office, insurance and administration expenditures increased by $717,850 or 166% for the year ended December 31, 2024, compared to the equivalent period in the prior year. The increase was primarily due to the Company now incurring more significant insurance related expenses and general office related expenditures in support of expanded operations.
Business development and investor relations expenses increased by $727,072 or 746% for the year ended December 31, 2024, compared to the equivalent period in the prior year. Business development and investor relations expenses for the year ended December 31, 2024, were primarily incurred as a result of the Company becoming a listed public entity after the RTO and getting listed on the Nasdaq.
Stock-based compensation increased by $305,706 or 310% for the year ended December 31, 2024, compared to the equivalent period in the prior year. Stock-based compensation changes based on the variability in the number of options granted, vesting periods of the options and the grant date fair value. During the year ended December 31, 2024, the stock-based compensation expense relates to the vesting of share options granted during the year. On June 25, 2024, our board of directors approved the acceleration of vesting for all outstanding share options resulting in the Company recognizing the remaining expense for all share options outstanding and unvested as of that date.
Listing expenses were $0 for the year ended December 31, 2024, and $2,071,580 for the year ended December 31, 2023. Listing expenses were incurred to complete the RTO transaction and include the cost related to the assumed liabilities of RBx Capital, LP.
There is an expected increase in general and administrative expenses associated with being a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with applicable securities law requirements; additional director and officer insurance costs; and investor and public relations costs.
Research and development ("R&D")
Research and development ("R&D") costs include costs incurred under agreements with third-party contract research organizations, contract manufacturing organizations and other third parties that conduct preclinical and clinical activities on our behalf and manufacture our product candidates, and other costs associated with our R&D programs, including laboratory materials and supplies.
R&D expenses increased by $3,334,280 or 1722% for the year ended December 31, 2024, compared to the equivalent periods in the prior year. This increase is primarily due to costs incurred related to SKNJCT-003 and $308,828 of stock-based compensation recognized within R&D expenses for the year ended December 31, 2024 (2023 - $0).
As of March 20, 2025, the Company has commenced activating its clinical trial sites and has randomized more than 50% of the 60 patients expected to be enrolled in the study. We expect our R&D expenses to increase substantially for the foreseeable future as we continue with the SKNJCT-003 study and trials.
The principal risks related to the Company's future performance are that the trials are unsuccessful, the Company does not receive FDA approval to proceed with the next stage of its research and development, or the Company is unsuccessful in obtaining future funding needed to continue its research and development. These are customary risks for a development stage pharmaceutical Company and are less acute than for a Company with a less advanced product. Nevertheless, there can be no assurance that the Company will be able to complete its trials of the MNA, that the trials will be successful, or that the product will ultimately reach commercialization.
Finance income, net, for the year ended December 31, 2024, was $25,386 compared to a net finance expense of $584,820 for the year ended December 31, 2023. Finance income for the year ended December 31, 2024, is primarily related to interest income earned on short-term money market investments of $104,411, offset by interest expense of $79,025 on convertible notes. Finance expense for the year ended December 31, 2023 is primarily related to interest and accretion expense on convertible notes of $823,337 and dividend expense of $431,586, partially offset by a gain on adjustment to the fair value of the convertible promissory notes of $670,103.
Finance (income) expense, net
Liquidity and Capital Resources
We are a clinical stage development company and we currently do not earn any revenues from our preclinical programs and are therefore considered to be in the R&D stage. As required, the Company will continue to finance its operations through the sale of equity or pursue non-dilutive funding sources available to the Company in the future. The continuation of our R&D activities is dependent on our ability to obtain financing.
The financial statements and this MD&A have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.
The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. In addition to the SEPA (as defined below), management believes that the Company has access to additional capital resources through public and/or private equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, if the Company is unable to secure additional capital, it may be required to take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These measures could cause significant delays or entirely prevent the Company's continued efforts to commercialize its current or future products, which are critical to the realization of its business plan and the future operations of the Company. This uncertainty, along with the Company's history of losses, indicates that there is substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued. The financial statements and this MD&A do not include any adjustments to the amounts and classification of assets and liabilities that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
As of March 31, 2025, the Company had cash and cash equivalents of $3,982,430 compared to cash and cash equivalents of $4,164,323 as of December 31, 2024. During the three months ended March 31, 2025, the Company received net proceeds of $3,784,101 from the issuance of common shares and warrants in connection with the Regulation A Offering. As of March 31, 2025, the Company has an accumulated deficit of $34,006,311 and net loss and comprehensive loss of $5,102,408 for the three months ended March 31, 2025. For the three months ended March 31, 2024 the Company had net loss and comprehensive loss of $1,707,358. The Company has a working capital surplus of $1,751,860 as of March 31, 2025.
On March 10, 2025, the Company closed the Regulation A Offering of 1,490,000 Regulation A Offering Units, with each Regulation A Offering Units consisting of one common share and one Regulation A Warrant. Total gross proceeds from the Regulation A Offering were $4,172,000. As of March 31, 2025, 5,000 of the 1,490,000 Regulation A Warrants have been exercised for cash, for proceeds to the Company of $14,000.
The Company does not expect to generate positive cash flow from operations for the foreseeable future due to additional R&D expenses, including expenses related to drug discovery, preclinical testing, clinical trials, chemistry, manufacturing and controls and operating expenses associated with supporting these activities. It is expected that negative cash flow from operations will continue until such time, if ever, that we receive regulatory approval to commercialize any of our products under development and/or we receive royalty or milestone revenue from any such products that exceeds our expenses.
Standby Equity Purchase Agreement
On February 10, 2025, the Company entered into the SEPA with YA II PN, LTD (the "Investor" or “Yorkville”), an investment fund managed by Yorkville Advisors Global, LP. Pursuant to the SEPA, the Company has the option, at its sole discretion, to sell up to $15,000,000 of the Company's common shares to the Investor at any time during the 36-months following the date of the SEPA.
The Investor's obligation to purchase the common shares is subject to a number of conditions, including that the Company file a registration statement with the SEC registering the resale of the common shares issuable thereunder, and that the registration statement is declared effective by the SEC.
The total number of common shares issuable under the terms of the SEPA is limited to a number equivalent to 19.99% of the outstanding common shares, as of the date of the SEPA unless certain pricing conditions are met, which could have the effect of limiting the total proceeds made available to the Company under the SEPA. The issuance of common shares under the SEPA is subject to further limitations, including that the common shares beneficially owned by the Investor and its affiliates at any one time will not exceed 4.99% of the then-outstanding common shares.
Common shares issued and sold to the Investor under the SEPA will be priced at 97% of the market price (as defined in the SEPA) of the common shares during a specified three-day pricing period. The Company reserves the right to set a minimum acceptable price for the common share issuances.
Cash flows
| For the three months ended March 31, | |||||||
| 2025 $ |
2024 $ |
||||||
| Cash used in operating activities | (3,940,994 | ) | (1,176,933 | ) | |||
| Cash provided by financing activities | 3,759,101 | - | |||||
| Net change in cash during the year | (181,893 | ) | (1,176,933 | ) | |||
| Cash, beginning of the year | 4,164,323 | 1,719,338 | |||||
| Cash, end of the year | 3,982,430 | 542,405 | |||||
Cash flows used in operating activities
Cash flows used in operating activities for the three months ended March 31, 2025 were $3,940,994 compared to cash flows used in operating activities of $1,176,933 for the three months ended March 31, 2024. The increase is primarily due to increased spending on research and development activities for our SKNJCT-003 study and trials and increased general and administrative expenses related to our recent initial public offering and resulting U.S. reporting obligations.
Cash flows provided by financing activities
Cash flows provided by financing activities for the three months ended March 31, 2025, were $3,759,101 due to proceeds from issuance of common shares and warrants, net of offering costs from the Regulation A Offering. The Company did not have any financing activities for the three months ended March 31, 2024.
| For the year ended December 31, | |||||||
| 2024 $ |
2023 $ |
||||||
| Cash used in operating activities | (10,247,231 | ) | (4,158,264 | ) | |||
| Cash provided by financing activities | 12,692,216 | 5,609,950 | |||||
| Net change in cash during the year | 2,444,985 | 1,451,686 | |||||
| Cash, beginning of the year | 1,719,338 | 267,652 | |||||
| Cash, end of the year | 4,164,323 | 1,719,338 | |||||
Cash flows used in operating activities
Cash flows used in operating activities for the year ended December 31, 2024 were $10,247,231 compared to cash flows used in operating activities of $4,158,264 for the year ended December 31, 2023. The increase is primarily due to increased spending on research and development and general and administrative expenses.
Cash flows provided by financing activities
Cash flows provide by financing activities for the year ended December 31, 2024, were $12,692,216 compared to cash flows provided by financing activities of $5,609,950 for the year ended December 31, 2023. The increase is primarily due to increased proceeds from the issuance of convertible notes and proceeds from the issuance of common shares during the year ended December 31, 2024, compared to proceeds from concurrent financing during the year ended December 31, 2023.
Contractual Obligations
We have no significant contractual arrangements other than those noted in our financial statements.
Off-Balance Sheet Arrangements
During the periods presented, we have not entered into any off-balance sheet arrangements.
Critical Accounting Policies
Critical Accounting Policies and Estimates
We periodically review our financial reporting and disclosure practices and accounting policies to ensure that they provide accurate and transparent information relative to the current economic and business environment. As part of this process, we have reviewed our selection, application and communication of critical accounting policies and financial disclosures. Management has discussed the development and selection of the critical accounting policies with our audit committee, and our audit committee has reviewed the disclosure relating to critical accounting policies in this MD&A.
Significant accounting judgments and estimates
Management's assessment of our ability to continue as a going concern involves making a judgment, at a particular point in time, about inherently uncertain future outcomes and events or conditions. Please see the "Liquidity and Capital Resources" section in this document for a discussion of the factors considered by management in arriving at its assessment.
Other important accounting policies and estimates made by management are the assumptions used in determining the valuation of stock-based compensation.
Research and development
All research and development costs are expensed as incurred. Research and development costs consist primarily of salaries, employee benefits, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services). Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites, and others. Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones. For the latter, the Company accrues the expenses as goods or services are used or rendered. Clinical trial site costs related to patient enrollment are accrued as patients enter and progress through the trial. Upfront costs, such as costs associated with setting up clinical trial sites for participation in the trials, are expensed immediately once incurred as research and development expenses.
Stock-based compensation
The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company records the expense for stock-based compensation awards subject to vesting over the requisite service period using an estimate of the number of options that will eventually vest. The Company estimates the fair value of stock option grants and shares purchasable under the Company's Equity Incentive Plan (the "Plan") using the Black- Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment. The Company accounts for forfeitures as they occur. All stock-based compensation costs are recorded in the statements of operations and comprehensive loss based upon the underlying employees or non-employee's roles within the Company.
Updated share information
As of March 31, 2025, we had 13,417,561 Common Shares issued and outstanding. In addition, there were 1,185,000 Common Shares issuable upon the exercise of outstanding stock options and 2,603,260 Common Shares issuable upon the exercise of two outstanding classes of warrants.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements.
OUR BUSINESS
Our company (formerly, Interactive Capital Partners Corporation) was incorporated pursuant to the Business Corporations Act (Ontario) on April 30, 2008 under the name Interactive Capital Partners Corporation. On September 29, 2023, we completed the Business Combination with SkinJect, Inc., a Pennsylvania corporation, pursuant to a business combination agreement dated May 12, 2023, as amended, among the Company, SkinJect and RBx. The Business Combination resulted in a reverse takeover of the Company by the former shareholders of SkinJect, with SkinJect becoming a wholly owned operating subsidiary of the Company, and the Company being renamed "Medicus Pharma Ltd."
On October 11, 2023, our common shares commenced trading on the TSXV under the symbol "MDCX." On November 15, 2024, we completed our initial public offering in the United States and our common shares and Public Warrants began trading on the Nasdaq under the symbols "MDCX" and "MDCXW", respectively. Effective on February 21, 2025, the Company's common shares were voluntarily delisted from the TSXV. The common shares continue to be listed on Nasdaq.
We are a biotech/life sciences company focused on accelerating the clinical development programs of novel and disruptive therapeutic assets. Currently, we are developing one product, SkinJectTM, with an indication for basal cell carcinoma.
Our principal purpose is to advance the clinical development program of the Product, while opportunistically identifying, evaluating, and acquiring accretive assets, properties or businesses. Through our wholly owned subsidiary, SkinJect, we focus on the development of our in-licensed drug device combination product using novel dissolvable microneedle arrays for the treatment of non-melanoma skin cancers. Our combination product candidate is a doxorubicin tip-loaded D-MNA filed with the FDA under an Investigational New Drug Application and is regulated by the Center for Drug Evaluation and Registration (CDER), Oncology Division.
The business conducted by the Company prior to the Business Combination was undertaken by SkinJect. References to the Company in this section as of a date prior to the completion of the Business Combination relate to the business undertakings of SkinJect.
In 2016, SkinJect licensed certain intellectual property from the University of Pittsburgh. During 2016 and 2017, SkinJect developed validated manufacturing methods for the manufacture of the microneedle arrays covered by the licensed patents. In 2017 and 2018, SkinJect completed pre-clinical animal studies and related verification analyses.
In 2018, SkinJect prepared an IND application and submitted it to the FDA for the conduct of a dose escalation study in human subjects ("Phase 1 study"). The FDA issued a Study May Proceed letter in November 2018.The study was completed in March 2021 and the clinical study report showed that the study met its primary objective of safety and tolerability. The investigational product, D-MNA was found to be well-tolerated across all dose levels in all thirteen (13) participants enrolled in the study, with no dose-limiting toxicities (DLTs), serious adverse events (SAE), or study discontinuations. Furthermore, there were no systemic effects or clinically significant abnormal findings in laboratory parameters, vital signs, ECGs, and physical examinations. The clinical study report (CSR) also describes the efficacy of the investigational product, D-MNA, with 6 participants experiencing complete responses. The complete response is defined as the disappearance of basal cell carcinoma ("BCC") histologically in the final excision at the end of study visit. The participants profile, demonstrating complete responses, was diverse and all participants (6/6) had nodular subtype of BCC.
On January 3, 2024, we announced that we had submitted to the FDA a Phase 2 Investigational New Drug clinical protocol for the Product, which provides the Company with flexibility to potentially accelerate to a Phase 2 pivotal trial, subject to, among other things, sufficient capital resources to do so, or to decelerate its clinical trial to a Phase 2A trial.
Basal Cell Carcinoma Market Overview and Current Therapies
Basal cell carcinoma is a type of skin cancer that begins in the basal layer of the epidermis. It is the most common type of skin cancer.
Basal cell carcinoma often appears as a slightly transparent bump on the skin, though it can take other forms. Basal cell carcinoma occurs most often on areas of the skin that are exposed to the sun, such as your head and neck. Most basal cell carcinomas are thought to be caused by "long-term exposure to ultraviolet (UV) radiation from sunlight" (Mayo Clinic). Additional factors that increase your risk of developing basal cell cancer include radiation therapy, fair skin, increasing age, family history and immune suppressing drugs.
Basal cell carcinomas account for approximately 80 percent of all non-melanoma skin cancers worldwide. (The Johns Hopkins University). Based on studies of populations in the United States, 40-50% of Americans who live to age 65 will experience BCC or squamous cell carcinoma at least once.
More than 5 million cases of basal cell carcinoma are diagnosed in the United States each year. Untreated BCCs can become locally invasive, grow wide and deep into the skin and destroy skin, tissue and bone.
The most common treatment for basal cell carcinoma in the United States is surgical removal. Surgery is the standard treatment for most BCC patients, either standard excision or Mohs Micrographic surgery. The treatment of basal cell carcinoma by a surgical procedure can result in high costs and clearly visible scarring.
Basal cell carcinoma is the most common cancer in humans, with an estimated annual incidence in the United States of 5.4 million cases (American Cancer Society). BCC arises from the basal cells in the epidermis and is associated with both chronic and intermittent acute UV exposure. The development of basal cell carcinoma is thought to be attributable, in part, to a deregulation of the Hedgehog signaling pathway. The Hedgehog pathway is involved in stem cell maintenance, regulation of cell proliferation and differentiation, and carcinogenesis. Unregulated activation has been implicated in the development of multiple cancers, including BCC (Gupta et. al. 2010). Chemotherapeutic inhibition of Hedgehog signaling has been demonstrated to be effective against advanced BCC (Soura et. al. 2015).
The current standard of care for localized BCC is surgical, either via standard excision or Mohs micrographic surgery; but it carries risks, including bleeding, scarring, and infection. Surgical treatment may not be desirable or indicated for all patients, resulting in a demand for more non-surgical treatment options.
Commonly used topical treatments for BCC currently include: imiquimod; 5-fluorouracil; and tazarotene.
Imiquimod works primarily by acting as an agonist of toll-like receptors 7 and 8 (Schon and Schon, 2007) leading to activation of nuclear factor-kappa B. This activation results in the induction of pro-inflammatory cytokines and chemokines, ultimately resulting in a T-cell-mediated anti-tumor immune response (Schon and Schon, 2007). Imiquimod has demonstrated efficacy in the treatment of both superficial and nodular BCC; however, imiquimod's efficacy is significantly inferior to surgery, with 84% of imiquimod-treated patients remaining tumor-free after 3-years, compared to 98% of surgically treated patients (Bath-Hextall et. al. 2014).
5-Fluorouracil is an antimetabolite that blocks DNA replication by inhibiting thymidylate synthase (Nakamura et. al. 2014). Three-year tumor-free status following treatment with fluorouracil is poorer than with imiquimod, with 68% of patients remaining tumor-free after 3-years (Roozeboom et. al. 2016).
Tazarotene's mechanism-of-action as an anti-neoplastic agent is not fully understood, but it is believed to be related to its ability to cause caspase-dependent apoptosis (Wu et. al. 2014). Tazarotene is a less-promising non-surgical alternative, with only 30.5% of patients remaining tumor-free at 3 years (Bianchi et. al. 2004).
Regulatory Environment
The production and manufacture of the Product and its research and development activities are subject to regulation for safety, efficacy and ethics by various governmental authorities in the United States. Although the present plan is to focus research and development in the United States, we might in the future expand into Canada and the European Union, in which case our activities will also be governed by regulatory authorities in these jurisdictions. These authorities, in the United States, Canada and the rest of the world, regulate research, development, testing, manufacturing, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing and import/export of pharmaceutical products, among other things. In the United States drugs and biological products are subject to regulation by the FDA and in the European Union activities are regulated by the applicable competent authority within each individual country and by the European Medicines Agency. In Canada, these activities are primarily regulated by the Food and Drug Act and the rules and regulations thereunder, which are enforced by the Therapeutic Products Directorate of Health Canada.
Drug approval laws in the United States, Canada and Europe generally require licensing of manufacturing facilities, carefully controlled research and testing of products, government review and approval of results prior to marketing and sale of drugs and drug delivery products. In addition, they require adherence to best practices as defined by the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use, as well as national guidelines. The process for pharmaceutical development and approval are subject to inherent risks, described in "Risk Factors."
The principal steps generally required for approval of drug and drug delivery products in the United States, Canada and Europe are described below.
Preclinical Toxicology Studies
Preclinical studies are conducted in vitro and in animals to evaluate toxicokinetics and pharmacokinetics to provide evidence of the safety and bioavailability of the product prior to its administration to humans in clinical studies and throughout development. Such studies compliant with FDA guidelines have been completed.
Human Testing
The process of conducting clinical trials with a new drug product generally cannot begin until a company has submitted to the appropriate regulatory authorities an application to do so and the required number of days have lapsed without objection from the applicable regulatory authority. (In certain jurisdictions, a no objection letter or approval may be required before the clinical trial can proceed). In the United States, this application is called an investigational new drug study, or "IND", and in Canada and most European countries, a clinical trial application, or "CTA."
For the United States, the sponsor of the study must submit the results of the non-clinical tests, manufacturing information, analytical data and available clinical data or literature, within the IND, to the FDA. Some information may be omitted from the IND in instances where prior FDA findings of safety or efficacy of a drug product are being relied upon. Even once the IND is submitted, non-clinical testing may continue to occur. An IND becomes effective automatically 30 days after receipt of the document by the FDA, unless within that time the FDA raises concerns or questions, in which case a clinical hold may be put in place until the concerns are adequately addressed by the study sponsor with the FDA.
Two key factors influencing the rate of progression of clinical trials are the rate at which patients can be enrolled to participate in the research program and whether effective treatments are currently available for the disease that the drug is intended to treat. Patient enrollment is largely dependent upon the incidence and severity of the disease, the treatments available and the potential side effects of the drug to be tested and any restrictions for enrolment that may be imposed by regulatory agencies. For further information see "Risk Factors."
Phase 1 Clinical Trials
Phase 1 clinical trials are typically conducted, on a small number of individuals (healthy volunteers or patients), to determine safety, dose limiting toxicities, tolerability, pharmacokinetics and to determine dose ranging for Phase 2 clinical trials in humans.
Phase 2 Clinical Trials
Phase 2 clinical trials typically involve a larger patient population than is required for Phase 1 and are conducted to evaluate the safety and efficacy of a drug candidate in patients having the disease for which the drug is indicated. This phase also serves to identify possible common short-term side effects and risks.
Phase 3 Clinical Trials
Phase 3 clinical trials typically involve tests in a much larger population of patients suffering from the targeted condition or disease. These studies involve controlled and/or uncontrolled testing in an expanded patient population (several hundred to several thousand patients) at geographically dispersed test sites to establish clinical safety and effectiveness. These trials also generate information from which the overall risk-benefit relationship relating to the drug can be determined.
Marketing Application
Upon successful completion of Phase 3 clinical trials, the sponsor company assembles all the non-clinical, clinical and manufacturing data and submits a marketing application to the applicable regulatory authority for their review in order to obtain approval to sell the drug.
Before the applicable regulatory authority approves the marketing application, they will initiate an inspection of the facility or facilities where the product is manufactured. Products will not be approved unless there is compliance with Good Manufacturing Practices, or "GMP." Approval will occur if the inspection is satisfactory and the marketing application contains data that provides substantial evidence that the drug is safe and effective in the studied indication. In addition to manufacturing inspections, the regulatory authority will typically inspect one or more clinical sites to assure compliance with Good Clinical Practices.
The testing and approval process for a new drug candidate requires substantial time, effort and financial resources, and may take several years to complete. Data obtained from non-clinical and clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. Approval may not be granted on a timely basis, or at all.
Even if a regulatory authority approves a product candidate, the relevant authority may limit the approved indications for use, require specific contraindications, warnings or precautions be included in the product label, including a black box warning, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug's safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms. For example, the FDA may require a Risk Evaluation and Mitigation Strategy ("REMS"), (also known as a Risk Management Plan ("RMP") in Europe) as a condition of, or following, approval to mitigate any identified or suspected serious risks and ensure safe use of the drug. The REMS or RMP could include medication guides, physician communication plans, assessment plans, and elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools. A REMS or RMP could materially affect the potential market and profitability of the product. A regulatory authority may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional label claims, are subject to further testing requirements, notification, and regulatory authority review and approval. Further, should new safety information arise, additional testing, product labeling or regulatory notification may be required.
Regulation of Combination Products in the United States
Certain products may be comprised of components, such as drug components and device components that would normally be subject to different regulatory frameworks by the FDA and frequently regulated by different centers at the FDA. These products are known as combination products. Under the FDCA, the FDA is charged with assigning a center with primary jurisdiction, or a lead center, for review of a combination product. The determination of which center will be the lead center is based on the "primary mode of action" of the combination product. Thus, if the primary mode of action of a drug-device combination product is attributable to the drug product, the FDA center responsible for premarket review of the drug product would have primary jurisdiction for the combination product. The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to the regulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developing guidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review of combination products where the jurisdiction is unclear or in dispute.
A combination product with a primary mode of action attributable to the drug component generally would be reviewed and approved pursuant to the drug approval processes set forth in the FDCA. In reviewing the new drug application for such a product, however, FDA reviewers could consult with their counterparts in the device center to ensure that the device component of the combination product met applicable requirements regarding safety, effectiveness, durability and performance. In addition, under FDA regulations, combination products are subject to current GMP requirements applicable to both drugs and devices, including the Quality System Regulations applicable to medical devices.
Healthcare Laws and Regulations
Coverage and Reimbursement
In the United States, Canada, and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Thus, even if a product candidate is approved, sales of the product will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, the product. In the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.
In the United States, Medicare tends to have a greater role than private insurers in determining reimbursement for the treatment of conditions, such as basal cell cancer, that disproportionately affect patients over the age of 65.
Applicable Laws in the United States
If we obtain FDA approval for the Product and begin commercializing the Product in the United States, our operations may be directly, or indirectly through our future potential customers and third-party payors, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act ("FCA"), and data privacy and physician sunshine laws and regulations. These laws or their relevant foreign counterparts may impact, among other things, our proposed sales, marketing, and education programs and its relationships with healthcare providers, physicians and other parties through which we market, sell and distribute its products for which it obtains marketing approval. In addition, we may be subject to patient privacy regulation by the federal government and the states in the United States as well as other jurisdictions. The laws that may affect our ability to operate include:
• the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual, or the purchase, lease, order, arrangement, or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The term remuneration has been interpreted broadly to include anything of value. Further, courts have found that if "one purpose" of remuneration is to induce referrals, the federal Anti-Kickback Statute is violated. Violations are subject to significant civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs. In addition, a claim submitted for payment to any federal healthcare program that includes items or services that were made as a result of a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution;
• the federal civil and criminal false claims laws, including the FCA, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs; knowingly making, using, or causing to be made or used, a false record or statement material to a false, fictitious or fraudulent claim or an obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. A claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. The FCA also permits a private individual acting as a "whistleblower" to bring qui tam actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery or settlement. When an entity is determined to have violated the FCA, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;
• the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false fictitious or fraudulent statement or entry in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA fraud provisions without actual knowledge of the statute or specific intent to violate it;
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or "HITECH", and their respective implementing regulations, which impose, among other things, certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their respective "business associates," those independent contractors or agents of covered entities that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions. In addition, there may be additional federal, state and non-U.S. laws, including but not limited to: (i) General Data Protection Regulation (European Union); (ii) the Personal Information Protection and Electronic Documents Act (Canada); and (iii) Personal Information Protection Act (Canada), which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;
• the federal Physician Payments Sunshine Act, created under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, and its implementing regulations, which require manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to the CMS, information related to direct or indirect payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain non-physician providers such as physician assistants and nurse practitioners;
• federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and
• analogous U.S. state, local and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers and may be broader in scope than their federal equivalents; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and other relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing; state and local laws that require the registration of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information, some of which may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018) in certain circumstances, and may differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Healthcare Reform
The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of products have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company's revenue generated from the sale of any approved products. Coverage policies and third-party payor reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
There have been a number of proposals during the last few years regarding the pricing of pharmaceutical products, limiting coverage and the amount of reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States. For example, in March 2010, the U.S. Congress enacted the ACA, which, among other things, includes contains to the coverage and payment for products under government health care programs. Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and there are likely to be additional challenges and amendments to the ACA in the future. For example, various portions of the ACA are currently undergoing legal and constitutional challenges in the U.S. Supreme Court. Additionally, the former Trump administration has issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA.
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory150 initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their products. Such scrutiny has resulted in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. Several regulations have also been proposed partly in response to several executive orders issued by President Trump related to prescription drug pricing that seek to implement several of the administration's proposals. While some of these and other measures may require additional authorization to become effective, and the current Biden administration may reverse or otherwise change these measures, Congress has indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.
The Microneedle Array Solution and Doxorubicin Hydrochloride
Why Doxorubicin Hydrochloride
The binding of doxorubicin to cellular membranes may affect a variety of cellular functions. Enzymatic electron reduction of doxorubicin by a variety of oxidases, reductases and dehydrogenases generates highly reactive species including the hydroxyl free radical (• OH). Cells treated with doxorubicin have been shown to manifest the characteristic morphologic changes associated with apoptosis or programmed cell death. Doxorubicin-induced apoptosis may be an integral component of the cellular mechanism of action relating to therapeutic effects, toxicities, or both. Doxorubicin is a particularly well-suited chemotherapeutic drug for the chemo-immunization strategy, because it creates an immunogenic "good death" for tumor cells (Galluzzi et. al. 2012) and (Storkus and Falo Jr 2007). As shown in the figure below, doxorubicin chemotherapy has been shown to result in innate immune activation, including the attraction and activation of antigen presenting cells, and a cell death process that facilitates the activation of antigen presenting cells and their internalization and processing of dying tumor cell derivatives through underlying mechanisms that include ATP and HMGB1 release, and calreticulin exposure (Zitvogel et al 2010 and Obeid et. al.) 2007). The doxorubicin-containing microneedle arrays ("D-MNA") in development by us utilizes this immunogenic apoptosis by applying very low doses of doxorubicin via the D-MNA to basal cell lesions. Doxorubicin is not currently approved for the treatment of BCC.
Utility of Microneedle Arrays to Deliver Doxorubicin to Basal Cell Lesions
The D-MNA is a dissolvable, tip-loaded 15 x 15 mm microneedle array delivering doxorubicin to the tumor microenvironment for non-melanoma skin cancer therapy. The arrays are "pressed" into the skin where an appropriate-size lesion is growing and left on the lesion site for up to 30 minutes, allowing the microneedles to penetrate the skin, dissolve, and deliver defined quantities of doxorubicin to the lesion. The micro-needle array's main excipient is buffered carboxymethyl cellulose. Doses of 25 µg, 50 µg, 100 µg, or 200 µg of doxorubicin hydrochloride can be contained in the array's 400 microneedles. A placebo array without doxorubicin hydrochloride but alike in every other respect ("P-MNA") has been fabricated for clinical testing and "blanks" for analytical testing.
Figure 1. Activation of Calreticulin Pathway and Immunogenic Good Death
The goal of our program is to demonstrate the D-MNA as a more robust alternative to the currently available non-surgical, and in many cases, surgical treatments for BCC.
Preclinical Proof of Efficacy Studies
The program's therapeutic strategy relies on highly localized delivery of doxorubicin to the topically accessible tumor microenvironment. Doxorubicin delivered by the MNAs described in University of Pittsburgh's IND #122448 had shown efficacy in causing local, acute tumor cell death in the mouse melanoma model at doses that would otherwise be considered safe (e.g., 25 µg), but sub-therapeutic if delivered via a systemic route of administration. A typical systemic dose of doxorubicin is 60-75 micrograms/m2 and a typical adult cancer patient is 1.73 m2, resulting in a dose of 104 to 130 milligrams (approximately 4,000 times higher than the 25 µg delivered by the MNA).
MNAs delivering doxorubicin also demonstrated efficacy in a murine squamous cell carcinoma model, with 100% survival in MNA-Doxorubicin group versus 0% survival in MNA-Blank group (Friedman B, et al, 2017). Survival advantage persisted with 40% of MNA-Doxorubicin-treated mice alive at 40 days post-inoculation. As a result, we believe BCC is a rational target for chemo-immunotherapy using D-MNAs.
The University of Pittsburgh research under IND #122448 was conducted on mice in groups ranging in size from six mice to 45 mice using the same D-MNAs that we are developing. These studies were not powered to demonstrate statistical significance.
Manufacturing Processes and Critical to Quality Parameters
Overview
For BCC, the principal mode of action of the D-MNA depends on doxorubicin being delivered to this basal layer space, disrupting the affected basal cells, and recruiting immune cells to eradicate the lesion. The 400 microneedles in the D-MNA must therefore be durable enough to penetrate the stratum corneum and upper layers of the epidermis, but also dissolve quickly enough to deliver sufficient doxorubicin to the site during the 30 minute application. Other more traditional parameters of biopharmaceutics also apply, such as consistency of dose between arrays, made more complex than oral or other dosage forms, by the molding and centrifugation process for the arrays. The important biopharmaceutic considerations for the efficacy of the array therefore include the following:
• Fidelity of dose to label claim
• Needle strength/hardness
• Homogeneous distribution of drug throughout the array
• Consistency of dose between arrays
• Dissolution of the microneedles sufficient to deliver the drug payload
These factors can affect the ability of a dissolvable, tip-loaded microneedle array to perform as expected in human clinical studies. We have taken the following steps to ensure these factors are properly controlled during manufacturing.
Factors Affecting Ability of MNA to Perform Clinically
| Factor | Measurement | |
| Fidelity of dose to label claim | Quantitative testing of the array samples by a validated HPLC method | |
| Homogeneous distribution of drug throughout the array | Visual inspection for "hot spots" | |
| Consistency of dose between arrays | Quantitative testing for content uniformity of the array samples by a validated HPLC method | |
| Needle strength/hardness | Desiccation measured by loss on drying to approximately 5%. | |
| Dissolution of the microneedles sufficient to deliver the drug payload | Demonstrated in vitro, ex vivo, and in vivo. | |
| Doxorubicin stability | pH measurement of the solution prior to carboxymethyl cellulose ("CMC") addition; follow-up analytical testing for impurities | |
| MNA = dissolvable microneedle array, HPLC = high power liquid chromatography, UV = ultra-violet, CMC = carboxymethyl cellulose. | ||
Manufacturers of D-MNA Components
| API/Excipient | Manufacturer/Lot Number | |
| Doxorubicin HCl | Gemini PharmChem, Mannheim, GmbH, batch no. 070520 |
| API/Excipient | Manufacturer/Lot Number | |
| Citric acid anhydrous | Fischer Scientific/185791 | |
| Sodium phosphate dibasic anhydrous | Fischer Scientific/175060 | |
| Trehalose dihydrate | Pfanstiehl/37108A | |
| Carboxymethyl cellulose | Dow distr. By aic, Inc./F294F88017 Spectrum Chemical Mfg. Inc./ 2JA0070 |
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| USP purified water | Millipore/F7PA35615 |
Composition of the Drug Product
Each array contains 400 microneedles with a total tip volume of 9.6 µL which are evenly filled with 9.6 µL of doxorubicin gel of the following composition. The doses in the headline refer to the base of doxorubicin. The current formulation contains an overage of 5% of drug substance.
Controls of Critical Steps and Intermediates
The following are fundamental to the production of arrays according to GFE Protocol P171016-1-R3.
• Preparation: Assembly and gel formulation.
• Deposition 1 (Tip Loading): Deposition of the formulation containing active doxorubicin and excipients.
• Deposition 2 (Backing Plate): Deposition of formulation containing only excipients to create the backing plate to the needle structure.
• Drying: Centrifugation of the array under controlled temperature and humidity conditions until moisture is removed from the formulation.
• Demolding, Cutting, Desiccation, and Storage: Removal of the arrays from the molds, trimming, and storage in a desiccator box in a controlled refrigerated environment for 72-96 hours.
Critical to quality parameters include:
• Dissolution and homogeneity of all materials during mixing.
• Centrifuge rpm and quality/degree of tip loading.
• Dilution and viscosity of gels relating to accurate, consistent deposition.
• Duration and speed of drying steps affecting water content and flatness of arrays.
• Temperature maintained (2-8 C) within centrifuge with impact on drying time and on doxorubicin stability.
• Refrigeration of arrays once fabricated.
• Post-fabrication, moisture content of arrays reduced to 5%, as measured by loss on drying.
In-Process Controls: D-MNA; P-MNA
| In-Process Controls (Engineering) | Limit | |
| Master mold fabrication via milling process | CAD/CAM of all suitable material rendering required geometry for microneedles | |
| Production molds fabricated from polydimethyl siloxane | Spun in the same centrifuge to fabricate the arrays such that forces and angles used to make production mold mirror those used to fabricate the arrays. Production molds inspected after every production cycle to ensure integrity of the needle forms-Protocol P171016-1 R3 governs this process. | |
| Fabrication of each fixture necessary for array production | Protocol P171016-1 R3 provides these parameters |
| In-Process Controls (Formulation) | Limit | |
| Dissolution of all materials in gel formulation | Visual inspection | |
| Viscosity of the gel | Verified by cone plate viscometer torque reading; Brookefield Viscometer DVII+ calibrated at every run | |
| pH of the gel | A pH of between 4.5 and 5.1 is sufficiently acidic. Follow procedure for dilution of gel, use of pH probe, and calculation (Determination of the pH of SkinJect Formulations) |
| In-Process Controls (Array Fabrication) | Limit | |
| Deposition and centrifugation. | Deposit approximately 0.5 ml per 2 x 5 production mold. The centrifuge is run for 30 minutes at 5,500 rpm at 15C. | |
| Doxorubicin stability | Temperature maintained within centrifuge at 15C that impacts drying. Refrigeration of arrays once fabricated at 2-8°C |
The flow chart, below, describes in more detail the critical steps and manufacturing parameters. A summary narrative of the process is provided on subsequent pages.
Figure 2. Manufacturing flow chart
Manufacturing Process Equipment
The equipment used to fabricate the arrays is listed in the table below:
Equipment Used to Fabricate Arrays
| Description | Supplier | Model/Part Number/Print | ||
| Centrifuge | Thermofisher | Sorvall Lynx 4000 | ||
| Rotor | Thermofisher | BioFlex HC (PN 75003000Q502807) | ||
| Rotor Bucket | Thermofisher | BioFlex HC (PN 75003000Q502807) | ||
| Bucket Lid with Gasket | Thermofisher | BioFlex HC Lid (PN 75007309Q502807) | ||
| Bucket Insert | GFE LLC | GFE Print "Lynx Square Tool Holder Rev R1" | ||
| Casting Mask | GFE LLC | GFE Print "Array Rev X6 Production Mold Frame" | ||
| Casting Sleeve | GFE LLC | GFE Print "Array Rev X6 MNA Master Sleeve Rev E0" | ||
| Production Mold | GFE LLC | GFE Print "Array Rev X6 Production Mold Rev E0" |
In an initial step, a master mold is fabricated by a milling process under CAD/CAM of a suitable material such as an acrylic or a metal alloy, rendering the required geometry for the microneedles. Once fabricated, the master mold is stored for future rendering of production molds as needed. The masters are wrapped in a clean-room towel for protection and stored in individually labeled rigid containers. The production molds are stored 4 per glass container labeled with revision codes. All materials are stored in a final secondary container labeled masters and production molds.
The master mold is then used to fabricate the production molds from polydimethyl siloxane (PDMS; (Slygard® 184, Dow Corning) (B)). This latter material is poured onto the master mold, positioned, and spun in the same centrifuge used to fabricate the arrays such that the forces and angles used to make the production mold mirror those used to fabricate, ultimately, the arrays. The production molds are inspected after every production cycle to ensure integrity of the needle forms. Protocol P171016-3 governs the process by which each production mold is cleaned of any material from a previous production run.
1. Preparation
The Lynx square tool holder assembly is disassembled into the components and all components are cleaned thoroughly with isopropyl alcohol. This includes the "square" bucket tool holder (black), the casting sleeves (white), and the leveling plates (green).
The square tool holder assembly is then reassembled. Each position in each holder is engraved with a number and letter. The number refers to the tool holder and the letter the position within the bucket. The cast leveling plates have similar markings and should align. Note the direction of arrow which identifies the spin direction of the centrifuge and orientation of the leveling plate.
The production molds and the mold masks, if used, should be sonicated in deionized water within an ultrasonic cleaner for 30 minutes at 35C and dried for 24 hours prior to use.
Pre-assemble the production molds by aligning the exterior step and pressing into the production mold.
The production mold is placed in the square tool holder assembly and pressed into the levelling plate. There is no orientation of the production mold.
The square tool holder is used for placement of completed assemblies into the buckets within the centrifuge and run at 2,000 rpm for 30 seconds. The purpose of this is to "seat" all components within the mold and levelling plate to a "home" position.
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2. Deposition #1 (Tip Loading) The entire square tool holder assembly is removed from each bucket within the centrifuge. Using the appropriate placebo or active formulation, the operator deposits a small quantity of gel within each cavity as shown in Figure 2. The deposition should be approximately 0.05 ml per array cavity in each 5 x 2 production mold in an evenly distributed manner such as 5 small dots shown in Figure 2. All formulation syringes remain capped when not in use. The square tool holder assembly is placed into the bucket using the bucket holder and covered using the bio-safe bucket covers with gaskets. Note that the centrifuge must be balanced. Either two buckets may be used or four buckets. |
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The covered buckets are centrifuged for a short period of time to "set" the doxorubicin gel into the needle tips. Deposition #1 is complete: the doxorubicin gel has been molded into the microneedles. Upon completion of this step, the square tool holder assembly is removed from the centrifuge buckets. (Figure 3). | |
| A square edge spatula is then used to remove the excess formulation on the production mold. This removes most of the excess formulation (Figure 4). The square bucket tool holder assembly is placed in the centrifuge buckets, covered with biosafe HC caps and gaskets. These are centrifuged for 30 minutes at 5,500 rpm at 15°C. This step assures that the formulation is pushed as deeply into the tips as possible and to promote drying, allowing space for the backing plate material to be deposited, overlaying the microneedles. |
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3. Deposition #2 (Backing "Plate" to each D-MNA)
After the full drying cycle of 30 minutes finishes, the bucket tool holder assembly is removed from the centrifuge buckets. Next, the placebo formulation, 0.25 mL per array, is deposited in each array cavity (10 cavities per production mold). The material is deposited as evenly as possible.
The square tool holder assembly is placed back into the centrifuge buckets and covered with biosafe lids with gaskets. The centrifuge is run for 30 minutes at 5,500 rpms at 20°C. Upon completion of the centrifugation, the caps are removed from the buckets.
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4. Drying Only the lids are removed from the buckets if not already completed, the tooling remains in the centrifuge. Drying is initiated at 4,000 rpms for 5.0 hours at 25°C. Flow valves for the desiccated air inlet are open. This ensures that the desiccation tube contains dry desiccant (dry is indicated by blue, purple indicates wet). The operator sets the flow for 20 psi at a minimum of 2 LPM. The operator ensures that the outlet of the centrifuge contains a new disposable HEPA filter with a 0.2 µm or smaller filter element to prevent room contamination of doxorubicin hydrochloride. Upon completion of the 5-hour drying cycle, the drying step is completed. 5. Demolding, Desiccation, and Storage All square tool holders are removed from the centrifuge buckets. Production molds are removed from the square tool holder (Figure 5). The operator places the freshly prepared arrays in a desiccator box in a controlled temperature refrigerator and allows the arrays to dry to a moisture content of approximately 5%. When fully dried, the arrays are then packaged and stored at 2-8°C. The fabrication cycle is complete. Subsequent cycles consisting of 80 microneedle arrays per run will follow the same process. |
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Packaging of Product
Starting from the innermost packaging, each array is contained in a foil-sealed PETG cube, which is contained in a 2" x 3" opaque, U-Line packet labeled with standard investigational drug text (Figure 6).
Figure 7. Left, the "cubes" holding each array (foil seal not shown); center, 2" x 3" packets holding the cubes; right, ziplock bag holding 4 packets of arrays
Four 2" x 3" packets are then stored in a Ziplock Uline 4" x 6" bag, which contains D-MNA's of the same dosage (25 µg, 50 µg, 100 µg, or 200 µg, or placebo). The outer Uline bag is sealed with a serialized security tape and carries standard investigation drug labeling (Figure 7) including a supplemental label containing the subject number.
Figure 8. 4" x 6" Ziplock Uline Bag with Serialized Security Strip
When the packaging of the entire production run (consisting typically of 200-240 arrays) has been completed, the product is then shipped on ice pack for the next phase, namely, sterilization, quality control testing, and release of the product.
Release Testing and Release of Product
The release of GMP-quality product to a clinical site is a highly regulated practice. Upon shipping of the arrays form GFE, LLC, the array manufacturer, which has already performed its own quality control, the entire shipment of arrays embarks on a multistage process, whose end goal is release of the investigational product to the clinical site (Figure 8).
Because the arrays are breaking the skin surface of human subjects, the FDA views the arrays as a type of parenteral product and therefore requires sterilization. On the day of completing the packaging of the arrays, GFE ships the fully packaged arrays by overnight courier to Ebeam Services who performs electron beam sterilization of the arrays. The arrays are then transported by a same-day courier service from Ebeam Services to Intertek Pharmaceutical Services ("Intertek"), who performs four functions:
1) places the majority of the arrays in stability storage;
2) ships a designated number of arrays to Nelson Laboratories for endotoxin and bioburden testing;
3) initiates analytical and other testing of the arrays within Intertek; and
4) ships a designated number of the arrays to Clinigen on quarantine for distribution to the clinical sites when the arrays have passed quality control/quality assurance.
Figure 9. Release procedures for Microneedle Arrays
Figure 10 indicates the types of tests performed for release of the product.
Figure 10. Certificate of Analysis qualifying the release of microneedle arrays
The essential settings for the phase appropriate, GMP-validated HPLC method for identity, assay/purity, related substances, and content uniformity testing performed by Intertek are provided below.
While Intertek is performing this testing, Nelson Laboratories is performing the following work to assess microbiological safety:
● Endotoxin testing: The Bacterial Endotoxin Test, or Lumulus Amebocyte Lysate ("LAL") Test, quantifies endotoxins that are part of the cell wall of gram-negative bacteria. LAL testing is performed on samples at T0 and subsequent stability timepoints.
● Sterility/bioburden: The arrays are also dissolved and the contents are cultured to determine if the sterilization eradicated all bacteria and yeasts from the samples. This test is performed on samples at T0 and subsequent stability timepoints.
All of the results of these tests and others such as moisture content and physical assessment are then collated and appended to a certificate of analysis ("COA"), which, when signed by qualified persons, allows the release of the product by Clinigen Clinical Services, who has stored the product under quarantine until they receive the signed COA authorizing release to the clinical site.
Preclinical Development of D-MNA
Preclinical Test Material
GMP-quality doxorubicin was used for all preclinical studies (murine local lymph node assay, rabbit irritation and pyrogenicity study, and Yucatan minipig local tolerance study). The nonclinical arrays were produced under non-GMP conditions; GMP conditions were not required for these studies. The manufacturing methods used to make the arrays for the non-clinical studies are identical to the methods used to make the GMP-quality arrays.
Preclinical PK and Safety Studies
The results of the preclinical studies indicate a reliable lack of systemic exposure when doxorubicin is delivered via MNA. Furthermore, minipig studies using doses of up to 200 µg per MNA showed no detectable levels of doxorubicin, measured by LC-MS/MS. Given these data, no systemic effects are anticipated from D-MNA application.
All preclinical studies of D-MNA were conducted by the University of Pittsburgh at the laboratory of Dr. Louis Falo.
University of Pittsburgh Experience
Doxorubicin delivered by the MNAs described in University of Pittsburgh's IND #122448 showed efficacy in causing local, acute tumor cell death in the mouse melanoma model at doses that would otherwise be considered safe (e.g., 25 µg), but sub-therapeutic if delivered via a systemic route of administration. A typical systemic dose of doxorubicin is 60-75 micrograms/m2 and a typical adult cancer patient is 1.73 m2, resulting in a dose of 104 to 130 milligrams (approximately 4,000 times higher than the 25 µg delivered by the MNA).
MNAs delivering doxorubicin also demonstrated efficacy in a murine squamous cell carcinoma model, with 100% survival in MNA-Doxorubicin group versus 0% survival in MNA-Blank group (Friedman B, et al, 2017). Survival advantage persisted with 40% of MNA-Doxorubicin-treated mice alive at 40 days post-inoculation. As a result, we believe BCC is a rational target for chemo-immunotherapy using D-MNAs.
The University of Pittsburgh research under IND #122448 was conducted on mice in groups ranging in size from six mice to 45 mice using the same D-MNAs that we are developing. These studies were not powered to demonstrate statistical significance.
Pharmacokinetics
Pharmacokinetics and Product Metabolism in Non-Human Animals
As shown by the data and Figure 10 below (courtesy of Louis Falo, M.D., Ph.D.), blood samples were collected from mice intravenously injected with 100 µg or 200 µg of doxorubicin or from mice receiving 200 µg D-MNA, after 5, 20, and 60 minutes. Doxorubicin content of the blood samples was measured by spectrofluorimetry and quantitated against a calibration curve. No detectable quantities of doxorubicin were observed in the mice receiving the 200 µg D-MNA; doxorubicin levels were detectable in the intravenously injected mice.
Figure 11.
In addition, Medicus obtained pharmacokinetic data during the Yucatan minipig local tolerance study (Study No. S15055). A total of 30 minipigs (15 males and 15 females) were randomized into five treatment groups. Groups of 3 males and 3 females were treated with a blank control array (Group 1), and three dose levels of D-MNA at 25, 50 and 200 µg/dose of doxorubicin hydrochloride (Groups 2 - 4), respectively. An intravenous ("IV") doxorubicin group consisting of 3 males and 3 females served as a reference control (Group 5). Dosing occurred on Days 1, 7 and 14 with either control array or test article (Groups 1-4), and Group 5 was dosed IV on these same study days. Each topical treatment was 30 minutes. The experimental design is provided in the table below.
Study Design of Minipig Local Tolerance Study
Group |
Treatment |
Treatment/Dose |
Number of Animals |
Dose Route/ Frequency |
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| Array | Dosage (µg/dose) | Male | Female | |||||||||
| 1 | Blank Control | 1 | 0 | 3 | 3 | MNA/Days 1, 7, 14 | ||||||
| 2 | D-MNA-low | 1 | 25 | 3 | 3 | |||||||
| 3 | D-MNA-mid | 1 | 50 | 3 | 3 | |||||||
| 4 | D-MNA-high | 1 | 200 | 3 | 3 | |||||||
| 5 | Reference Control | NA | 2 mg/kg (Doxorubicin Hydrocholoride) | 3 | 3 | IV/Days, 1, 7, 14 | ||||||
Note:
(1) Dosing volume for Group 5 was 1 ml/kg (doxorubicin hydrocholoride 2 mg/ml). NA = Not Applicable IV = Intravenous
Blood collections for toxicokinetic evaluation were conducted on Days 1 and 14 post dose administration (post-30 mins application for Groups 1-4) for all groups.
Excluding the group 5 control group, all array-treated groups showed doxorubicin plasma levels below the lower limit of quantitation ("LLOQ"), which for this LC-MS/MS method was 0.25 ng/ml. The study sponsor concluded that in the minipig model there was no measurable systemic exposure to doxorubicin when administered by the Sponsor's tip-loaded, dissolvable microneedle array.
Based on the mice and minipig pharmacokinetic data, we concluded that human systemic exposure to doxorubicin is unlikely through the application of the D-MNA.
Analytical Methods and Validation
A bioanalytical method was validated for the determination of doxorubicin in Yucatan minipig plasma ("K2EDTA") by liquid chromatography tandem mass spectrometry ("LC-MS/MS") at a dynamic range of 0.250 - 50.0 ng/ml. The analyte is light sensitive and exposure to direct light was minimized during extraction and analysis. Doxorubicin-13C,d3 was used as the internal standard.
A summary of the validation data for the analyte is presented in the table below.
Summary of Validation Data from LC-MS/MS Study
| Analyte | Doxorubicin | |
| Matrix | Yucatan Mini Pig Plasma (K2EDTA) | |
| Analytical Procedure | LC-MS/MS | |
| Assay Aliquot Volume | 50 µl | |
| Sample Preparation | Protein Precipitation | |
| Assay Range | 0.250 - 50.0 ng/ml | |
| Regression | Linear (1/x2) | |
| Selectivity | 6 of 6 lots within acceptance | ≤ 20% of mean LLOQ, ≥90% of individual lots free of interference |
| Injector Carryover | Not Significant | ≤20% of mean LLOQ |
| Validation Batch Acceptance (Acceptable/Total Primary Runs) | 4/4 | |
The toxicity of doxorubicin hydrochloride has previously been evaluated and reported in standard preclinical toxicology models. More important, the toxicity profile of parenteral doxorubicin in humans at doses cytotoxic to cancers has been well established and recounted in the Investigator Brochure for D-MNA Patch (September 4, 2018).
We have not conducted any formal safety pharmacology studies. However, selected parameters that are typically collected in CNS and respiratory safety pharmacology were collected in the form of clinical observations in the below-listed toxicology studies. In addition, electrocardiograms were recorded in a pivotal toxicology study in minipigs and were evaluated by a board-certified veterinary cardiologist.
We have completed three GLP-compliant toxicology studies:
1. D-MNA toxicity, local tolerance and toxicokinetics study in Yucatan minipigs (Study No. S15055)
2. Local lymph node immunotoxicology assay ("LLNA") in CBA/J mice (Study No. BRT Study 20170724)
3. Pyrogenicity/skin irritation study in New Zealand White ("NZW") rabbits (Study No. Study No. S15054), each of which was preceded by a pilot study using the same species and strain of animal.
The D-MNA was designed to penetrate human skin and dissolve into a skin cancer. Given the inherent differences in skin types between mammalian species, the pilot studies were necessary to ensure that the GLP study would provide for a valid safety assessment.
In total, three pilot studies were performed. For the GLP minipig study (SRC Study No. S15055), a pilot study demonstrated that it was technically feasible to administer D-MNA to Yucatan minipigs (SRC Study No. S15200). For the LLNA (BRT Study No. 20170725), the site of dosing is always the mouse's ears. It was immediately obvious that a novel approach would be needed since the D-MNA measures approximately 1.5 x 1.5 cm, as large or larger than the ears themselves. The study sponsor developed a liquid test article containing all the ingredients of the D-MNA with added DMSO, an approved LLNA solvent which helps the test article to penetrate the skin of the mouse ear. The pilot study demonstrated that this test article was non-irritating, and therefore, should perform a valid assessment of D-MNA's sensitization potential (BRT Study No. 20170724).
For the GLP rabbit study (SRC Study No. S15054), the pilot study demonstrated that the rabbit was not a valid model for testing D-MNA due to the lack of underlying musculoskeletal support which allows for the technician to apply pressure to the D-MNA during administration (SRC Study No. S15198). In addition, the presence of tightly spaced hair follicles appeared to at least partially inhibit penetration of the needles on the D-MNA. Accordingly, the Sponsor determined that a subcutaneous injection of modified D-MNA gel, with extra buffer added to make the D-MNA formulation syringeable, would provide a valid assessment of pyrogenicity. This same formulation was also used to test for skin irritation on abraded skin.
The data in the table below describe the results of studies conducted by SkinJect to elucidate the effects of delivering the gel used to make the array or the array itself to the skin.
Summary of Toxicology Studies (Phase 1 Study)
| Study | Start Date | Model | Dose | Frequency/ Duration |
Route of Admin |
Observations | Conclusions | |||||||
| Single Dose: Pilot study, SRC Study No. S15200 |
09-Aug-2017 | Yucatan Minipig 1 and 3- month old; 1M/1F n = 4 |
50 µg (3 mo. old) and 200 µg (1 month old) D-MNA | Day 1 | D-MNA | Trial 1: 30 min 1 male and 1 female 3 month old pig. Trial 2: 60 min 1 male and 1 female 1 month old pig. D-MNA was applied to 1- or 3-month old minipigs, removed after 60 or 30 min, respectively, and analyzed for concentrations of doxorubicin as well as visual inspection of D-MNAs post application. 3-month old minipigs were ultimately used due to ease of handling and blood draws. | D-MNA administration was acceptable. 3- month old minipigs chosen for technical reasons. And 60 minutes resulted in backing part of array being too soft. |
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| Repeat-Dose: SRC Study No. S15055 | 05-Feb-2018 | Yucatan Minipig 3-month old; 3M/3F per group n = 30 |
0, 25, 50 and 200 µg/dose D- MNA; 2 mg/kg IV doxorubicin (positive control group) | Days 1, 7, 14 | D-MNA, IV | 200 µg minipigs show red discoloration of epidermis at dosing site, which correlated with dermal inflammatory reactions seen microscopically with high frequency and severity in D-MNA treated groups. | D-MNA doses of up to 200 µg per week for three doses total were well tolerated. Tissue reactions were limited to inflammatory reactions of the dermis at the treated sites. |
| Study | Start Date | Model | Dose | Frequency/ Duration |
Route of Admin |
Observations | Conclusions | |||||||
| Local Tolerance: SRC Study No. S15055 (continued) |
- |
Group 5 (reference control IV doxorubicin) males and females both had numerically or significantly decreased WBC, red blood cell counts, hemoglobin, hematocrit, platelets (females only), neutrophils, lymphocytes, monocytes (females only), eosinophils and reticulocytes. Group 5 (reference control) males had significantly (p<0.05) elevated APTTD and fibrinogen on study Day16. Blood samples (plasma) analyses after array administration on dosing phase Day 1 and 14 showed that there was no detectable doxorubicin systemic exposure after topical application at doses up to 200 μg via D-MNA (lower limit of detection was 0.250 ng/mL). For the reference control animals, all animals had detectable concentrations of doxorubicin for up to 8 hours post dose administration. | D-MNA doses of up to 200 µg per week for three doses total were well tolerated. Tissue reactions were limited to inflammatory reactions of the dermis at the treated sites. |
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| Immunotoxi-cology (LLNA Pilot): BRT Study 20170724 | 21-Feb-2018 | CBA/J Mice 8- weeks old; 2F per group N =8 | 25, 50, 100, 200 µg/ear modified D- MNA gel + DMSO | Days 1-3 | Topical gel (both ears) | Modified D-MNA gel + DMSO was applied for three days and ear thickness and irritation were determined. | None had ≥ 25% increase of ear thickness or skin irritation. | |||||||
| Doxorubicin-Containing Microneedle Array (D-MNA) Constituents (Doxorubicin and Carboxymethyl Cellulose): Local Lymph Node Assay(LLNA) in Mice BRT Study 20170725 | 28-Feb-2018 | CBA/J Mice 8-weeks old; 5-8F per group N = 45 | 25, 50, 100, 200 µg/ear modified D- MNA gel + DMSO | Days 1-3 | Topical gel (both ears) | GLP. Standard test for sensitization potential of doxorubicin using modified D-MNA gel + DMSO. There were no clinical signs and no noteworthy body weight changes. Change in ear thickness was <25%. It was not possible to calculate an EC3 value. | Modified D-MNA gel + DMSO was not considered a sensitizer. |
| Study | Start Date | Model | Dose | Frequency/ Duration |
Route of Admin |
Observations | Conclusions | |||||||
| Other (Pilot Pyrogenicity & Skin Irritation): SRC Study No. S15198 | 09-Aug-2017 | New Zealand White rabbit 5-7 months old, 2M per group | 0, 50 µg D-MNA (Trial #1) 200 µg D-MNA (Trial #2) |
Day 1 | D-MNA | D-MNA was applied to shaved, depilated rabbits, removed after 30 minutes (Trial #1) or 60 min (Trial #2), and analyzed for concentrations of doxorubicin and well as visual inspection of D-MNAs post application. | The size and fragility of the rabbits resulted in inconsistent delivery profiles from the D-MNA and the Sponsor deemed the D-MNA unsuitable for use in the rabbit model. | |||||||
| Other (Pyrogenicity & Skin Irritation): SRC Study No. S15054 |
21-Dec-2017 | New Zealand White rabbit 6-7 months old, 3M per group n = 15 | 50, 100, 200 µg/dose modified D-MNA gel + buffer, vehicle, LPS positive control (pyrogenicity), SLS positive control (dermal irritation) | Days 1 and 8 | Day 1: SC injection of gel for pyro.; Day 8: gel for irritation | GLP. Day 1 - core body temperatures were measured at baseline and at post modified D-MNA gel administration at 30 min intervals until 4 hours, and then at 8 and 24 hours. Day 8 - Modified Draize scoring at baseline and at 1, 4, 24 and 48 hour post modified D-MNA gel administration. For the reference control (Group 5), animal body temperatures were above normal (104.8-107.7F/40.4-42.1C) for all animals during the first 4 hours after intravenously administered. | No noteworthy changes in body temperature or skin irritation for test article. Severe skin irritation was observed on all the test sites (SLS) in group 5. |
Murine Local Lymph Node Assay
The purpose of this study (BRT Study No. 20170725) was to evaluate the sensitization potential of doxorubicin, the active component of D-MNA, when applied at 4 concentrations (25, 50, 100, 200 µg) to both mouse ears, once daily for 3 consecutive days, in the LLNA.
There were no clinical observations or signs of erythema in the vehicle group or in test article-treated animals. No meaningful body weight loss was observed in any of the control or treatment groups.
Treatment-group mean ear thickness values did not increase by 25% or more at any tested concentration of the test or control articles. Thus, primary irritation would not be expected to have affected the LLNA stimulation indices.
It was not possible to calculate a threshold positive response (EC3 potency) in the current study since all test article stimulation index values were below 3, thus, the test article containing D-MNA constituents (doxorubicin in DMSO, CMC and excipients) was not considered a sensitizer under the conditions of this study.
Irritation and Pyrogenicity Study in the New Zealand Rabbit
Experience in a pilot trial (SRC Study No. S15198) using this rabbit species with the dissolvable, tip-loaded microneedle array of doxorubicin indicated that the microneedle array was not suitable for the NZW rabbits.
Consequently, SkinJect decided to test the pre-molding array formulation, i.e., the gel consisting of doxorubicin, carboxy methylcellulose, trehalose, citric acid, dibasic sodium phosphate, and deionized water, on the New Zealand rabbit in this GLP study (SRC Study No. S15054). This approach provided a method for testing all gel components for their pyrogenic and irritation potential. The objective of this study was to evaluate the test article (doxorubicin and excipients) for pyrogenicity following subcutaneous (SQ) injection, and for local skin irritation potential after topical dose administration of various dose concentrations on NZW rabbits.
A total of 15 male NZW rabbits were randomized into one of five treatment groups, including a vehicle control (Group 1), three dose levels of test article (Groups 2-4), and a reference control (Group 5). This study was conducted in two phases as follows:
Pyrogenicity Phase: Pyrogenicity of the test article was evaluated at dose levels of 50, 100 and 200 μg (0.3 ml/animal). On dosing phase Day 1, the vehicle or test article formulations were administered via SQ injection to the scapular area of each animal (Groups 1-4). Group 5 animals were intravenously administered lipopolysaccharide (LPS, 0.01μg/ml) at 0.04 ml/kg and 4 ml/kg within ~4 hours. Body temperatures were recorded at baseline, and at ~30-minute intervals for the first 4 hours post-dose, and at 8 and 24 hours post-dose administration.
All animals had a normal body temperature (99.2-103.4 ºF/37.3-39.7 ºC) at baseline. After dose administration, all vehicle control and test animals body temperature appeared normal (ranged from 99.1 ºF/37.3 ºC to 103.9 ºF/39.9 ºC) within the observation period up to 24 hours, except for two measurements at 8 hour respectively for one vehicle animal (104.1°F /40.1°C) and one high dose animal (104.9°F /40.5°C). These two measurements were slightly above the normal range and considered an incidental finding. For the reference control (Group 5), animal body temperatures were above normal (104.8-107.7°F/40.4-42.1°C) for all animals during the first 4 hours after intravenously administered lipopolysaccharide (LPS, 0.01μg/ml) at 0.04 μg/kg.
Dermal Irritation Phase: Groups 1-4, all animals were dosed topically via 2 filter paper patches (2.5 cm x 2.5 cm) on naïve dorsal skin sites with a saline control patch (saturated with ~0.2 ml saline) and a 0.3 ml of vehicle (Group 1) or test formulation (Groups 2-4, 50, 100 or 200 μg/site) instilled patch. Prior to dosing, skin of all dose sites was abraded using adhesive tape. The patches were removed after 30 minutes. For the reference control (Group 5) animals, 2 saline control and 2 reference control patches (~0.2 ml/patch) were applied to the dose sites for 4 hours. Dose site skin was assessed at approximately 1, 4, 24 and 48 hours following patch removal for all groups.
All animals in groups 1 - 4 exhibited minimal-to-no dose-related erythema or edema. If erythema and edema were present, they were generally mild, with only a few observations of well-defined erythema. Severe skin irritation was observed on all the test sites (SLS) in group 5. These results demonstrate that the test article did not cause any pyrogenicity after subcutaneous injection or topical application at doses up to 200 μg/site.
14-Day Toxicity Study in the Yucatan Minipig
The objective of this study (SRC Study No. S15055) was to evaluate the local tissue tolerability, potential toxicity, skin irritation and systemic exposure after various dose levels delivered by D-MNA following three (3) topical dose administrations within two weeks on young Yucatan minipigs. The minipig data needs to be considered in the context of an unexpectedly high degree of dose variability. The variability in the minipig study was most likely the result of inconsistent delivery of doxorubicin from the microneedle array, possibly due to animal movement as the arrays were being applied.
Following an acclimation period, a total of 30 minipigs (15 males and 15 females) were randomized into one of five treatment groups. Groups of 3 males and 3 females were treated with a blank control array (Group 1), and three dose levels of D-MNA at 25, 50 and 200 µg/dose of doxorubicin (Groups 2 - 4), respectively. An IV DXR group, consisting of 3 males and 3 females, served as a reference control (Group 5). Dosing occurred on Days 1, 7 and 14 with either control array or test article (Groups 1-4), and Group 5 was dosed intravenously on these same study days. Each topical treatment lasted 30 minutes. Each animal receiving topical treatment (Groups 1 - 4) was observed for clinical signs and dose site reactions. Blood collections for toxicokinetic evaluation were conducted on Days 1 and 14 post dose administration (post-30 mins application for Groups 1-4) for all groups. Clinical pathology was conducted on all animals on Day 3 to look for acute effects, and again on Day 16 prior to necropsy. The animals were euthanized on Day 16 with designated tissues collection for histopathology. Study Day 1 corresponded to the first day of dose administration.
The histopathology findings showed that the D-MNA-treated animals exhibited no systemic effects and no organ toxicity. These findings are consistent with systemic exposure to doxorubicin being below the lower limit of quantitation.
Application of the D-MNAs to the minipig's skin produced several findings all related to cutaneous reactions. Test article-related macroscopic findings were present in the dose site (skin). Red discoloration of the epidermis of the dose site was identified in four animals, limited to Groups 3 and 4 (D-MNA mid and high dose, respectively). In two of the Group 4 female animals, the red discoloration correlated microscopically with serocellular crust, and additionally with dermis congestion in one of those animals. The other two animals (males) did not have a microscopic correlation. Abnormal surface (scabbing) of the epidermis of the dose site was observed in a Group 4 male animal and correlated microscopically with serocellular crust.
Hemorrhage of the right axillary region was observed in a single animal in Group 5 (intravenous Doxorubicin) and correlated microscopically to hemorrhage. It was believed to be related to blood collection or injection procedures.
Other macroscopic findings represented incidental background findings typical for this species, or else did not have a correlate.
Local cutaneous reactions were expected with application of the D-MNA to the minipig and similar reactions are likely to occur in human subjects receiving D-MNAs.
Clinical Development of D-MNA:
SkinJect Experience
Protocol SKNJCT-001 (Phase 1 Study)
Study Design: This study was designed as an open-label dose escalation trial of D-MNA in participants with BCC (subtype: superficial or nodular). The study followed a traditional 3+3 dose escalation design with 4 dose groups plus placebo to define a maximum tolerated dose ("MTD") by evaluating DLTs. Treatments consisted of one application administered weekly, three times over a two-week period. The goal of the dose escalation was to determine the MTD and assess lesion responses in the different dose groups to inform a decision on the doses to be tested in a subsequent Phase 2 study.
The study was composed of a screening visit, three treatment visits at one-week intervals over a two-week period, an end of treatment visit, and three follow-up visits. The total duration for study recruitment was completed in approximately five to seven months. Individual participant participation was approximately up to 11 weeks (four weeks screening + seven weeks from the first treatment to the final follow up visit).
Escalation followed a traditional 3+3 design. Specifically, in each dose group n=3 participants were treated. If no DLTs were observed, the study was escalated to the next dose level. If DLTs had been observed in 2 or more participants, then the MTD would have been exceeded. If one DLT had been observed, an additional three participants would have been added at the same dose level. If no DLTs had been observed in the additional three participants, the study would have escalated to the next dose level. If DLTs had been observed in one or more of the three additional participants, the MTD would have been exceeded. The first two dose groups, Placebo and 25 µg, screened and enrolled subjects concurrently in the study.
SkinJect hypothesized that treatment with D-MNA would result in tumor destruction and the induction of potent, immunogenic anti-tumor responses. Because MNAs enable this agent to be delivered at very low doses to a confined tumor microenvironment, the study sponsor expected only minimal, if any, systemic drug toxicity; thus, facilitating optimal local dose levels and durable clinical responses.
The study design also included a placebo group (placebo-MNA). Inclusion of placebo-MNA allowed the evaluation of two questions:
• Tolerability: to assess if there was a cutaneous response to microneedle penetration that was independent of microneedle delivery of doxorubicin to the target tissue.
• Efficacy: to assess if a placebo-containing array could stimulate a non-specific immune response in reaction to microneedle penetration of the skin, and compare to the response with the active compound doxorubicin delivered by the D-MNA.
In addition the clinical design also assessed the pre-established secondary efficacy endpoint described below.
• Secondary Endpoint: Lesion response as assessed by a central reader after the 3-week course of treatment to be categorized as either absence or presence of a complete response defined as no evidence of residual BCC in the resected specimen on histological examination.
Subject populations included adult males and females, 18+ years in general good health as assessed by the study's principal investigator. BCC (subtype: superficial or nodular) had to confirmed histologically by diagnostic shave biopsy at the screening visit. If previously confirmed, participants could only have diagnosed BCC via shave biopsy within 6 months of first study treatment. The disease had to be primary BCC (i.e., no previous treatment), and the lesion size was required to = 64 mm2 or 8 x 8 mm and = 169 mm2 or 13 x 13 mm, i.e., the entire lesion must be covered by 13 x 13 mm area of the array containing the microneedles. Laboratory values had to be within normal ranges.
Subjects were excluded from participation in this study if they had evidence of clinically significant, unstable medical conditions as assessed by the principal investigator; if they had an excisional biopsy performed on the lesion to be treated in this study; if they had recent therapy(ies) to the BCC treatment area; if they had recurrent BCC (previously treated) at the site presented for treatment; and if they previously demonstrated sensitivity to doxorubicin or carboxymethyl cellulose. Other reasons for exclusion included current active malignancies, metastatic disease, in other regions; pregnancy; and any other reason that the investigator deemed as prejudicial to the outcome of the study.
The investigational product is chemotherapeutic agent, doxorubicin (25 µg, 50 µg, 100 µg, or 200 µg) delivered to the basal layer of skin by a novel delivery system, a MNA. The delivery system is a square array 15 x 15 mm in dimension edge to edge. The dissolvable array of 400 microneedles is in a 13 x 13 mm area. The microneedles are 750 microns in length. Each MNA patch delivers 9.6 µL of drug product into the peri-epidermal space.
Conclusions: The Phase 1 study was designed as an open-label dose escalation trial of D-MNA in participants with BCC (subtype: superficial or nodular). The study followed a traditional 3+3 dose escalation design with 4 dose groups plus placebo to define a MTD by evaluating DLTs. Treatments consisted of one application administered weekly, three times over a two-week period. The goal of the dose escalation was to determine the MTD and assess lesion responses in the different dose groups to inform a decision on the doses to be tested in a subsequent Phase 2 study. Of the 13 subjects enrolled, all 13 subjects completed the study and were included in all analysis populations; no subjects discontinued the study prematurely. Most subjects (8 of 13) were male, all subjects were White, and all but one subject were Non-Hispanic/Latino. Age range across the 13 subjects was 31 to 94 years.
The primary study endpoint was the assessment of DLT through Visit 4 (21 days) as defined using the LSR grading scale. No subjects reached DLT at any treatment assessment.
At screening, both the site and central reader were in agreement for 7 of 13 subjects (5 were considered nodular and 2 superficial at screening); however, for 6 subjects, the site and central reader assessments differed. For one subject (01-014), the Central Reader found no BCC present in the screening biopsy. Consultants reviewing the study results stated that multiple reasons could possibly be attributable, including human error misreading at the site, confusion of BCC with certain benign follicular tumors, and the presence of BCCs with both nodular and superficial components.
At the end of study, three subjects (01-001, Placebo; 01-008, D-MNA 25 µg and 01-011, D-MNA 50 µg) had differing results when Local/Site evaluation were compared to the Central Reader evaluation. In all three subjects, the Local/Site evaluation noted the presence of residual BCC compared to the Central Reader results which noted no residual BCC for all three subjects. It should be noted that the central reader was blinded to study treatment. In addition, another contributing factor to the noted differences may have been related to different slices of the tumor being evaluated by each of the readers; the local/site reader had the tissue sample obtained at the time of the excision, whereas the Central Reader tissue samples were sliced from the same block for each subject and stained several months later; the slides used in the Local/Site evaluation were not available for reading by the Central Reader.
For the secondary endpoint of BCC clinical response, evaluations were performed both at the local/site level as well as independently by a central reader. For the local/site assessment, complete lesion response was observed in one subject each for Placebo, D-MNA 25 µg, D-MNA 100 µg, and D-MNA 200 µg. For D-MNA 50 µg, no subjects were observed to have CR. For the central reader assessment, histopathologic assessment showed six subjects (one Placebo, two D-MNA 25 µg, one D-MNA 50 µg, one D-MNA 100 µg, and one D-MNA 200 µg) with no residual BCC. A "complete response" was considered the absence of BCC in the final excision at 4 weeks. For the Placebo subject (001-003) although it was assessed as a clinical responder according to the local site assessment, the local PI noted a new squamous cell carcinoma in situ (but no residual basal cell carcinoma) that was also confirmed as squamous cell carcinoma by the Central Reader assessment of the end of study excision. Consultants stated that it could be difficult to tell by skin examination alone if there was residual BCC, and that a minority of subjects do not have any residual BCC after having had a biopsy (possibly due in part to local post-procedural inflammatory response).
For the exploratory endpoint of quantification of doxorubicin released by the MNAs, doxorubicin delivery was confirmed, but across all dose groups it was observed that there was inconsistent doxorubicin deposition by the MNAs.
For the secondary endpoint of local tolerance of the MNA, at post-MNA application, assessments indicated that subjects had mild to moderate erythema restricted to the treatment area, at each visit with each dose level, including placebo. Flaking/scaling was minimal and isolated to the lesions. Crusting was generally absent or isolated. Swelling, vesiculation/pustulation, and erosion/ulceration were absent. Based on the proposed mechanism of action, some erythema evidencing an inflammatory reaction at the site of D-MNA application was to be expected.
For the secondary endpoint of pain assessment, for most subjects, no pain was noted. Some subjects experienced mild or moderate pain, generally at Visit 2 or Visit 3. At the Visit 4 End of Treatment assessment, no pain was noted for any subject.
Only two subjects reported a total of three adverse events ("AEs") in this study. All three AEs were considered mild in severity, and only one was considered probably related to study treatment mild application site pain that resolved the same day; this AE was associated with a low pain assessment scale score (1) at Visit 3. No deaths, serious adverse events, or AEs leading to treatment discontinuation were reported. No clinically significant abnormal findings were observed with regard to laboratory parameters, vital signs, ECGs, and physical examinations.
The SKNJCT-001 study was designed to assess the safety of the D-MNA patch in patients with BCC. There were no serious adverse events nor any demonstrated alterations in any clinical measurements during the trial. The conclusion of the study was that D-MNA patch was well tolerated with no evidence of dose limiting toxicity.
The SKNJCT-001 study also had a pre-established secondary efficacy endpoint as described above. Six of the 13 patients were categorized as complete response by the central reader.
As a result, the clinical study report concluded that SKNJCT-001 study met both its primary and secondary endpoints.
Protocol SKNJCT-002 (Suspended Phase 1/Phase 2 Study)
This study was written by SkinJect, Inc. prior to its acquisition by the Company and submitted as part of the IND. The FDA approved this protocol in 2021. It was designed as a two-part study. The first part involved the enrollment of 15 healthy volunteers and was designed to study the penetration of placebo-containing DMA patches at five different anatomic locations. After the first seven health volunteers were enrolled, due to the variability of array application observed by the investigator, SkinJect made the decision to pause the trial. The study was never resumed, and it was ultimately closed without further enrollment. There were no adverse events reported in the enrolled subjects.
Protocol SKNJCT-003 (Phase 2 Study)
Study Design: The clinical study, SKNJCT-003, is designed to be a randomized, double-blinded, placebo-controlled (P-MNA), multi-center study enrolling up to 60 subjects presenting with nodular type BCC of the skin. The study will evaluate the efficacy of two dose levels of D-MNA compared to placebo in patients with nodular BCC. The participants will be randomized 1:1:1 to one of three groups: a placebo-controlled group receiving P-MNA, a low-dose group receiving 100μg of D-MNA, and a high-dose group receiving 200μg of D-MNA. The clinical design was submitted to the FDA in January 2024 to seek comments to revise and amend the IND and finalize the protocol. The FDA responded in March 2024 and requested additional clinical information. A final protocol was submitted to the FDA in July 2024, which included the information requested by the FDA, along with updated chemistry, manufacturing and controls (CMC), stability and sterility data. On July 31, 2024, the FDA responded to the latest submission and requested certain additional information and clarification. The Company has responded to the FDA on August 2, 2024. Beginning August 13, 2024, the Company commenced activating its clinical trial sites and participant recruitment is now underway. On December 2, 2024, the Company announced that the phase 2 clinical study (SKNJCT-003) was underway in nine clinical sites in the United States and that it had already randomized more than 25% of the 60 patients expected to be enrolled in the study. As of the date of this prospectus, the Company has activated nine clinical sites in the United States and has randomized more than 50% of the 90 patients expected to be enrolled in the study. On March 6, 2025, the Company announced a positively trending interim analysis for its SKNJCT-003 Phase 2 clinical study. The interim analysis shows the clinical study SKNJCT-003 is trending positively with a proportion of subjects with complete clinical clearance of more than 60%. The analysis also shows the investigational product, D-MNA was well tolerated for both dose levels, a low-dose group receiving 100ug of D-MNA and a high-dose group receiving 200ug of D-MNA in all participants so far enrolled in the study, with no dose limiting toxicities (DLTs), or serious adverse events (SAEs). In addition, there were no systemic effects or clinically significant abnormal findings in laboratory parameters, vital signs, ECGs, and physical examinations. The findings of the interim analysis are preliminary and may or may not correlate with the findings of the study once completed. The Company plans to submit its findings to the FDA as a part of a package seeking a meeting with the FDA to advance clinical development.
Protocol SKNJCT-004 (Phase 2 Study)
On May 22, 2025, the Company announced that it has received study may proceed approval from the United Arab Emirates (UAE) Department of Health to commence Phase 2 clinical study (SKNJCT-004) to non-invasively treat BCC of the skin. The clinical study, SKNJCT-004, is designed to be a randomized, double-blind, placebo-controlled (P-MNA), multi-center study enrolling up to 36 subjects presenting with BCC of the skin at four sites in the UAE.
Patents and Proprietary Information
License Agreement with the University of Pittsburgh
SkinJect entered into an exclusive license agreement with the University of Pittsburgh on April 26, 2016 (as amended, the "License Agreement"). The License Agreement was amended on February 26, 2020 and on April 23, 2024.
The License Agreement covers products designed to deliver drugs and bioactive agents, such as, but not limited to doxorubicin, for the treatment of cancers and pre-cancerous lesions, but specifically excluding the treatment of in-transit melanoma. Such treatments may include, but are not limited to, the use of agents that stimulate an immune response, which is different from vaccines, where an immune response is provoked by presentation of an antigen (the "Field").
The term of the License Agreement runs until the expiration of the last claim of the Patent Rights listed in the License Agreement, which is projected to be November 6, 2035 and could be extended, unless terminated earlier (the "Term"). The University of Pittsburgh has the right to terminate the License Agreement if breaches are not cured within 30 days of our receipt of written notice thereof from the University of Pittsburgh or in certain insolvency-related situations or if we cease to carry out its business.
The License Agreement covers any product or part thereof or service which is (a) covered in whole or in part by an issued, unexpired or pending claim contained in the Patent Rights in the country in which any such product or part thereof is made, used or sold or in which any such service is used or sold; (b) manufactured by using a process or is employed to practice a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Patent Rights in the country in which any such process that is included in Licensed Technology is used or in which such product or part thereof or service is used or sold; or (c) manufactured by or otherwise makes use of Know How (as defined below) (the "Licensed Technology").
The License Agreement also covers Know How that includes: (a) the University of Pittsburgh's IND Application 122488 for Microneedle Array (carboxymethylcellulose matrix) containing the active drug, doxorubicin for the treatment of cutaneous T-cell lymphoma, (b) experimental protocols, data, and any supporting materials relating to B16 Melanoma murine experiments comparing tumor growth over time for Microneedle Array -delivered chemo-immunotherapy for B16 melanoma, including control mice that did not receive any treatment and mice that were treated with doxorubicin incorporated into Microneedle Arrays, and (c) Response from the University of Pittsburgh for SkinJect's Know How Request provided April 29, 2016 and accompanying Batch Analysis documentation (the "Know How").
We have been granted an exclusive, worldwide license to make, have made, use and sell the Licensed Technology in the Field and to practice under the patent rights listed in the table below for the Term of the License. We have also been granted a non-exclusive worldwide license to practice under the Know How in the Field for the Term of the License.
The University of Pittsburgh has also granted to us an option to enter into a non-exclusive license in the Field to Future Intellectual Property Rights upon such terms and conditions as the parties may agree and which contain similar standard terms and conditions as contained hereunder to the extent not prohibited by law, regulation, or third-party obligations within sixty (60) days after University informs us that the clinical trial under the University of Pittsburgh's IND 122488 is closed and the final report for such clinical trial is completed ("Option Exercise"). Upon University's timely receipt of such written notice from us, the parties shall negotiate in good faith, which negotiations shall commence no later than sixty (60) days following Option Exercise and shall endeavor to enter into a definitive royalty-bearing license agreement as soon thereafter as reasonably possible. In furtherance of the foregoing, University has agreed to disclose from time to time at University's sole discretion to SkinJect Future Intellectual Property Rights until expiration of the option. Future Intellectual Property Rights are defined as specific Know How encompassed within the University of Pittsburgh's IND 122488 and/or deriving from studies conducted under such IND which the University of Pittsburgh owns or controls before or after the April 26, 2016.
The University of Pittsburgh and Carnegie Mellon University have retained a royalty-free, nonexclusive right to practice under the Patent Rights and to use the Licensed Technology for Non-Commercial Education and Research Purposes. Non-Commercial Education and Research Purposes are defined as the use of Patent Rights (including distribution of biological materials covered by the Patent Rights) in the Field for academic research or other not-for-profit scholarly purposes which are undertaken at a nonprofit or governmental institution that does not use the Patent Rights in the production or manufacture of products for sale or the performance of services for a fee. The license granted is subject to the rights of the U.S. government, if any, as set forth in 35 U.S.C. §200, et seq. The U.S. government may have acquired a nonexclusive, nontransferable, paid-up license to practice or have practiced for or on behalf of the United States the inventions described in the Patent Rights throughout the world. Pursuant to 35 U.S.C. §200, et seq. Licensed Technology produced for sale in the United States shall be substantially manufactured in the United States (unless a waiver under 35 U.S.C. §204 is granted by the appropriate U.S. government agencies).
We have the right to enter into sublicensing arrangements for the rights, privileges and licenses granted hereunder upon prior written approval of each sublicensee by the University of Pittsburgh, except that sublicensee shall not have rights to sublicense. Such sublicense agreements shall include a royalty rate upon sublicense Net Sales in an amount at least equal to the rate set forth in Article 5.1(c). Rights of any sublicensee shall terminate upon termination of this Agreement.
We are obligated to pay annual maintenance fees, which are non-refundable, non-creditable, and not to be prorated against any other payment or royalties due, in the amount of $5,000 until the first Net Sales occurs. we are further obligated to pay 15.0% of any execution fees, maintenance fees, milestone fees and all other non-royalty payments received by us from any of our sublicensees a share of Non-Royalty Sublicense Income.
Royalties are payable in an amount equal to 3.0% of Net Sales payable each calendar quarter with a minimum annual royalty of $50,000 per calendar year, but only to the extent such minimum royalty is greater than the aggregate annual royalty.
The License Agreement contains six milestones listed below:
1. Establish validated analytical methods related to licensed technology.
2. Submit IND application to FDA relating to licensed technology.
3. Raise $2.5 million of capital from investors or strategic partners (or combination thereof) in support of development or commercializing the licensed technology.
4. Submit a completed report to FDA of a Phase 2 trial of licensed technology or foreign equivalent.
5. Submit an NDA or foreign equivalent for a covered product under Licensed Technology.
6. First commercial sale of Licensed Technology within five years of submission of a NDA or foreign equivalent for a product covered under Licensed Technology.
The first four milestones have been achieved and noted as completed by the University of Pittsburgh on January 6, 2022.
Payments made to the University of Pittsburgh in connection with the License Agreement, including patent legal expense reimbursement, have amounted to $681,473 since April 2016. We expect the patent legal expense reimbursement to continue at an average of approximately $7,000 per month. Should sales commence in the future, royalties are payable to the University of Pittsburgh as described above.
Our failure to perform or to fulfill on a timely basis any one of the milestones set forth above shall be grounds for university to terminate this Agreement and upon termination all rights and interest to the Licensed Technology, Patent Rights, Know How, and Future Intellectual Property shall revert to university. Notwithstanding the foregoing, for a single time, if one of the milestones defined above has not been achieved within the required timeframe, through no fault of ours, and following best efforts of ours to meet the milestone, we shall be deemed to have fulfilled the milestone requirement if we make a payment of $50,000. In such case, in addition to the payment required, we shall negotiate with the University of Pittsburgh in good faith a new date for attainment of such missed milestone. If we fail to meet the revised milestone date, the University of Pittsburgh may terminate the License Agreement and upon termination all rights and interest to the Licensed Technology shall revert to the University of Pittsburgh.
Except as described above, there are no future milestone payments to be paid pursuant to the License Agreement.
We are in compliance with the License Agreement (after giving effect to such waivers and amendments as have been granted or entered into). The time taken to reach future milestones is dependent on several factors, not all of which are controlled by us. Although there can be no assurance that it will do so, we expect the University of Pittsburgh will grant any necessary future extensions to milestone requirements commensurate with our progress with its clinical development plan.
We have licensed three patent families from the University of Pittsburgh that include several granted U.S. patents and pending U.S. patent applications, as well as granted patents and pending patent applications in foreign jurisdictions, relating to microneedle arrays for delivering various drugs and bioactive agents to the skin, their use, and manufacture. The first patent family entitled "dissolvable microneedle arrays for transdermal delivery to human skin" includes 2 issued U.S. patents expiring in 2030 and 2031 claiming dissolvable microneedle arrays including a variety of bioactive components. This family also includes a pending U.S application. The second patent family entitled "Tip-loaded microneedle arrays for transdermal insertion" includes 1 issued U.S. patent expiring in 2033 claiming dissolvable microneedle arrays including one or more bioactive components. This family also includes issued patents in Australia, Canada, Japan and Mexico, and pending applications in the U.S., Australia, Europe, Hong Kong, India, Japan, and Mexico. The third patent family entitled "Microneedle arrays for cancer therapy applications" includes a pending U.S. patent application as well as pending patent applications in Australia, Canada, Europe, Israel, Japan, and Korea relating to the use of microneedle arrays comprising one or more bioactive agents for the treatment of various cancers, which if issued, would have a natural expiration in 2035. The table below summarizes the patents covered by the License Agreement, each of which is a utility patent.
| Country Name | Title | Application No. |
Priority Date | Filed Date | Patent No. | Issue Date | Projected Expiration Date |
Status | Assignee(s) |
| United States | Dissolvable microneedle arrays for transdermal delivery to human skin | 12/910,516 | 10/23/2009 | 10/22/2010 | 8,834,423 | 9/16/2014 | 6/14/2031 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| United States | Dissolvable microneedle arrays for transdermal delivery to human skin | 16/861,112 | 10/23/2009 | 4/28/2020 | 11,744,927 | 9/5/2023 | 10/22/2030 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| United States | Dissolvable microneedle arrays for transdermal delivery to human skin | 18/454,628 | 10/23/2009 | 8/23/2023 | 10/22/2030 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| United States | Tip-loaded microneedle arrays for transdermal insertion | 14/398,375 | 5/1/2012 | 10/31/2014 | 9,944,019 | 4/17/2018 | 7/5/2033 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| Canada | Tip-loaded microneedle arrays for transdermal insertion | 2871770 | 5/1/2012 | 5/1/2013 | 2871770 | 7/7/2020 | 5/1/2033 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| Mexico | Tip-loaded microneedle arrays for transdermal insertion | MX/a/2014/013234 | 5/1/2012 | 5/1/2013 | 370579 | 12/17/2019 | 5/1/2033 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| Australia | Tip-loaded microneedle arrays for transdermal insertion | 2013256348 | 5/1/2012 | 5/1/2013 | 2013256348 | 9/28/2017 | 5/1/2033 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| India | Tip-loaded microneedle arrays for transdermal insertion | 10161/DELNP/2014 | 5/1/2012 | 5/1/2013 | 5/1/2033 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Europe | Tip-loaded microneedle arrays for transdermal insertion | 22192026.7 | 5/1/2012 | 5/1/2013 | 5/1/2033 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Japan | Tip-loaded microneedle arrays for transdermal insertion | 2017-078229 | 5/1/2012 | 5/1/2013 | 6712963 | 6/4/2020 | 5/1/2033 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| Canada | Tip-loaded microneedle arrays for transdermal insertion | 3077452 | 5/1/2012 | 5/1/2013 | 3077452 | 8/9/2022 | 5/1/2033 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| Mexico | Tip-loaded microneedle arrays for transdermal insertion | MX/a/2018/009573 | 5/1/2012 | 5/1/2013 | 11/6/2035 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Australia | Tip-loaded microneedle arrays for transdermal insertion | 2017225155 | 5/1/2012 | 5/1/2013 | 2017225155 | 9/19/2019 | 5/1/2033 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| China | Tip-loaded microneedle arrays for transdermal insertion | 202110125343.0 | 5/1/2012 | 5/1/2013 | 5/1/2033 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| United States | Tip-loaded microneedle arrays for transdermal insertion | 18/119,197 | 5/1/2012 | 3/8/2023 | 5/1/2033 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Brazil | Tip-loaded microneedle arrays for transdermal insertion | 112014027242-5 | 5/1/2012 | 5/1/2013 | 5/1/2033 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Australia | Tip-loaded microneedle arrays for transdermal insertion | 2021201365 | 5/1/2012 | 5/1/2013 | 2021201365 | 1/12/2023 | 5/1/2033 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| Japan | Tip-loaded microneedle arrays for transdermal insertion | 2021-148376 | 5/1/2012 | 5/1/2013 | 5/1/2033 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Australia | Tip-loaded microneedle arrays for transdermal insertion | 2022291555 | 5/1/2012 | 5/1/2013 | 11/6/2035 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Hong Kong | Tip-loaded microneedle arrays for transdermal insertion | 42021044396.6 | 5/1/2012 | 5/1/2013 | 5/1/2033 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Japan | Tip-loaded microneedle arrays for transdermal insertion | 2023-175104 | 5/1/2012 | 5/1/2013 | 5/1/2033 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Europe | Microneedle arrays for cancer therapy applications | 15857785.8 | 11/6/2014 | 11/6/2015 | 11/6/2035 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| Canada | Microneedle arrays for cancer therapy applications | 2967017 | 11/6/2014 | 11/6/2015 | 2967017 | 3/24/2020 | 11/6/2035 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| Israel | Microneedle arrays for cancer therapy applications | 252096 | 11/6/2014 | 11/6/2015 | 252096 | 10/2/2022 | 11/6/2035 | Issued | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| United States | Microneedle arrays for cancer therapy applications | 17/576,141 | 11/6/2014 | 1/14/2022 | 11/6/2035 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Israel | Microneedle arrays for cancer therapy applications | 293291 | 11/6/2014 | 11/6/2015 | 293291 | 2/1/2024 | 11/6/2035 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
| Australia | Microneedle arrays for cancer therapy applications | 2024256083 | 11/6/2014 | 11/6/2015 | 11/6/2035 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Korea | Microneedle arrays for cancer therapy applications | 10-2022-7039076 | 11/6/2014 | 11/6/2015 | 11/6/2035 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Japan | Microneedle arrays for cancer therapy applications | 2024189676 | 11/6/2014 | 11/6/2015 | 11/6/2035 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University | ||
| Singapore | Microneedle arrays for cancer therapy applications | 1002004900T | 11/6/2014 | 11/6/2015 | 11/6/2035 | Pending | University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information relating to our directors and executive officers as of the date of this prospectus. Directors of Medicus hold office for a one year term and, unless re-elected, will retire from office at the end of the next annual meeting of the shareholders of Medicus. Unless otherwise stated, the business address of our executive officers and directors is our office address at 300 Conshohocken State Rd., Suite 200, W. Conshohocken, PA 19428.
| Name | Age | Position with Medicus |
||
| Dr. Larry Kaiser(1) (5) | 72 | Director | ||
| Robert J. Ciaruffoli(1) (2) (3) | 73 | Director | ||
| Frank Lavelle(1) (2) (4) | 75 | Director | ||
| William L. Ashton(3) (4) (5) | 74 | Director | ||
| Barry Fishman(2) (4) (5) | 67 | Director | ||
| Dr. Sara R. May(2) | 47 | Director | ||
| Dr. Raza Bokhari(3) | 58 | Executive Chairman and Chief Executive Officer | ||
| Carolyn Bonner | 41 | President | ||
| James Quinlan | 61 | Chief Financial Officer | ||
| Dr. Edward Brennan | 65 | Chief Scientific Officer & Head of R&D Program | ||
| Dr. Faisal Mehmud | 50 | Chief Medical Officer |
Notes:
(1) Member of the Compensation Committee. Mr. Lavelle is the Chair.
(2) Member of the Audit Committee. Mr. Ciaruffoli is the Chair.
(3) Member of the Corporate Disclosure Committee. Mr. Ciaruffoli is the Chair.
(4) Member of the Governance Committee. Mr. Fishman is the Chair.
(5) Member of the Nominating Committee. Dr. Kaiser is the Chair.
Set forth below is a description of the background of the directors and executive officers of Medicus.
Dr. Raza Bokhari, Executive Chairman and Chief Executive Officer
Dr. Bokhari has served as our Executive Chairman and Chief Executive Officer since September 2023. Dr. Bokhari works full time for the Company.
A recipient of Philadelphia Business Journal's "40 under 40" award, Dr. Raza Bokhari, a physician turned serial entrepreneur, has a demonstrated successful track record in aggregating and accelerating life sciences, healthcare services and Pharmaceutical R&D companies.
He previously served as Executive Chairman and CEO of FSD Pharma (Nasdaq: HUGE) (2020 to 2021), where his strategies successfully pivoted the company out of medicinal cannabis and into a clinical stage pharmaceutical R&D, a transition marked by a NASDAQ listing in January 2020, and raising nearly $100M institutional capital to fuel growth and expansion.
In addition to his corporate roles, Dr. Bokhari serves as the Vice Chairman of the World Affairs Council of Philadelphia. He formerly served on the Board of Temple University's Fox School of Business and Management as Chairman of the Executive Advisory Committee and was a Trustee of the esteemed Franklin Institute and Foreign Policy Research Institute.
Dr. Bokhari, through his family foundation, believes in giving back and investing in the community. In recognition of a $1 million gift, he made to his alma mater, Temple University, its Fox Business School named the Innovation & Entrepreneurship Institute Suite in his honor. The school acknowledged Dr. Bokhari in 2018 by naming him a Centennial Honoree, a special collection of entrepreneurs, visionaries, and disruptors who helped shape the Fox School and the business world since 1918.
Dr. Bokhari has a Doctor of Medicine degree from the University of Punjab, Rawalpindi Medical College, and an Executive MBA from Temple University, Fox School of Business & Management.
Dr. Larry Kaiser, Director
Dr. Larry Kaiser has served as a member of our board of directors since September 2023.
Dr. Kaiser has been the Managing Director with the Healthcare Industry Group at Alvarez and Marsal, a leading global professional services firm, since 2020. Most recently, Dr. Kaiser was the President and CEO of the $2.2 billion Temple University Health System, Dean of Temple University's Lewis Katz School of Medicine, and Senior Executive Vice President for Health Sciences at Temple University (2011 to 2019). Among his many accomplishments at Temple was the acquisition of the Fox Chase NCI-designated Comprehensive Cancer Center, the development of a number of programs, including the number one lung transplant program in the country, a nationally recognized program in pulmonary hypertension, in addition to growing programs in cardiovascular surgery, thoracic surgery, neurosurgery, and orthopedic surgery. Before joining Temple University in 2011, Dr. Kaiser served as the President of the University of Texas Health Science Center at Houston (2008 to 2011), the largest of six health-related campuses at the University of Texas.
Dr. Kaiser graduated AOA (Alpha Omega Alpha Honor Medical Fraternity) from the Tulane University School of Medicine in 1977 and completed his residency in general surgery as well as a fellowship in surgical oncology at the University of California, Los Angeles. He then completed a residency in cardiovascular and thoracic surgery at the University of Toronto. Following that, he held positions as attending thoracic surgeon at Memorial Sloan-Kettering Cancer Center and Assistant Professor of Surgery at Cornell University Medical College (both New York City) and subsequently as Associate Professor (with tenure) at the Washington University School of Medicine (St. Louis) (1988 to 1991). At the University of Pennsylvania, Dr. Kaiser held a variety of positions from 1991 to 2008, including chief of general thoracic surgery, founder and director of the university's lung transplantation program, director of its Center for Lung Cancers and Related Disorders, and co-director of the Thoracic Oncology Laboratory. In 2001, following a national search, he was named the John Rhea Barton Professor and Chair of the Department of Surgery as well as Surgeon in Chief for the University of Pennsylvania Health System. In 1997, Dr. Kaiser was named as the first recipient of the Eldridge Eliason Professorship of Surgery endowment at the Perelman School of Medicine at the University of Pennsylvania.
Robert J. Ciaruffoli, Director
Robert J. Ciaruffoli has served as a member of our board of directors since September 2023.
Mr. Ciaruffoli is the co-founder and has been the Chairman of Broad Street Angels since 2016, a 100-member Philadelphia-based angel investor network which invests in start-up entrepreneurial businesses with high growth potential. Broad Street Angels is the largest angel investor network in the Philadelphia region.
Mr. Ciaruffoli is a CPA and served as the Chairman and CEO of the Parente Beard/Baker Tilly accounting and advisory firm (2000 to 2015). During his tenure as Chairman and CEO, he and his team transitioned the firm from a Pennsylvania practice to a multi-state super-regional firm. In 2014, he orchestrated a merger of the Parente Beard and Baker Tilly Virchow Krause firms to create the 12th largest U.S. accounting and advisory firm. Mr. Ciaruffoli also served on the board of directors and executive committee of Baker Tilly International, the 8th largest global accounting network. During his tenure on the board and the executive committee, Baker Tilly International grew from an unranked network to the eighth largest global accounting network.
Throughout his career, Mr. Ciaruffoli has served on numerous for-profit and not-for-profit boards. Presently, he is a board member of Ben Franklin Technology Partners. He was also the past chairman of the Pennsylvania State Board of Accountancy.
Mr. Ciaruffoli holds a Bachelor of Science in Accounting from Kings College, Wilkes-Barre, Pennsylvania and has proudly served in the U.S. Marine Corps (1970 - 1972).
Frank Lavelle, Director
Frank Lavelle has served as a member of our board of directors since September 2023.
For the past 40 years, Mr. Lavelle has been a President and Chief Executive Officer of global and multinational organizations focused on high-value data, analytics, technology solutions, and actionable insights for healthcare and life sciences manufacturers, payers, and providers. Mr. Lavelle has also brought technology solutions to public health, education, and the public sector over his career.
Mr. Lavelle has owned and operated F W Lavelle Consulting LLC since 2019, providing advisory services to healthcare and life sciences manufacturers with a primary focus on pharmaceutical development and public health.
During his career, Mr. Lavelle was President and Chief Executive Officer of Siemens Health Solutions (2000 to 2003), one of the world's largest suppliers to the healthcare industry; Chief Executive Officer and director of Symphony Health Solutions (2013 to 2014) which gave deep insight into the pharmaceutical market tracking drug development and use on over 280 million patients and 65% of all specialty drug activity; board member and advisor to Symphony Performance Health (2014 to 2016) working with accountable health organizations, direct contracting entities, and health systems to improve health systems costs with analytics into the performance of their provider network; President of MedQuist (2004 to 2007) the world's largest provider of voice-to-coding solutions for healthcare, dictation, and speech recognition software. In addition, Mr. Lavelle was President and Chief Executive Officer of SunGard Public Sector and Education (2015 to 2017) specializing in software solutions for cities and public schools which cover public safety, public administration, and public education (K-12) touching 150 million citizens and 17.5 million students.
Mr. Lavelle received his B.A. in Marketing from Pennsylvania State University.
William L. Ashton, Director
William L. Ashton has served as a member of our board of directors since September 2023.
Mr. Ashton is a former Fortune 100 senior executive with over 35 years' experience in the biotechnology and pharmaceutical business. Mr. Ashton retired from a successful career at Amgen Inc. where he served in various positions since 1989 including Vice President of U.S. Sales, Vice President/General Manager of the Corporate Accounts, and Vice President of Government and Commercial Affairs where he was responsible for working with the FDA, and Centers for Medicare and Medicaid Services and Advocacy groups.
He previously worked for Boehringer-Ingelheim and Warner Lambert Pharmaceuticals.
Mr. Ashton has been the President at Harrison Consulting Group, LLC, a privately held biopharmaceutical/ healthcare consulting firm with expertise in commercialization, payer strategy, and reimbursement since 2013.
He has served on the boards of several publicly traded pharmaceutical companies, namely, Spectrum Oncology, where he was Chairman of the Board, Baudax Bio, Societal CDMO, Sucampo Pharmaceuticals and Galena Bio Pharma. On February 22, 2024, Baudax Bio filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the eastern District of Pennsylvania.
In addition, he has served on the boards of the National Osteoporosis Foundation, Friends of the National Library of Medicine, and is a Commissioner on the Medical Representatives National Certification Commission.
Following his extensive pharmaceutical career, Mr. Ashton was the Founding Dean and assistant professor at the Mayes College of Healthcare Business and Policy (2007 to 2013) at the University of the Sciences of Philadelphia (now St. Joseph University).
Mr. Ashton holds a B.S. in Education from the University of California of Pennsylvania, (now Penn Western University) and a M.A. in Education from the University of Pittsburgh.
Barry Fishman, Director
Barry Fishman has served as a member of our board of directors since September 2023.
Mr. Fishman has almost 25 years of experience as an entrepreneurial business leader, most recently as CEO of VIVO Cannabis Inc. (2017 to 2020). Prior to joining VIVO, Mr. Fishman served as CEO of international specialty pharmaceutical company Merus Labs (2014 to 2017), through its 2017 acquisition by Norgine M.V. He also previously served as CEO of Teva Canada (2003 to 2014), a major affiliate of the world's largest generic drug-maker and began his pharmaceutical career at Eli Lilly Canada, where he served as Vice President of Marketing (1983 to 2000). Mr. Fishman has also recently served as an independent director on a number of high-profile boards, including Aurora Cannabis Inc. and Canopy Growth Corporation. Mr. Fishman graduated from McGill University with a concentration in finance and went on to become a CPA while working for Deloitte in Southern California.
Dr. Sara R. May, Director
Sara May, PhD, has served as a member of our board of directors since June 2024.
Dr. May is a highly skilled professional with over 10 years of experience managing large-scale commercial and research projects within regulated industries. Dr. May brings a multidisciplinary background in quality assurance and compliance, clinical trial management, environmental consulting, and data analytics. She has direct experience working with regulators including the FDA, Health Canada and Canada Revenue Agency.
Dr. May started her career in environmental consulting at Beacon Environmental, an employee-owned environmental consulting firm in Ontario, Canada, where she currently holds the position of Senior Terrestrial Ecologist and Geomatics Manager (2012 to present). Dr. May has also served as the President of FV Pharma Inc. (2018 to 2020), a start up public cannabis company where she was responsible for all aspects of operations, and Senior Vice President of FSD Pharma Inc. (2020 to 2022), where Dr. May led several enterprise-wide transformation initiatives focused on enabling the company's business model to adapt to the shift in markets from cannabis to boutique pharma and drug development.
In addition, Dr. May brings deep corporate governance experience through her work with both corporate and not for profit boards, including contributing to the public listing and uplisting process of several start-up cannabis and boutique pharmaceutical companies. Dr. May has served on the board of directors of FV Pharma Inc. (2018 to 2020) and the board of directors of Cannara Biotech (2019 to 2020) where she chaired the Compensation Committee and was a member of the Corporate Governance Committee. She has also been a member of the YMCA Northumberland Charity Board (2020 to 2023) where she chaired the Finance Audit and Risk Committee and has been on the board of directors of Beacon Environmental since 2023.
Dr. May received her Bachelor of Science (Honours) degree in Botany and Plant Genetics from the University of Guelph and her PhD in Evolutionary Genetics from Queen's University.
Carolyn Bonner, President
Carolyn Bonner has served as our President since September 2023.
Ms. Bonner until recently was the President & CEO of Parkway Clinical Laboratories (2019 to 2023), a College of American pathologist (CAP), accredited diagnostic company, serving healthcare providers across the United States.
Ms. Bonner was the Director of Corporate Development at Building Beyond BRIC Investment Fund (2019 to 2023) where she was extensively involved in fundraising, marketing, and assisting with back office operations from May 2009 to December 2011.
Previously Ms. Bonner was the Director of Business Development at Parkway Clinical Laboratories ("PCL"), where she delivered client guided customization of PCL services and creative corporate partnerships. Carolyn also simultaneously served as Director of Corporate Development for Rosetta Genomics, a publicly traded Israeli biotech company, the parent company of PCL, from July 2008 to May 2009.
Ms. Bonner started her career in 2006 as a sales executive at Lakewood Pathology (now called PLUS Diagnostics), which is owned and operated by Water Street Healthcare Partners, a Chicago based private equity fund. Ms. Bonner has a B.A. focused in marketing from West Chester University.
James Quinlan, Chief Financial Officer
James Quinlan has served as our Chief Financial Officer since September 2023.
Mr. Quinlan is a Certified Public Accountant, Certified Financial Planner, Chartered Financial Consultant and has spent his career in financial services. He has been President of Trinity Financial Advisors, Smart Financial Advisors (1999 to 2007), and Beneficial Advisors (2007 to 2011), as well as a Partner at both Smart Business Advisory and Consulting (1999 to 2008), and Wipfli, LLP (2017 to 2022). While at Wipfli he was the U.S. Mid Atlantic regional leader for both Tax and Wealth management services (2017 to 2022).
Mr. Quinlan has been recognized in the Philadelphia region as a recipient of the 40 under 40 award and is very active in the community. His past board involvement includes acting as President of the Catholic Charities Appeal for the Archdiocese of Philadelphia (2011 to 2016), and Development Chair for the Archbishop John Carroll High School Board (2010 to 2020).
Mr. Quinlan has an MBA from Villanova University and a BS degree from Bucknell University.
Dr. Edward Brennan, Chief Scientific Officer & Head of R&D Program
Dr. Edward Brennan has served as our Chief Scientific Officer & Head of R&D Program since November 2024. Before that, Dr. Brennan served as our Chief Medical Officer since September 2023.
Dr. Brennan has more than 25 years of experience in leadership roles at major pharmaceutical companies and clinical research organizations. He is an accomplished biopharmaceutical executive with a proven track record in FDA submissions and drug development.
Dr. Brennan has extensive experience in all phases of clinical development across multiple therapeutic areas. As a Medical Director with Wyeth-Ayerst Research (2000 to 2003), and GlaxoSmithKline (2003 to 2007), he led teams through ten IND applications and advanced multiple compounds from pre-candidate selection (proof of concept) through clinical trial management and approval. At GSK, he was also responsible for coordinating all clinical activities for external partners within its Center of Excellence in External Drug Discovery. Dr. Brennan next founded IndiPharm (2007 to 2016), a full-service global CRO that was eventually acquired by private equity company, Velocity Fund Partners.
Dr. Brennan received his undergraduate Bachelor of Science Degree in Pharmacy from the Philadelphia College of Pharmacy and Science. He went on to study Medicine at the Royal College of Surgeons in Ireland before receiving his medical degree from the Temple University School of Medicine.
Dr. Faisal Mehmud, Chief Medical Officer
Dr. Faisal Mehmud has served as our Chief Medical Officer since November 2024.
Dr. Mehmud is a seasoned pharmaceutical executive, who brings over 20 years of global experience as a senior medical professional in clinical development, medical affairs, and drug safety across various therapeutic areas, including oncology, hematology, rare diseases, and primary care. He has played a central role in multiple successful launches of new medicines and has spearheaded innovative global medical lifecycle management strategies including for small molecules, antibodies, cell therapies and cytotoxic chemotherapies. Dr. Mehmud's expertise encompasses late-phase development, product launch, and the seamless integration of new therapies into treatment pathways, all with a focus on improving patient outcomes through forward thinking clinical development plans. Dr. Mehmud's career includes senior roles at leading pharmaceutical companies such as Sanofi, Novartis, Bristol Myers Squibb (BMS), Pfizer, and GlaxoSmithKline (GSK) based in London, Paris and Philadelphia.
Most recently, Dr. Mehmud was the Senior Vice President, Data Generation and Scientific Communications in Worldwide Global Medical Affairs at GlaxoSmithKline (LSE/NYSE:GSK), which included leadership of medical affairs sponsored and supported, interventional and non-interventional clinical trials
Before GSK, Dr. Mehmud was with Pfizer Inc. (NYSE: PFE), where he served in various roles including as Vice President and Worldwide Medical Franchise Head for Precision Medicine and Early Oncology Development, advancing the precision medicine oncology portfolio in a variety of tumor types, and supporting early-stage oncology projects moving from early clinical development to full development and market readiness, effectively bridging scientific innovation with commercial strategy.
Dr. Mehmud has also held leadership roles at Bristol Myers Squibb (NYSE: BMY), including as Vice President in global drug safety, where he oversaw the safety risk management of complex therapies, including antibody-based treatments and cellular therapies.
Dr. Mehmud completed a medical degree from the University of Cambridge, and has received diplomas in internal medicine and pharmaceutical medicine from the Royal College of Physicians and holds a medical license with the UK General Medical Council.
Penalties, Sanctions, Cease Trade Orders or Bankruptcies
Penalties or Sanctions
Other than as disclosed, to our knowledge, no director or executive officer, or shareholder holding a sufficient number of our securities to materially affect the control of us, has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.
Individual Bankruptcies
To our knowledge, no director or executive officer, or shareholder holding a sufficient number of our securities to materially affect the control of us, has, within the ten years prior to the date of this prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold his or her assets.
Corporate Cease Trade Orders and Bankruptcies
To our knowledge, no director or executive officer, or shareholder holding a sufficient number of our securities to materially affect the control of us, is, as at the date of this prospectus, or has been within the ten years prior to the date of this prospectus: (a) a director, chief executive officer or chief financial officer of any company that was subject to an order that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; (b) was subject to an order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; or (c) a director or executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets. For the purposes of this paragraph, "order" means a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation, in each case, that was in effect for a period of more than 30 consecutive days.
Conflicts of Interest
To the best of our knowledge, except as disclosed elsewhere in this prospectus, we are not aware of any existing or potential material conflicts of interest between us and any of our directors or officers as of the date hereof. However, certain of our directors and officers are, or may become, directors or officers of other companies with businesses, which may conflict with its business. Accordingly, conflicts of interest may arise which could influence these individuals in evaluating possible acquisitions or in generally acting on our behalf. See also "Risk Factors."
Pursuant to the OBCA, our directors and officers are required to act honestly and in good faith with a view to act in our best interests. Generally, as a matter of practice, directors who have disclosed a material interest in any contract or transaction that the Board is considering will not take part in any board discussion respecting that contract or transaction. If on occasion such directors do participate in the discussions, they will refrain from voting on any matters relating to matters in which they have disclosed a material interest. In appropriate cases, we will establish a special committee of independent directors to review a matter in which directors or officers may have a conflict.
Composition of Board of Directors
Our board of directors (the "Board") is responsible for the general supervision of the management of our business and affairs with the objective of enhancing shareholder value. The Board discharges its responsibilities directly and through its committees.
Our board consists of seven directors: Dr. Larry Kaiser, Robert J. Ciaruffoli, Frank Lavelle, William L. Ashton, Barry Fishman, Dr. Sara R. May and Dr. Raza Bokhari. Dr. Bokhari is the Chairman of the Board. Robert J. Ciaruffoli acts as independent lead director and will assume the duties of the Chairman as and when required to address any actual or potential conflicts of interest.
Our articles provide that the number of directors may be between 1 and 15. The number of directors may be increased or decreased upon approval of the shareholders or, in certain circumstances and subject to our articles, by a majority of the directors. Our directors are elected at each annual general meeting of our shareholders and serve until the next annual meeting of shareholders or until their successors are elected or appointed unless their positions are earlier vacated.
Director Term Limits and Other Mechanisms of Board Renewal
Our Board has not adopted director term limits, a retirement policy for its directors or other automatic mechanisms of board renewal. Our Board will hold office for a one year term and, unless re-elected, will retire from office at the end of the next annual meeting of the shareholders of Medicus.
Director Independence
Our Board has determined that six members of our Board are "independent," as defined under the Nasdaq rules and for purposes of Canadian securities laws and therefore, a majority of the directors on our Board are independent. Dr. Bokhari is not considered independent by virtue of his management position.
For purposes of the Nasdaq rules, an independent director means a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, subject to certain additional limitations. A director is considered to be independent for the purposes of Canadian securities laws if the director has no direct or indirect material relationship to the company. A material relationship is a relationship that could, in the view of the Board, be reasonably expected to interfere with the exercise of a director's independent judgment. Certain individuals, such as our employees and executive officers, are deemed by Canadian securities laws to have material relationships with us.
We will take steps to ensure that adequate structures and processes will be in place following the consummation of this offering to permit our Board to function independently of management, including for purposes of encouraging an objective process for nominating directors and determining executive compensation.
Meetings of Directors
Our Board holds regularly scheduled meetings as well as ad hoc meetings from time to time. The independent members of our Board will also meet, as required, without the non-independent directors and members of management before or after each regularly scheduled board meeting.
Board of Directors' Charter
The Board has adopted a written mandate. The primary mandate of the Board is supervision of the senior management of the business, the going concern and general affairs of the Company. The Board discharges certain of its responsibilities through delegation to its committees as more particularly set out in committee mandates.
Position Descriptions
The Board has adopted a written position description for the lead independent director, which position is currently held by Robert J. Ciaruffoli, as well as a written position description for individual directors.
The Board does not intend on adopting written position descriptions for the Chief Executive Officer ("CEO"), other than as described in the CEO's employment contract, or the committee chairs on the basis that the roles are well understood by all of the directors. In general, the roles of the Board and committee chairs are to ensure that the Mandate of the Board or the mandate of a committee, as set out in their respective charters, are carried out in full.
With respect to the chairs of the committees, the Board has determined that their responsibilities include providing leadership to the applicable committee to carry out the committee's mandate as set out in a charter or through regulatory requirements and enhancing the committee's effectiveness through facilitating the committee's interaction with management, the Board and other committees of the Board and reporting as appropriate to the Board with respect to the committee's work.
With respect to the CEO, the CEO is responsible for our overall leadership and management in accordance with the strategies, policies and mandates established by the Board from time to time, and reports to the Board regarding our management and operations including the progress or deviations, if any, from the strategic plans set by the Board.
Orientation and Continuing Education
The Governance Committee, in conjunction with the Chair of the Board and the CEO, is responsible for ensuring that new directors are provided with an orientation program. It is not anticipated that we will adopt any formal policies with respect to the orientation of new directors, nor is it anticipated to provide continuing education for the directors. Formal policies with respect to director orientation and education will be implemented as and when warranted by growth of our operations.
Ethical Business Conduct
The Board has adopted a written code of conduct and ethics for its directors, officers, employees, contractors and consultants (the "Code of Conduct"). The Board will be responsible for monitoring compliance with the Code of Conduct. The Board has also adopted a whistleblower policy.
The Board will take appropriate measures to exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer may have a material interest. Where appropriate, directors will abstain from portions of board or committee meetings to allow independent discussion of points in issue.
Conflicts of Interest
When faced with a conflict, it is required that business judgment of responsible persons, uninfluenced by considerations other than our best interests, will be exercised in compliance with the guidelines set out in the Code of Conduct. Pursuant to the OBCA, any of our officers or directors with a conflict of interest must disclose the nature and extent of such conflict to the Board and recuse themselves from a matter that materially conflicts with that individual's duty as one of our directors or senior officers.
Protection and Proper Use of Corporate Assets, Information and Opportunities
Confidential information is not to be used for any purposes other than ours. This requirement of confidentiality extends beyond the duty not to discuss private information, whether about us and/or our management and also applies to any of our assets, including trade secrets, patient, supplier or customer lists, business plans, computer software, company records and other proprietary information. The Code provides for certain specific guidelines around the duty of confidentiality of our directors, officers, employees, contractors and consultants.
In the situation of contracts with third parties such as suppliers and service providers, management is to share only that information which is needed to satisfy the conditions of the contract and only to those individuals who need to know.
The duty of confidentiality applies to all directors, officers, employees, contractors and consultants even after leaving their position with us, regardless of the reason for departing.
Compliance with Laws, Rules, and Regulations
It is required that we are in compliance with all legislation applicable to our business operations, including but not restricted to the federal and provincial laws of Canada, and any other applicable laws in jurisdictions where the company operates.
All Board members and employees have a duty to know, understand and comply with any specific legislation pertaining to our business and any legislation applicable to their duties and responsibilities.
The Code of Conduct provides guidelines surrounding, among other items, compliance with applicable laws, conflicts of interest, certain opportunities, confidentiality and disclosure, employment practices, and use of our property and resources.
Insider Trading Policy
The Board has adopted an insider trading policy to set forth basic guidelines for trading in our securities and to preserve our confidential information so as to avoid any situation that might have the potential to damage our reputation, or which could constitute a violation of applicable securities law by our officers, directors, or employees. Under this policy, "insiders" (i.e., officers, members of the Board and other individuals having access to material non-public information) are prohibited from trading in common shares and other securities on the basis of such material non-public information until after the information has been disclosed to the public. The obligation not to trade on inside information applies not only to our insiders, but also to persons who obtain such information from insiders and use it to their advantage. Thus, liability may be imposed upon us, our insiders and also outsiders who are the source of leaks of material information not yet disclosed to the public and the leaks coincide with purchases or sales of our securities (i) by such insiders or outsiders, (ii) by the us, or (iii) by "tippees" (including relatives, friends, investment analysts, etc.).
We have established scheduled "blackout periods" prohibiting sales or purchases by our directors and officers, and any other employee, independent contractor, or consultant of the Company who receives notice from our Chief Financial Officer that they are designated blacked-out employees in respect of a given period prior to the release of financial results which continue until two business days after the time such information has been released to the public and which begin, (i) in the case of interim period financial results, ten business days prior to the end of the fiscal quarter; and (ii) in the case of annual financial results, ten business days before the end of the annual period. From time to time due to specific or anticipated events, we may feel it necessary to issue an unscheduled blackout period for a specific or indefinite period covering insiders or specific employees or groups.
Diversity Policy
The Board has adopted a written diversity policy relating to the identification and nomination of directors or members of senior management that are women, Indigenous peoples (First Nations, Inuit, and Metis), persons with disabilities or members of other racial, ethnic and/or visible minorities (collectively, "Designated Groups"). The Board and the Nominating Committee generally identifies, evaluates, and recommends candidates to become members of the Board or members of senior management with the goal of creating a Board and members of the senior management team that, as a whole, consists of individuals who possess extensive knowledge and competencies, diverse points of view, and relevant expertise, provide balance in terms of the knowledge and competencies of and represent all genders, various ages, and geographic and ethnic diversity, religious belief, cultural background, economic circumstance, human capacity, sexual orientation, as well as a broad range of business and educational experience, professional expertise, personal skills and perspectives The diversity policy identifies specific targets in respect of appointing persons from Designated Groups to the Board and in respect of executive officer appointments.
Committees of our Board of Directors
The Board may establish such other committees as it determines to be appropriate. Each permanent committee will have a mandate that is approved by the Board setting out the responsibilities of, and the extent of the powers delegated to, such committee by the Board.
Assessment of Directors, the Board and Board Committees
The Board is responsible for assessing its own mandate and the effectiveness in fulfilling its mandate and assesses the mandate and effectiveness of fulfilling each of the other committees (considering, among other things, the recommendation of the applicable committee) from time to time and at least annually.
Audit Committee
Composition of Audit Committee
Our audit committee is currently comprised of four members, including Robert J. Ciaruffoli, Frank Lavelle, Barry Fishman and Dr. Sara R. May. Each member of our audit committee is a non-employee member of our Board. In addition, each member of our audit committee is financially literate, as required by the Nasdaq rules and Canadian securities laws. All of the members of our audit committee are "independent" members of our Board, as required by the Nasdaq rules, Rule 10A-3 of the Exchange Act and Canadian securities laws.
Relevant Education and Experience
The education and related experience of each of the members of the Audit Committee that is relevant to the performance of his responsibilities as a member of the Audit Committee is described below.
Robert J. Ciaruffoli
Robert J. Ciaruffoli has served as a member of our audit committee since 2023. Mr. Ciaruffoli holds a Bachelor of Science in Accounting from Kings College, Wilkes-Barre, Pennsylvania. Mr. Ciaruffoli is a CPA and served as the Chairman and CEO of the Parente Beard/Baker Tilly accounting and advisory firm. Mr. Ciaruffoli also served on the Board and executive committee of Baker Tilly International. Throughout his career, Mr. Ciaruffoli has served on numerous for-profit and not-for-profit boards. Presently, he is a board member of Ben Franklin Technology Partners and the co-founder and Chairman of Broad Street Angels, an angel investor network. He was also the past chairman of the Pennsylvania State Board of Accountancy.
Frank Lavelle
Frank Lavelle has served as a member of our audit committee since 2023. Mr. Lavelle holds a Bachelor of Arts in Marketing from Pennsylvania State University. During his career, Mr. Lavelle served as the President and Chief Executive Officer of Siemens Health Solutions, the Chief Executive Officer and director of Symphony Health Solutions, board member and advisor to Symphony Performance Health and as President of MedQuist the world's largest provider of voice-to-coding solutions for healthcare, dictation, and speech recognition software. In addition, Mr. Lavelle was President and Chief Executive Officer of SunGard Public Sector and Education.
Barry Fishman
Barry Fishman has served as a member of our audit committee since 2023. Mr. Fishman holds a Bachelor of Commerce in Accounting and Finance from McGill University. Mr. Fishman is a CPA and has served as Chief Executive Officer of Merus Labs and Teva Canada, and Vice President of Marketing at Eli Lilly Canada. Mr. Fishman has also recently served as an independent director on a number of high-profile boards, including Aurora Cannabis Inc. and Canopy Growth Corporation.
Dr. Sara R. May
Dr. Sara R. May has served as a member of our audit committee since 2024. Dr. May brings deep corporate governance experience through her work with both corporate and not for profit boards, including contributing to the public listing and uplisting process of several start-up cannabis and boutique pharmaceutical companies. Dr. May has served on the board of directors of FV Pharma Inc. (2018 to 2020) and the board of directors of Cannara Biotech (2019 to 2020) where she chaired the Compensation Committee and was a member of the Corporate Governance Committee. She has also been a member of the YMCA Northumberland Charity Board (2020 to 2023) where she chaired the Finance Audit and Risk Committee and has been on the board of directors of Beacon Environmental since 2023.
Audit Committee Charter
Our audit committee has adopted an audit committee charter, which details the principal functions of the Audit Committee, including:
• reviewing the financial statements to be included in our annual report and review with the Board and the auditors the results of the annual audit and reviews any financial statements;
• reviewing and recommending to the Board for approval, where appropriate, financial information contained in any prospectuses, annual information forms, annual reports to shareholders, management proxy circulars, press releases, material change disclosures of a financial nature and similar disclosure documents;
• reviewing with our management of the and with our auditor and assess significant accounting principles and disclosure issues and alternative treatments under IFRS or U.S. GAAP, as applicable, all with a view to gaining reasonable assurance that financial statements present fairly, in all material respects, our financial position, cash flows and the results of our operations in accordance with IFRS or U.S. GAAP, as applicable;
• reviewing and assessing the adequacy and effectiveness of our system of internal control and management information systems, risk management policies and procedures, and financial reporting of any transaction between us, and investigating any alleged fraud;
• reviewing and discussing with our management our major financial risk exposures and the steps taken to monitor and control such exposures, including the use of any financial derivatives and hedging activities;
• reviewing, discussing and investigating any alleged fraud involving our management or employees in relation to the internal controls, including our management's response to any allegations of fraud;
• reviewing the financial reporting of any transaction between us and any officer, director or other "related party" or any entity in which any such person has a financial interest;
• recommending an auditor for nomination and the auditors compensation to the Board, overseeing the work of the auditors, establishing communication with the auditors, reviewing the independence of the auditor, the audit plan, the performance of the auditors, and the results of the external audit and the report thereon;
• monitoring and periodically reviewing our corporate policies and associated procedures, and hiring policies; and
• providing broad oversight of our financial, risk and control related activities.
The Audit Committee has unrestricted access to all information regarding the Company and all our directors, officers and employees and will be directed to cooperate as requested by the Audit Committee. The Audit Committee has the authority to retain, at our expense, outside legal, financial and other advisors, consultants and experts, to assist the Audit Committee in fulfilling its duties and responsibilities. The Audit Committee also has the authority to communicate directly with the auditors and, if applicable, our internal auditors.
Pre-Approval Policies and Procedures
The Audit Committee will pre-approve all non-audit services to be provided to us by its external auditors. The Audit Committee may delegate to one or more of its members the authority to pre-approve non-audit services but preapproval by such member or members so delegated shall be presented to the full Audit Committee at its first scheduled meeting following such pre-approval.
External Auditor Service Fees
The aggregate fees billed by the Company's external auditors in the years ended December 31, 2024 and 2023 are set out below:
| Financial Year Ending |
Audit Fees(1) ($) |
Audit-Related Fees(2) ($) |
Tax Fees(3) ($) |
All Other Fees(4) ($) |
| December 31, 2024(5) | $168,000 | $0 | $0 | $0 |
| December 31, 2024(6) | $134,673 | $36,114 | $10,213 | $9,471 |
| December 31, 2023(7) | $158,004 | $12,125 | $8,178 | $0 |
Notes:
(1) Audit Fees include fees for performance of the annual audit of the Company's financial statements, reviews of quarterly financial statements, reviews of periodic reports and reviews of other documents required by legislation or regulation.
(2) Audit-Related Fees include fees related to comfort letters, consents and reviews of securities filings.
(3) Tax Fees include fees billed for tax compliance, tax advice and tax planning professional services. These services included reviewing tax returns and assisting in responses to government tax authorities.
(4) All other fees include aggregate fees billed for professional services which included accounting advice.
(5) Aggregate fees for the financial year ending December 31, 2024 billed by EisnerAmper LLP.
(6) Aggregate fees for the financial year ending December 31, 2024 billed by MNP LLP.
(7) Aggregate fees for the financial year ending December 31, 2023 were billed by MNP LLP.
Compensation Committee
The purpose of the Compensation Committee is to assess and make recommendations to the Board regarding certain compensation matters, including, but not limited to, relating to the development of human resource strategy, policies and programs, the proper utilization of human resources within the Company, with special focus on senior management succession, development and compensation, the compensation of directors and senior executives and other employee benefits.
The Compensation Committee is required to review and assess the adequacy of its charter periodically as conditions dictate, but at least annually, to ensure compliance with any rules or regulations and recommend any modifications to its charter if and when appropriate to the Board for its approval.
Composition of the Compensation Committee
As of the date of this prospectus, the Compensation Committee is comprised of Dr. Larry Kaiser, Robert J. Ciaruffoli, and Frank Lavelle, all of whom are considered independent.
Compensation Committee Charter
The Board has adopted a written charter for the Compensation Committee, which sets out the Compensation Committee's responsibilities, including:
• reviewing and recommending on an annual basis, the remuneration of our senior executives to the Board, including any incentive plans of directors and any remuneration policies;
• reviewing the CEO's goals and objectives, including corporate goals and objectives relevant to the compensation of the CEO and the CEO's performance in light of those goals and objectives;
• reviewing with the CEO the goals and objectives of other senior executives, including corporate goals and objectives relevant to the compensation of such senior executives, evaluate the performance of senior executives in light of those goals and objectives;
• reviewing, in conjunction with the Nominating Committee, our corporate succession and development plans at the executive officer level;
• reviewing executive compensation disclosure before we publicly disclose this information;
• keeping abreast of current developments in executive compensation in companies engage in similar industries;
• reviewing and making recommendations to the Board in relation to employment offers for a CEO or any senior executive employment offer, or any offer that contains special terms including, but not limited to, any retiring or other allowance agreements, equity-based compensation and any proposed change of control provisions;
• proposing to the Board the engagement of, and manage and supervise, compensation consultants to assist in the evaluation of the compensation of the senior executives' and directors', including the fees and other terms of the retention;
• periodically reviewing the structure and implementation of bonus plans and all share compensation plans;
• reviewing on an annual basis our remuneration policies, including the total remuneration (including benefits) and the main components thereof for the directors and senior executives, and to compare such remuneration policies with the remuneration practices of peers in the same industry;
• reviewing and recommending to the Board for its approval the disclosure required in any management information circular in respect of meetings of our shareholders relating to executive compensation and finalizing the report on executive compensation in any management information circular;
• determining those directors, officers, employees and consultants of the Company who will participate in long term incentive plans, the number and type of shares of the Company allocated to each participant under such plan and the time or times when ownership of such shares will vest for each participant;
• administering all matters relating to any long term incentive plan and any employee bonus plan to which the Committee has been delegated authority pursuant to the terms of such plans or any resolutions passed by the Board;
• annually recommending to the Board the CEO's and senior executives' entitlement to be paid a bonus under any employee bonus plan;
• reviewing on an annual basis, its mandate and recommending any proposed changes to the Board;
• reporting regularly to the Board in relation to any matters arising from its review of compensation practices; and
• evaluating the function of the Compensation Committee on an annual basis.
Nominating Committee
The primary function of the Nominating Committee, in accordance with its charter, is to assist the Board in fulfilling its responsibility to oversee our nominating procedures.
The Nominating Committee is required to review and assess the adequacy of its charter periodically as conditions dictate, but at least annually, to ensure compliance with any rules or regulations and recommend any modifications to its charter if and when appropriate to the Board for its approval.
Nominating Committee Composition
As of the date of this prospectus, the Nominating Committee is comprised of Dr. Larry Kaiser, Barry Fishman, and William L. Ashton, all of whom are considered independent.
Nominating Committee Charter
The Board has adopted a written charter for the Nominating Committee, which sets out the Compensation Committee's responsibilities, including;
• making recommendations to the Board with respect to the size, composition and structure of the Board;
• making recommendations to the Board with respect to the reorganization of responsibilities among committees, the creation of additional committees or subcommittees, or the elimination of committees;
• making recommendations to the Board with respect to the preferred experience and qualifications of news directors to be elected by shareholders;
• making recommendations to the Board with respect to qualified candidates for nomination for election to the Board at each annual general meeting of shareholders;
• making recommendations to the Board with respect to the appointment of qualified directors to each committee;
• making recommendations to the Board with respect to developing and overseeing an orientation program for new directors and a continuing education program for current directors;
• making recommendations to the Board with respect to Board succession; and
• conducting annual performance assessments of the Board.
Executive Compensation
Named Executive Officers
Compensation of our named executive officers generally consists of the following elements: base salaries and participation in our equity incentive plan. The following table sets forth all compensation awarded to, or earned by, our named executive officers for the years ended December 31, 2024 and 2023.
| Name and principal position |
Fiscal Year Ended December 31, |
Salary ($) |
Share-based Awards ($) |
Option-based Awards ($) |
Pension Value ($) |
All Other Compensation ($) |
Total Compensation ($) |
| Dr. Raza Bokhari, (1) CEO | 2024 | - | - | 100,856 | - | - | 100,856 |
| 2023 | - | - | 132,601 | - | - | 132,601 | |
| James Quinlan, CFO |
2024 | 318,269 | - | 40,342 | - | 125,000 | 483,611 |
| 2023 | 93,969 | - | 66,300 | - | 100,000 | 260,269 | |
| Dr. Edward Brennan, CSO, CMO (2) |
2024 | 325,710 | - | 40,342 | - | 125,000 | 491,052 |
| 2023 | 79,424 | - | 39,780 | - | 75,000 | 194,204 |
(1) Dr. Raza Bokhari provided executive services to the Company through an agreement between Medicus and RBx, an entity controlled by Dr. Bokhari. RBx also made available to the Company certain other management services and administrative and executive support. Reimbursable salaries paid to RBx pursuant to this agreement were $125,000 per month through November 2024. In December 2024, reimbursable salaries were changed to $100,000 per month.
(2) Dr. Edward Brennan served as our Chief Medical Officer from September 2023 to November 2024. Dr. Edward Brennan has served as our Chief Scientific Officer & Head of R&D Program since November 2024.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information concerning equity awards granted to our named executive officers that remained outstanding as of December 31, 2024.
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) |
Number of Securities Underlying Unexercised Options Unexercisable (#)(1) |
Option Exercise Price (C$) |
Option Expiration Date |
| Dr. Raza Bokhari | 250,000 | - | 1.16 | 10/24/2028 |
| - | 50,000 | 3.95 | 12/17/2029 | |
| James Quinlan | 125,000 | - | 1.16 | 10/24/2028 |
| - | 20,000 | 3.95 | 12/17/2029 | |
| Dr. Edward Brennan | 75,000 | - | 1.16 | 10/24/2028 |
| - | 20,000 | 3.95 | 12/17/2029 |
(1) The options are scheduled to vest quarterly in four equal installments over one year from the grant date of December 17, 2024.
Employment and Consulting Agreements with Executive Officers
We have entered into written employment agreements with James Quinlan, our Chief Financial Officer, Edward Brennan, our Chief Scientific Officer and Faisal Mehmud, our Chief Medical Officer. Such agreements provide for a base salary, an annual discretionary bonus, notice and payment requirements upon termination without cause or as a result of a change in control, and payments following or in connection with any other termination or resignation. Mr. Quinlan, Mr. Brennan and Mr. Mehmud are also subject to non-solicitation and non-competition agreements prohibiting competing with us and soliciting our clients for a period of one year following termination and also prohibiting soliciting our employees, of officers, executives, or agents for a period of one year following termination.
Directors
Compensation of our directors generally consists of annual retainer fees and the Board and committee meeting fees, which are paid on a quarterly basis. There are no special arrangements between us and any director with respect to fees. Our directors are also entitled to participate in our equity incentive plan. Our executive officers who also act as directors do not receive any additional compensation for services rendered in their capacities as directors.
The following table sets forth all compensation awarded to, or earned by, our directors for the year ended December 31, 2024.
| Director | Fees earned ($)(1) |
Share-based Awards ($) |
Option-based Awards ($) |
Pension Value ($) |
All Other Compensation ($) |
Total Compensation ($) |
| Dr. Raza Bokhari | - | - | 100,856 | - | - | 100,856 |
| Dr. Larry Kaiser | 60,000 | - | 30,257 | - | - | 90,257 |
| Robert J. Ciaruffoli | 75,000 | - | 30,257 | - | - | 105,257 |
| Frank Lavelle | 60,000 | - | 30,257 | - | - | 90,257 |
| William L. Ashton | 50,000 | - | 30,257 | - | - | 80,257 |
| Barry Fishman | 60,000 | - | 30,257 | - | - | 90,257 |
| Dr. Sara R. May(2) | 30,000 | - | 76,051 | - | - | 106,051 |
(1) Other than Dr. Raza Bokhari, who did not receive any extra compensation for serving as Executive Chairman, all directors were paid $50,000 annually, in quarterly installments, as compensation for Board membership in 2024. In addition, committee Chairs received an annual compensation of $10,000, other than the Chair of the Audit Committee, who received $15,000, and Mr. Ciaruffoli, as the lead director, who received an additional $10,000 per annum.
(2) Dr. Sara R. May joined the Board in June 2024.
Directors' Service Contracts
There are no arrangements or understandings between us, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their service as directors of our company.
Employees
As of the date of this prospectus, we have 12 employees, all of which are full-time employees. None of our current employees were employees of Velocity Fund Partners or of SkinJect prior to the Business Combination.
Equity Incentive Plan
Background
The Board has adopted an Equity Incentive Plan (the "Plan"), which was approved by shareholders on July 28, 2023. The Plan allows for the issuance of restricted share units ("RSUs"), and stock options ("Options", and together with the RSUs, "Awards").
Purpose
The purpose of the Plan is to (i) assist in the reward, retention and motivation of directors, consultants, and key employees of the Company and its designated affiliates, (ii) link the reward of such persons to shareholder value creation, and (iii) align the interests of the directors, consultants, and key employees of the Company with its shareholders by providing an opportunity to receive an equity interest in the Company.
A summary of the key terms of the Plan is set out below, which is qualified in its entirety by the full text of the Plan.
Administration of the Equity Incentive Plan
The Plan is administered by the Compensation Committee, which has full authority to administer the Plan, subject to the rules of any stock exchange on which the common shares are listed, including the authority to: (i) interpret and construe any provision of the Plan; (ii) adopt, amend, and rescind such rules and regulations for administering the Plan as the Compensation Committee deems necessary or desirable in order to comply with the requirements of the Plan subject in all cases to compliance with regulatory requirements; (iii) permit an Option to be exercised by way of a "cashless exercise" or "net exercise" basis on terms established by the Compensation Committee in its sole discretion and in accordance with the policies of the Nasdaq, or such other principal market on which the common shares are then traded as designated by the Compensation Committee (the "Stock Exchange").
The Compensation Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan, in the manner and to the extent the Compensation Committee deems, in its discretion, necessary or desirable. All actions taken and all interpretations and determinations made by the Compensation Committee in good faith shall be final and conclusive and shall be binding on each of the Participants (as defined below) and the Company.
Eligibility
The Compensation Committee determines the employees, directors and consultants of the Company who are eligible to participate in the Plan (the "Participants"). The extent to which any Participant is entitled to receive a grant of an Award pursuant to the Plan will be determined in the sole and absolute discretion of the Compensation Committee. For Awards granted to eligible directors, eligible employees and consultants, the Company and the Participant are responsible for ensuring and confirming that the Participant is a bona fide eligible director, eligible employee or consultant, as the case may be.
Common Shares Subject to the Equity Incentive Plan
The Plan is a "rolling up to 10% and fixed up to 10%" security-based compensation plan, within the meaning of Policy 4.4 - Security Based Compensation of the TSXV. The Plan is: a "rolling" plan pursuant to which the number of common shares that are issuable pursuant to the exercise of Options granted under the Plan shall not exceed 10% of the issued and outstanding common shares as at the date of any Option grant; and a "fixed" plan under which the number of common shares that are issuable pursuant to all Awards other than Options granted under the Plan and under any other security based compensation plan, in the aggregate is a maximum of 10% of the issued and outstanding common shares as at the effective date of implementation of the Plan.
Insider Participation Limit, Individual Limits, Annual Grant Limits and Non-Employee Director Limits
The maximum number of common shares reserved for issue pursuant to Awards granted under the Plan to Participants who are "insiders" (as a group) in any 12-month period shall not exceed 10% of the number of common shares then outstanding, unless disinterested shareholder approval is received therefor in accordance with the policies of the Stock Exchange.
The maximum number of common shares reserved for issue pursuant to Awards granted under the Plan to Participants who are "insiders" (as a group) at any point in time shall not exceed 10% of the number of common shares then outstanding, unless disinterested shareholder approval is received therefor in accordance with the policies of Stock Exchange.
The maximum number of common shares reserved for issue under Awards granted to any one Participant in any 12-month period shall not exceed 5% of the number of common shares then outstanding, unless disinterested shareholder approval is received therefor in accordance with the policies of the Stock Exchange.
The maximum number of common shares reserved for issue under Awards granted to any one consultant in any 12-month period shall not exceed 2% of the number of common shares then outstanding.
The maximum number of common shares reserved for issue under Options granted to all Participants conducting investor relations activities in any 12-month period shall not exceed, in the aggregate, 2% of the number of common shares then outstanding. Options granted to Participants performing investor relations activities shall vest in stages over a 12-month period, with no more than one-quarter of the Options vesting in any three-month period. No acceleration of the vesting provisions of Options granted to persons retained to provide investor relations activities is allowed without the prior acceptance of the Stock Exchange.
Types of Awards
The Plan provides for the grant of Options and RSUs. All of the Awards described below are subject to the conditions, limitations, restrictions, exercise price, vesting, settlement and forfeiture provisions determined by the Board, in its sole discretion, subject to such limitations provided in the Plan. In addition, subject to the limitations provided in the Plan and in accordance with applicable law, the Board may accelerate or defer the vesting of Awards, modify outstanding Awards, and waive any condition imposed with respect to Awards or common shares issued pursuant to Awards.
Options
An Option is an option granted by the Company to a Participant entitling such Participant to acquire a designated number of common shares from treasury at the exercise price, subject to the provisions of the Plan. For greater certainty, the Company is obligated to issue and deliver the designated number of common shares on the exercise of an Option and shall have no independent discretion to settle an Option in cash or other property other than common shares issued from treasury. For the avoidance of doubt, no dividend equivalents shall be granted in connection with an Option.
Subject to the provisions set forth in the Plan and any shareholder or regulatory approval which may be required, the Compensation Committee shall, from time to time by resolution, in its sole discretion, (a) designate the eligible director, eligible employee or consultant who may receive Options under the Plan, (b) fix the number of Options, if any, to be granted to each eligible director, eligible employee or consultant and the date or dates on which such Options shall be granted, (c) determine the price per common share to be payable upon the exercise of each such Option, (d) determine the relevant vesting provisions (including performance criteria, if applicable) and (e) determine the period of time during which the particular Option may be exercised (the "Option Period").
Each Option granted to a Participant may be evidenced by a stock option notice or stock option agreement setting out terms and conditions consistent with the provisions of the Plan and may be subject to any other terms and conditions (including without limitation any recoupment, reimbursement or claw-back compensation policy as may be adopted by the Compensation Committee from time to time) which are not inconsistent with the Plan and which the Compensation Committee deems appropriate for inclusion in an Option, which terms and conditions need not be the same in each case and which terms and conditions may be changed from time to time.
The price per share (the "Exercise Price") at which any common share which is the subject of an Option may be purchased shall be determined by the Compensation Committee at the time the Option is granted, provided that the Exercise Price shall be not less than the closing price of the common shares on the Stock Exchange on the last trading day immediately preceding the date of the grant of such Option less the maximum discount, if any, permitted by the Stock Exchange or, if the common shares are not then listed on any Stock Exchange, the Exercise Price shall not be less than the fair market value of the common shares as may be determined by the Board on the day immediately preceding the date of the grant of such Option. Disinterested shareholder approval shall be required for any reduction in the Exercise Price of any Option if the optionee is an insider of the Company at the time of the proposed amendment to the Exercise Price.
Except as otherwise specifically provided in the Plan or in any employment contract, Options may be exercised by the optionee in whole at any time, or in part from time to time (in each case to the nearest full common share), during the Option Period only in accordance with the vesting schedule, if any, determined by the Compensation Committee, in its sole and absolute discretion, subject to the applicable requirements of the Stock Exchange, at the time of the grant of the Option, which vesting schedule may include performance vesting or acceleration of vesting in certain circumstances and which may be amended or changed by the Compensation Committee from time to time with respect to a particular Option. If the Compensation Committee does not determine a vesting schedule at the time of the grant of any particular Option, such Option shall be exercisable in whole at any time, or in part from time to time, during the Option Period, subject to the applicable requirements of the Stock Exchange. In the event that the common shares are listed on the TSXV, Options with an Exercise Price based on the discounted market price (as such term is defined in the policies of the TSXV), and the common shares issuable upon the exercise thereof, shall be subject to the restricted period and legending requirements imposed by the policies of the TSXV.
RSUs
An RSU is an Award that is a bonus for services rendered in the year of grant, that, upon settlement, entitles the recipient Participant to receive a cash payment equal to the market value of a common share or, at the sole discretion of the Compensation Committee, a common share, and subject to such restrictions and conditions on vesting as the Compensation Committee may determine at the time of grant, unless such RSU expires prior to being settled. Restrictions and conditions on vesting may, without limitation, be based on the passage of time during continued employment or other service relationship, the achievement of specified performance criteria or both.
Subject to the provisions of the Plan and any shareholder or regulatory approval which may be required, the Compensation Committee shall, from time to time by resolution, in its sole discretion, (a) designate the eligible director, eligible employee or consultant who may receive RSUs under the Plan, provided such person was not retained to provide investor relations activities, (b) fix the number of RSUs, if any, to be granted to each eligible director, eligible employee or consultant and the date or dates on which such RSUs shall be granted, (c) determine the relevant conditions, vesting provisions and the restriction period of such RSUs, and (d) determine any other terms and conditions applicable to the granted RSUs, which need not be identical and which, without limitation, may include non-competition provisions, subject to the terms and conditions prescribed in the Plan, in any RSU agreement, and any applicable rules of the Stock Exchange.
Subject to the vesting and other conditions and provisions in the Plan, all RSUs will vest in accordance with the terms of the RSU agreement entered into in respect of such RSUs, provided that no RSUs may vest for one year from the date of issuance.
Subject to the vesting and other conditions and provisions in the Plan and in the applicable RSU agreement, each RSU awarded to a Participant shall entitle the Participant to receive, on settlement, a cash payment equal to the market value of a common share, or, at the discretion of the Compensation Committee, one common share or any combination of cash and common shares as the Compensation Committee in its sole discretion may determine, in each case less any applicable withholding taxes. For greater certainty, no Participant shall have any right to demand to be paid in, or receive, common shares in respect of any RSU, and, notwithstanding any discretion exercised by the Compensation Committee to settle any RSU, or a portion thereof, in the form of common shares, the Compensation Committee reserves the right to change such form of payment at any time until payment is actually made.
Persons who provide investor relations activities shall not receive any Awards other than Options.
The Compensation Committee shall have sole discretion to (a) determine if any vesting conditions with respect to a RSU, including any performance criteria or other vesting conditions contained in the applicable RSU agreement, have been met, (b) waive the vesting conditions applicable to RSUs (or deem them to be satisfied), and (c) extend the restriction period with respect to any grant of RSUs, provided that any such extension shall not result in the restriction period for such RSUs extending beyond the RSU Outside Expiry Date (as defined below) and, provided, further, that any such determination, waiver or extension to an RSU granted to an eligible director, eligible employee or consultant who is a U.S. person shall be made in accordance with Section 409A of the U.S. Code. The Company shall communicate to a Participant, as soon as reasonably practicable, the date on which all such applicable vesting conditions in respect of a grant of RSUs to the Participant have been satisfied, waived or deemed satisfied and such RSUs have vested (the "Vesting Date").
Dividend Equivalents
Dividend equivalents may, as determined by the Compensation Committee in its sole discretion, be awarded as a bonus for services rendered in the year awarded in respect of unvested RSUs in a Participant's account on the same basis as cash dividends declared and paid on common shares as if the Participant was a shareholder of record of common shares on the relevant record date. Dividend equivalents, if any, will be credited to the Participant's account in additional RSUs, the number of which shall be equal to a fraction where the numerator is the product of (a) the number of RSUs in such Participant's account on the date that dividends are paid multiplied by (b) the dividend paid per common share and the denominator of which is the market value of a common share calculated as of the date that dividends are paid. Any additional RSUs credited to a Participant's account as a dividend equivalent shall be subject to the same terms and conditions (including vesting, restriction periods and expiry) as the RSUs in respect of which such additional RSUs are credited.
In the event that the Participant's applicable RSUs do not vest, all dividend equivalents, if any, associated with such RSUs will be forfeited by the Participant.
In the event that the limits set forth in the Plan prevent the Company from satisfying its obligations under any dividend equivalent, or the Company elects in its sole and absolute discretion, the Company shall be permitted to settle any dividend equivalent issued under the Plan in cash. Any such cash payments shall be calculated by multiplying the number of RSUs to be redeemed for cash by the market value per common share as at the settlement date.
Black-out Periods
If the expiry date of an Option fall falls within a blackout period or within ten business days after the expiry of a blackout period, then the expiry date of the Option will be the date which is ten business days after the expiry of the blackout period.
Expiry Date of Awards
Options
The Option Period for each Option shall be such period of time as shall be determined by the Compensation Committee, subject to amendment by an employment contract, provided that in no event shall an Option Period exceed ten years. Disinterested shareholder approval shall be required for the extension of any Option Period if the optionee is an insider of the Company at the time of the proposed amendment to the Option Period.
RSUs
No payment, whether in cash or in common shares, shall be made in respect of the settlement of any RSUs later than December 15th of the third (3rd) calendar year following the end of the calendar year in respect of which such RSU is granted (the "RSU Outside Expiry Date").
Termination of Employment or Service
Options
If a Participant shall:
(a) cease to be a director or of a designated affiliate, as the case may be (and is not or does not continue to be an employee thereof), for any reason (other than death); or
(b) cease to be employed by, or provide services to, the Company or the designated affiliates (and is not or does not continue to be a director or officer thereof), or any corporation engaged to provide services to the Company or the designated affiliates, for any reason (other than death) or shall receive notice from the Company or any designated affiliate of the termination of their employment contract;
(the earliest to occur of any of the foregoing events being referred to herein as a "Termination"), except as otherwise provided in any employment contract, such Participant may, but only within the 90 days next succeeding such Termination (or, subject to the limitations set forth below, such other period of time as may be determined by the Board), exercise the Options to the extent that such Participant was entitled to exercise such Options at the date of such Termination. Notwithstanding the foregoing or any employment contract, in no event shall such right extend beyond the Option Period or one year from the date of Termination, whichever is earlier.
RSUs
If a Participant shall:
(a) cease to be a director or of a designated affiliate, as the case may be (and is not or does not continue to be an employee thereof), for any reason (other than death); or
(b) cease to be employed by, or provide services to, the Company (and is not or does not continue to be a director or officer thereof), or any corporation engaged to provide services to the Company, for any reason (other than death) or shall receive notice from the Company of the termination of their employment contract;
(the earliest to occur of any of the foregoing events being referred to as a Termination), the Participant's participation in the Plan shall be terminated immediately, all RSUs credited to such Participant's account that have not vested shall be forfeited and cancelled, and the Participant's rights that relate to such Participant's unvested RSUs shall be forfeited and cancelled on the date of such Termination. Notwithstanding the foregoing, if the Compensation Committee, in its sole discretion, instead accelerates the vesting or waives vesting conditions with respect to all or some portion of outstanding unvested RSUs, the date of such action is the Vesting Date.
If a Participant or, in the case of a consultant which is not an individual, the primary individual providing services to the Company on behalf of the consultant, shall die, any unvested RSUs in the Participant's account as at the date of such death relating to a restriction period in progress shall become immediately forfeited and cancelled. For greater certainty, where a Participant's employment or service relationship with the Company is terminated as a result of death following the satisfaction of all vesting conditions in respect of particular RSUs but before receipt of the corresponding distribution or payment in respect of such RSUs, the Participant shall remain entitled to such distribution or payment. Notwithstanding the foregoing, if the Compensation Committee, in its sole discretion, instead accelerates the vesting or waives vesting conditions with respect to all or some portion of outstanding unvested RSUs, the date of such action is the Vesting Date.
Change of Control
Under the Plan, in the event of a potential change in control, except as otherwise provided in the applicable resolution granting an Award, the Board shall provide for the treatment of each outstanding Award as it determines in its sole discretion, which treatment need not be uniform for all Participants and/or Awards and which may include, without limitation, one or more of the following:
(a) (i) continuation of such Awards or (ii) conversion of such Awards into, or substitution or replacement of such Awards with, an Award with respect to shares of the successor corporation (or a parent or subsidiary thereof) with substantially equivalent terms and value as such Awards (which value as at immediately following such change in control shall not exceed the intrinsic value of any such Option as at immediately prior to such change in control), effected in accordance with Sections 409A and 424 of the United States Internal Revenue Code of 1986 to the extent applicable; and/or
(b) acceleration of the vesting and the right to exercise such Option or settle such RSU as at immediately, or during a specified period, prior to such change in control, and the termination of such Option to the extent such Option is not timely exercised. If the change in control is not completed within the time specified therein (as the same may be extended), the Awards which vest pursuant to the Plan shall be returned by us to the Participant and, if exercised or settled, as applicable, the common shares issued on such exercise or settlement shall be reinstated as authorized but unissued common shares and the original terms applicable to such Awards shall be reinstated.
(c) for purposes of the application of the change in control provisions to any outstanding Award, if such Award is subject to performance criteria (including any performance vesting conditions), the level of attainment of such criteria shall be determined by the Board in its sole discretion, including, without limitation, by deeming such criteria attained at the applicable target or maximum level regardless of actual performance, or measuring the attainment of such criteria based on actual performance through such change in control or a specified date prior thereto.
Notwithstanding the foregoing, to the extent necessary to comply with Section 409A of the Code with respect to the payment of deferred compensation to any U.S. taxpayer, change in control shall be limited to a change in control event as defined in Treasury Regulations (as defined below) Section 1.409A-3(i)(5) prescribed pursuant to Section 409A of the Code.
Non-Transferability of Awards
No rights under the Plan and no Award granted pursuant to the Plan are assignable or transferable by any Participant other than pursuant to a will or by the laws of descent and distribution.
Amendments to the Equity Incentive Plan
Subject to certain restrictions, the Compensation Committee shall have the right without the approval of the shareholders of the Company to make certain amendments to the Plan, including but not limited to the following amendments:
(a) any amendment of a "housekeeping" nature, including, without limitation, amending the wording of any provision of the Plan for the purpose of clarifying the meaning of existing provisions or to correct or supplement any provision of the Plan that is inconsistent with any other provision of the Plan, correcting grammatical or typographical errors and amending the definitions contained within the Plan;
(b) any amendment to comply with the rules, policies, instruments and notices of any regulatory authority to which the Company is subject, including the Stock Exchange, or to otherwise comply with any applicable law or regulation;
(c) other than changes to the expiration date and the exercise price of any Award, any amendment, with the consent of the Participant, to the terms of any Award previously granted to such Participant under the Plan;
(d) any amendment to the provisions concerning the effect of the termination of any Participant's position, employment or services on such Participant's status under the Plan;
(e) any amendment to the categories of persons who are Participants; and
(f) any amendment respecting the administration or implementation of the Plan.
Subject to the provisions of the Plan, the Compensation Committee also has the right, under the Plan with the approval of the shareholders of the Company by ordinary resolution including, if required by the applicable Stock Exchange, disinterested shareholder approval, to make amendments to the Plan not contemplated above, including, but not limited to:
(a) any change to the number of common shares issuable from treasury under the Plan, including an increase to the fixed maximum percentage or number of common shares or a change from a fixed maximum percentage of common shares to a fixed maximum number of common shares or vice versa;
(b) any amendment which reduces the exercise price of any Award, provided, however, that, for greater certainty, disinterested shareholder approval will be required for any amendment which reduces the exercise price of any Option if the Participant is an insider of the Company at the time of the proposed amendment;
(c) any amendment which extends the expiry date of an Award, or the restriction period of any RSU beyond the original expiry date or restriction period, except in the event of an extension due to a blackout period;
(d) any amendment which cancels any Award and replaces such Award with an Award which has a lower exercise price or other entitlement;
(e) any amendment which would permit Awards to be transferred or assigned by any Participant; and
(f) any amendments to the amendment provisions of the Plan.
Notwithstanding the foregoing: any amendment to the Plan shall be subject to the receipt of all required regulatory approvals including, without limitation, the approval of the Stock Exchange.
The following table sets forth the number of common shares to be issued, including upon exercise of outstanding convertible securities, pursuant to the Company's equity compensation plans, the weighted-average exercise price of such outstanding convertible securities and the number of common shares remaining available for future issuance under equity compensation plans as at December 31, 2024.
| Plan Category | Number of common shares to be issued upon exercise of outstanding Options, warrants and rights |
Weighted-average exercise price of outstanding Options, warrants and rights |
Number of common shares remaining available for future issuance under equity compensation plans |
| Equity compensation plans approved by security holders | 1,185,000 | C$2.06 | 801,556 |
| Equity compensation plans not approved by security holders | - | - | - |
| Total | 1,185,000 | C$2.06 | 801,556 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common shares as of May 21, 2025, by:
- each person known by us to be the beneficial owner of more than 5% of our outstanding common shares;
- each of our executive officers and directors; and
- all our executive officers and directors as a group.
The number of shares beneficially owned by each shareholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power. Applicable percentage ownership is based on 13,572,737 common shares outstanding as of May 21, 2025. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, common shares subject to options, warrants, or other rights held by such person that are currently exercisable or will become exercisable within 60 days of May 21, 2025 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all common shares beneficially owned by them.
| Name and Address of Beneficial Owner | Number of Shares Beneficially Owned |
Approximate Percentage of Outstanding Common Shares |
||||
| Directors and Executive Officers of Medicus Pharma Ltd.(1) | ||||||
| Dr. Raza Bokhari | 1,068,173 | (2) | 7.7 | % | ||
| James Quinlan | 288,147 | (3) | 2.1 | % | ||
| Carolyn Bonner | 86,405 | (4) | * | |||
| Edward Brennan | 195,500 | (5) | 1.4 | % | ||
| Faisal Mehmud | - | * | ||||
| William L. Ashton | 33,750 | (6) | * | |||
| Robert J. Ciaruffoli | 45,000 | (7) | * | |||
| Frank Lavelle | 58,122 | (8) | * | |||
| Larry Kaiser | 32,500 | (9) | * | |||
| Barry Fishman | 32,500 | (10) | * | |||
| Sara R. May | 32,500 | (11) | * | |||
| All officers and directors as a group (11 individuals) | 1,872,597 | 13.0 | % | |||
| Five Percent Holders of Medicus Pharma Ltd. | ||||||
| Dr. Kenneth Melani | 3,248,741 | (12) | 23.9 | % | ||
| Ajay Raju | 2,000,000 | (13) | 14.7 | % | ||
| Steven Boyd | 1,266,000 | (14) | 9.3 | % | ||
| John Hathaway | 800,952 | (15) | 5.9 | % |
* Less than one percent.
(1) Unless otherwise noted, the business address of each of our directors and executive officers is 300 Conshohocken State Rd., Suite 200, W. Conshohocken, PA 19428.
(2) Includes 793,173 common shares held by RBx Capital, LP, an entity controlled by Dr. Raza Bokhari. Dr. Raza Bokhari may be deemed the beneficial owner of securities held by RBx Capital, LP. Includes 275,000 common shares underlying stock options that are currently exercisable.
(3) Includes 135,000 common shares underlying stock options and 24,000 common shares underlying Public Warrants that are currently exercisable or will become exercisable.
(4) Includes 67,500 common shares underlying stock options that are currently exercisable.
(5) Includes 85,000 common shares underlying stock options and 24,000 common shares underlying Public Warrants that are currently exercisable.
(6) Includes 32,500 common shares underlying stock options that are currently exercisable.
(7) Includes 32,500 common shares underlying stock options that are currently exercisable.
(8) Includes 32,500 common shares underlying stock options that are currently exercisable.
(9) Includes 32,500 common shares underlying stock options that are currently exercisable.
(10) Includes 32,500 common shares underlying stock options that are currently exercisable.
(11) Includes 32,500 common shares underlying stock options that are currently exercisable.
(12) Includes 2,839,330 common shares held by Velocity Fund Partners, LP, an entity controlled by Dr. Kenneth R. Melani. Dr. Kenneth R. Melani's address is 1100 Stonegate Manor, Cheswick, PA 15024.
(13) Includes 2,000,000 common shares held of record by 215 Capital Togo PHL Fund I, LP. Ajay Raju's address is Two Liberty Place, 50 S. 16th Street, Suite 2710, Philadelphia, PA 19102.
(14) Includes 1,266,000 common shares held of record by Armistice Capital, LLC, an entity controlled by Steven Boyd. Steven Boyd’s address is 510 Madison Avenue, 7th Floor New York, New York 10022.
(15) Includes 800,952 common shares held of record by SkinJect Partners LLC, an entity controlled by John Hathaway. John Hathaway's address is 285 Kappa Drive, Suite 100, Pittsburgh, PA 15238.
Based upon a review of the information provided to us by our transfer agent, as of May 21, 2025, there were 137 record holders of our common shares, one holder of record of our Public Warrants and one holder of record of our Regulation A Warrants. Such numbers do not include beneficial owners holding our securities through nominee names.
RELATED PARTY TRANSACTIONS
The Company had an agreement with Velocity Fund Management, LLC ("VFM"), an affiliate of a shareholder of the Company, that provided for certain managerial positions to be filled from within VFM. These employees were not deemed employees of the Company, and VFM was responsible for the payment and provision of all wages, bonuses, commissions and benefits. Reimbursable salaries paid to VFM were approximately $180,000 during the year ended December 31, 2023. This agreement was terminated on September 29, 2023.
In December 2022, Velocity Fund Partners, LP, an affiliate of shareholders' of the Company invested $150,000 in a simple agreement for future equity issued by the Company.
On March 17, 2023, as amended on May 12, 2023 and August 29, 2023, the Company entered into the Business Combination under which the Company entered into a reverse takeover transaction ("RTO") with SkinJect on September 29, 2023. On September 29, 2023, RBx, an entity controlled by Executive Chairman and Chief Executive Officer of the Company, Dr. Raza Bokhari, invested $1,600,000 in exchange for 400,000 common shares as part of the share issuance in connection with the RTO, and received 261,780 common shares upon conversion of promissory notes. RBx made an additional investment of $55,000 in Interactive Capital Partners Corporation in exchange for 1,375,000 common shares, which were consolidated into 54,525 common shares of the Company at the date of the RTO. An additional $405,000 was invested by directors and officers of the Company in exchange for 101,250 common shares as part of the share issuance in connection with the RTO, and another $55,000 was invested in Interactive Capital Partners Corporation by an officer of the Company in exchange for 1,375,000 common shares, which were consolidated into 54,525 common shares of the Company at the date of the RTO.
On October 18, 2023, the Company signed an agreement with RBx, that provides for certain managerial positions to be filled from within RBx. RBx is responsible for the payment and provision of all wages, bonuses, and benefits for these positions. Reimbursable salaries paid to RBx pursuant to this agreement are $125,000 per month. In December 2024, reimbursable salaries were changed to $100,000 per month. Reimbursable salaries paid to RBx were $1,300,000 and $400,000 during the years ended December 31, 2024 and 2023, respectively. Additional expenses of $180,857 and $736,690 were incurred by RBx on behalf of the Company during the years ended December 31, 2024 and 2023, respectively. The Company paid $1,623,316 and $970,740 to RBx during the years ended December 31, 2024 and 2023. The total amount of accounts payable to RBx was $142,459 and $165,950 as of December 31, 2024 and 2023, respectively.
In connection with the convertible notes issued by the Company on May 3, 2024, related parties consisting of key management personnel subscribed for 168,750 convertible notes in the principal amount of $675,000 on the same terms as the investors who were not related to the Company. Upon conversion the Company settled the convertible notes, along with accrued but unpaid interest, with 172,953 common shares. RBx purchased $300,000 principal amount of convertible notes. James Quinlan, Chief Financial Officer of the Company, purchased $100,000 principal amount of convertible notes. Carolyn Bonner, President of the Company, purchased $25,000 principal amount of convertible notes.
On November 15, 2024, the Bokhari Trust, of which Dr. Raza Bokhari is a trustee, invested $594,000 in exchange for 144,000 units, consisting of 144,000 common shares and 144,000 Public Warrants as part of the Company's initial public offering, James Quinlan, Chief Financial Officer of the Company, invested $111,360 in exchange for 24,000 units, consisting of 24,000 common shares and 24,000 Public Warrants as part of the Company's U.S. initial public offering and Edward Brennan, Chief Scientific Officer of the Company, invested $111,360 in exchange for 24,000 units, consisting of 24,000 common shares and 24,000 Public Warrants as part of the Company's U.S. initial public offering.
Interests of Management and Others in Material Transactions
Other than as disclosed above, none of the directors or executive officers of Medicus, or persons or companies that beneficially own, or control or direct, directly or indirectly, more than 10% of our outstanding common shares, or any associate or affiliate of any of the foregoing, has any material interest, direct or indirect, in any transactions in which Medicus has participated within the three years before the date of this prospectus, which has materially affected or is reasonably expected to materially affect Medicus.
Indebtedness of Directors and Executive Officers
As of the date of this prospectus, no director or officer of Medicus, or any associate or affiliate of any of them is indebted to Medicus, nor is any indebtedness of any such person the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by Medicus.
DESCRIPTION OF SECURITIES
The following description of the material terms of the securities of the Company includes a summary of specified provisions of the articles of incorporation (the "Articles") and the by-laws (the "Bylaws") of the Company. This description is qualified by reference to the Articles and the Bylaws, copies of which have been filed with the SEC as exhibits to the registration statement of which this prospectus forms a part and are incorporated in this prospectus by reference.
Authorized Capital
The Company's authorized capital consists of an unlimited number of common shares and an unlimited number of preferred shares. The following is a summary of the rights, privileges, restrictions and conditions attached to the common shares and the preferred shares as set forth in the Articles and the Bylaws and certain related sections of the OBCA but does not purport to be complete. Reference should be made to the constating documents of the Company and the full text of their provisions for a complete description thereof.
Common Shares
The Company is authorized to issue an unlimited number of common shares, of which 13,572,737 are issued and outstanding as of May 21, 2025.
The holders of the common shares are entitled to receive notice of and attend any meeting of the shareholders of the Company and are entitled to one vote for each common share held. Shareholders are entitled to receive dividends, if, as and when declared by the board of directors of the Company and to receive a proportionate share, on a per share basis, of the assets of the Company available for distribution in the event of a liquidation, dissolution or winding-up of the Company.
Provisions as to the modification, amendment or variation of the rights attached to the common shares are contained in the Bylaws.
Preferred Shares
The Company is authorized to issue an unlimited number of preferred shares, of which no preferred shares are issued and outstanding as of the date of this prospectus.
|
Dividends |
The holders of the preferred shares are entitled to receive dividends if, as and when declared by the board of directors of the Company out of the assets of the Company properly applicable to the payment of dividends in such amounts and payable in such manner as the board of directors may from time to time determine. Subject to the rights of the holders of any other class of shares of the Company entitled to receive dividends in priority to or ratably with the holders of the preferred shares, the board of directors may in their sole discretion declare dividends on the preferred shares to the exclusion of any other class of shares of the Company. |
|
Participation |
In the event of the liquidation, dissolution or winding-up of the Company or other distribution of assets of the Company among its shareholders for the purpose of winding-up its affairs, the holders of the preferred shares shall be entitled to receive from the assets of the Company a sum equivalent to the aggregate Redemption Amount (as defined below) of all preferred shares held by them respectively before any amount shall be paid or any assets of the Company distributed to the holders of common shares or shares of any other class ranking junior to the preferred shares. After payment to the holders of the preferred shares of the amount so payable to them as above provided they shall not be entitled to share in any further distribution of the assets of the Company. |
|
Redemption Holder |
A holder of preferred shares is entitled to require the Company to redeem, subject to the requirements of the OBCA, at any time or times all or any of the preferred shares held by such holder by tendering to the Company at its registered office a share certificate or certificates representing the preferred shares which the holder desires to have the Company redeem together with a request in writing specifying (i) that the holder desires to have the preferred shares represented by such certificate or certificates redeemed by the Company and, if part only of the shares represented by such certificate or certificates is to be redeemed, the number thereof so to be redeemed and (ii) the business day (the "Redemption Date") on which the holder desires to have the Company redeem such preferred shares. The Redemption Date shall be not less than 30 days after the day on which the request in writing is given to the Company. Upon receipt of a share certificate or certificates representing the preferred shares which the holder desires to have the Company redeem together with such a request the Company shall on the Redemption Date redeem such preferred shares by paying to such holder an amount for each such preferred share being redeemed equal to the Redemption Amount. Such payment shall be made by cheque payable at par at any branch of the Company's bankers for the time being in Canada. If a part only of the shares represented by any certificate by redeemed a new certificate for the balance shall be issued at the expense of the Company. The said preferred shares shall be redeemed on the Redemption Date and from and after the Redemption Date the holder of such shares shall cease to be entitled to dividends and shall not be entitled to exercise any of the rights of a holder of preferred shares in respect thereof unless payment of the Redemption Amount is not made on the Redemption Date, in which event the rights of the holder of the said preferred shares shall remain unaffected. |
|
Redemption Company |
The Company may, upon giving notice to holders of preferred shares, redeem at any time the whole or from time to time any part of the then outstanding preferred shares on payment of an amount for each share to be redeemed equal to the amount paid up thereon plus all declared and unpaid dividends thereon, the whole constituting and being herein referred to as the "Redemption Amount." |
|
Voting |
The holders of the preferred shares shall not be entitled to receive notice of or to attend any meeting of the shareholders of the Company and shall not be entitled to vote at any such meeting. The holders of the preferred shares shall, however, be entitled to notice of meetings of the shareholders called for the purpose of authorizing the dissolution of the Company or the sale, lease or exchange of all or substantially all the property of the Company other than in the ordinary course of business of the Company under subsection 184(3) of the OBCA, as now enacted or as the same may from time to time be amended, re-enacted or replaced. |
Stock Options
As of the date of this prospectus, the Company had options outstanding to purchase approximately 1,185,000 common shares at exercise prices ranging from C$1.16 to C$4.80 and expiry dates ranging from October 24, 2028 to December 17, 2029. Of these options, 762,500 options may be exercised at C$1.16 and expire on October 24, 2028, 37,500 options may be exercised at C$4.80 and expire on April 1, 2029, 25,000 options may be exercised at C$3.34 and expire on June 25, 2029, 100,000 may be exercised at C$3.25 and expire on November 14, 2029, 50,000 may be exercised at C$2.70 and expire on November 20, 2029 and 210,000 options may be exercised at C$3.95 and expire on December 17, 2029.
Certain Important Provisions of the Articles and the Bylaws and the OBCA
The following is a summary of certain important provisions of the Articles and the Bylaws and certain related sections of the OBCA. Please note that this is only a summary and is not intended to be exhaustive. This summary is subject to, and is qualified in its entirety by reference to, the provisions of the Articles and the Bylaws and the OBCA.
Objects and Purposes of the Company
Our Articles do not contain and are not required to contain a description of our objects and purposes. There is no restriction contained in our Articles on the business that we may carry on.
Voting on Certain Proposal, Arrangement, Contract or Compensation by Directors
Other than as disclosed below, neither our Articles nor our Bylaws restrict our directors' power to: (a) vote on a proposal, arrangement or contract in which the directors are materially interested; or (b) to vote with regard to compensation payable to themselves or any other members of their body in the absence of an independent quorum.
Our Bylaws provide that a director who: (a) is a party to; or (b) is a director or an officer of, or has a material interest in, any person who is a party to; a material contract or transaction or proposed material contract or transaction with us shall disclose the nature and extent of such director's interest at the time and in the manner provided by the OBCA. Any such contract or transaction or proposed material contract or transaction shall be referred to our board of directors or shareholders for approval in accordance with the OBCA even if such contract or proposed material contract or transaction is one that in the ordinary course of our business would not require approval by our board of directors or shareholders, and a director interested in a contract or transaction so referred to our board of directors shall not attend any part of a meeting of our board of directors during which the contract or transaction is discussed and shall not vote on any resolution to approve such contract or transaction except as provided by the OBCA.
Subject to our Articles and any unanimous shareholder agreement, our directors shall be paid such remuneration for their services as our board of directors may from time to time determine. Our directors shall also be entitled to be reimbursed for travelling and other expenses properly incurred by them in attending meetings of our board of directors or any committee thereof. Nothing in our Bylaws shall preclude any director from serving the Company in any other capacity and receiving remuneration therefor in that capacity.
The OBCA provides that a director who: (a) is a party to a material contract or transaction or proposed material contract or transaction with the Company; or (b) is a director or an officer of, or has a material interest in, any person who is a party to a material contract or transaction or proposed material contract or transaction with the Company, shall not attend any part of a meeting of directors during which the contract or transaction is discussed and shall not vote on any resolution to approve the contract or transaction unless the contract or transaction is one: (i) relating primarily to such director's remuneration as a director of the Company or one of our affiliates; (ii) for indemnity or insurance for the benefit of such director in his or her capacity as a director; or (iii) with one of our affiliates.
Where a material contract is made or a material transaction is entered into between us and a director of the Company, or between us and another person of which a director of the Company is a director or officer or in which he or she has a material interest: (a) the director is not accountable to us or our shareholders for any profit or gain realized from the contract or transaction; and (b) the contract or transaction is neither void nor voidable, by reason only of that relationship or by reason only that the director is present at or is counted to determine the presence of a quorum at the meeting of directors that authorized the contract or transaction, if the director disclosed his or her interest in accordance with the OBCA and the contract or transaction was reasonable and fair to us at the time it was approved.
Borrowing Powers of Directors
Our Bylaws provide that, if authorized by our directors, we may, subject to our Articles: (i) borrow money upon our credit; (ii) issue, reissue, sell, pledge or hypothecate bonds, debentures, notes or other evidences of indebtedness of the Company, whether secured or unsecured; (iii) give a guarantee on behalf of the Company to secure performance of any present or future indebtedness, liability or obligation of any person; and (iv) mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal, movable or immovable, property of the Company including book debts, rights, powers, franchises and undertakings, to secure any such bonds, debentures, notes or other evidences of indebtedness or guarantee or any other present or future indebtedness, liability or obligation of the Company.
Amendment to the borrowing powers described above requires an amendment to the Articles and the Bylaws. Our Bylaws do not contain any provisions in connection with amending the Bylaws. The OBCA provides that our board of directors may by resolution, make, amend or repeal any Bylaws that regulate our business or affairs and that our board of directors shall submit such Bylaws, amendment or repeal to our shareholders at the next meeting of shareholders and the shareholders may confirm, reject or amend the Bylaw, amendment or repeal.
Qualifications of Directors
Under our Bylaws and the OBCA, the following persons are disqualified from being a director of the Company: (i) a person who is less than 18 years of age; (ii) a person who has been found under the Substitute Decisions Act, 1992 or under the Mental Health Act to be incapable of managing property or who has been found to be incapable by a court in Canada or elsewhere; (iii) a person who is not an individual; and (iv) a person who has the status of a bankrupt. Subject to our Articles, a director is not required to be a shareholder of the Company. At least 25% of our directors must be resident Canadian and if we have less than four directors, at least one director must be a resident Canadian.
Procedures to Change the Rights of Shareholders
The rights, privileges, restrictions and conditions attaching to our shares are contained in our Articles and such rights, privileges, restrictions and conditions may be changed by amending our Articles. In order to amend our Articles, the OBCA requires a resolution to be passed by a majority of not less than two-thirds of the votes cast by the shareholders entitled to vote thereon. In addition, if we resolve to make particular types of amendments to our Articles, a holder of our shares may dissent with regard to such resolution and, if such shareholder so elects, we would have to pay such shareholder the fair value of the shares held by the shareholder in respect of which the shareholder dissents, determined as of the close of business on the day before the resolution was adopted. The types of amendments that would be subject to dissent rights include without limitation: (i) to add, remove or change restrictions on the issue, transfer or ownership of shares of a class or series of our shares; (ii) to add, remove or change any restriction upon the business that we may carry on or upon the powers that we may exercise; (iii) to amalgamate with another corporation in accordance with the OBCA; (iv) to continue under the laws of another jurisdiction in accordance with the OBCA; and (v) to sell, lease or exchange all or substantially all of our property other than in the ordinary course of our business in accordance with the OBCA.
Meetings
Each director holds office until our next annual meeting or until his office is earlier vacated in accordance with our Articles, Bylaws or with the provisions of the OBCA. A director appointed or elected to fill a vacancy on our board also holds office until our next annual meeting.
Annual meetings of our shareholders must be held at such time in each year not more than 15 months after the last annual meeting, as our board of directors may determine. Notice of the time and place of a meeting of shareholders must be sent not less than twenty-one days and not more than fifty days, before the meeting.
Meetings of our shareholders shall be held at our registered office or, if our board of directors shall so determine, at some other place in Ontario or, at some place outside Ontario if all the shareholders entitled to vote at the meeting so agree.
Our Board, the Chair of our Board or our CEO shall have the power to call a special meeting of our shareholders at any time.
The OBCA provides that our shareholders may requisition a special meeting in accordance with the OBCA. The OBCA provides that the holders of not less than five percent of our issued shares that carry the right to vote at a meeting sought to be held may requisition our directors to call a special meeting of shareholders for the purposes stated in the requisition.
The quorum for the transaction of business at any meeting of our shareholders will not be less than 33 1/3 of the outstanding common shares.
Limitations on Ownership of Securities
Except as provided in the Investment Canada Act (Canada), there are no limitations specific to the rights of non-Canadians to hold or vote our shares under the laws of Canada or Ontario, or in our charter documents.
Change in Control
There are no provisions in our Articles or Bylaws that would have the effect of delaying, deferring or preventing a change in control of the Company, and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company or our subsidiaries.
Ownership Threshold
Neither the Articles nor the Bylaws contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed. In addition, securities legislation in Canada requires that we disclose in our proxy information circular for our annual meeting and certain other disclosure documents filed by us under such legislation, holders who beneficially own more than 10% of our issued and outstanding shares.
U.S. federal securities laws require us to disclose, in our annual reports on Form 10-K, holders who own 5% or more of our issued and outstanding voting shares.
Transfer Agent and Registrar
Our registrar and transfer agent for the common shares is Odyssey Trust Company, 702 - 67 Yonge Street, Toronto, Ontario, M5E 1J8, Canada, telephone: 1-888-290-1175.
Public Warrants
As of May 21, 2025, we had 1,037,124 Public Warrants outstanding. Each Public Warrant is exercisable for one common share at an exercise price of $4.64 per share. The Public Warrants were issued on November 15, 2024 in connection with our initial public offering and are exercisable at any time for a period of five years following the date of issuance, expiring at 5:00 pm EST on November 15, 2029.
The number of Public Warrants outstanding, and the exercise price of those securities, will be adjusted proportionately in the event of a consolidation or share split of our common shares, a recapitalization or reclassification of our common shares, payment of dividends or distributions in common shares to our common share holders, or similar transactions. In the event that the Company effects a rights offering to its common share holders or a pro rata distribution of its assets among its common share holders, then the holders of the Public Warrants will have the right to participate in such distribution and rights offering to the extent of their pro rata share of the Company's outstanding common shares assuming they owned the number of common shares issuable upon the exercise of their Public Warrants. In the event of a "Fundamental Transaction" by the Company, such as a merger or consolidation of it with another company, the sale or other disposition of all or substantially all of the Company's assets in one or a series of related transactions, a purchase offer, tender offer or exchange offer, or any reclassification, reorganization or recapitalization of the common shares, then the Public Warrant holders will have the right to receive, for each common share issuable upon the exercise of a Public Warrant, at the option of the holder, the number of common shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration payable as a result of the Fundamental Transaction, that would have been issued or conveyed to the Public Warrant holder had the holder exercised the Public Warrant immediately preceding the closing of the Fundamental Transaction.
The Company will promptly notify the Public Warrant holders in writing of any adjustment to the exercise price or to the number of the outstanding Public Warrants, declaration of a dividend or other distribution, a special non recurring cash dividend on or a redemption of the common shares, the authorization of a rights offering, the approval of the share holders required for any proposed reclassification of the common shares, a consolidation or merger by the Company, sale of all or substantially all of the assets of the Company, any compulsory share exchange, or the authorization of any voluntary or involuntary dissolution, liquidation, or winding up of the Company.
If at the time of exercise there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the underlying shares to the holder, in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of common shares determined according to a formula set forth in the full text of the Public Warrant.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Public Warrants. As to any fraction of a share which the holder would otherwise be entitled to purchase upon such exercise, we shall, at our election, either pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the exercise price of the Public Warrants or round the number of shares to be received by the holder up to the next whole number.
The Public Warrants are issued in registered form under a Warrant Agency Agreement between Odyssey Transfer and Trust Company ("Warrant Agent") and the Company. The Public Warrants were initially be represented only by one or more global warrants deposited with the Warrant Agent, as custodian on behalf of The Depository Trust Company (DTC), and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
The Public Warrants contain a contractual provision stating that all questions concerning the construction, validity, enforcement and interpretation of the Public Warrants are governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law.
This summary of the Public Warrants is not complete, and is qualified in its entirety by, the full text of the Public Warrant and Warrant Agency Agreement, copies of which have been filed with the SEC as exhibits to the registration statement of which this prospectus forms a part and are incorporated in this prospectus by reference.
Regulation A Warrants
As of May 21, 2025, we had 1,368,200 Regulation A Warrants outstanding. Each Regulation A Warrant is exercisable for one common share at an exercise price of $2.80 per share. The Regulation A Warrants were issued on March 10, 2025 in connection with our Regulation A offering and are exercisable at any time up for a period of five years following the date of issuance, expiring on or prior to 5:00 pm EST on March 10, 2030.
The number of Regulation A Warrants outstanding, and the exercise price of those securities, will be adjusted proportionately in the event of a consolidation or share split of our common shares, a recapitalization or reclassification of our common shares, payment of dividends or distributions in common shares to our common share holders, or similar transactions. In the event that the Company effects a rights offering to its common share holders or a pro rata distribution of its assets among its common share holders, then the holders of the Regulation A Warrants will have the right to participate in such distribution and rights offering to the extent of their pro rata share of the Company's outstanding common shares assuming they owned the number of common shares issuable upon the exercise of their Regulation A Warrants. In the event of a "Fundamental Transaction" by the Company, such as a merger or consolidation of it with another company, the sale or other disposition of all or substantially all of the Company's assets in one or a series of related transactions, a purchase offer, tender offer or exchange offer, or any reclassification, reorganization or recapitalization of the common shares, then the Regulation A Warrant holders will have the right to receive, for each common share issuable upon the exercise of a Regulation A Warrants, at the option of the holder, the number of common shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration payable as a result of the Fundamental Transaction, that would have been issued or conveyed to the Regulation A Warrant holder had the Regulation A Warrant holder exercised the Regulation A Warrant immediately preceding the closing of the Fundamental Transaction.
The Company will promptly notify the Regulation A Warrant holders in writing of any adjustment to the exercise price or to the number of the outstanding Regulation A Warrants, declaration of a dividend or other distribution, a special non-recurring cash dividend on or a redemption of the common shares, the authorization of a rights offering, the approval of the share holders required for any proposed reclassification of the common shares, a consolidation or merger by the Company, sale of all or substantially all of the assets of the Company, any compulsory share exchange, or the authorization of any voluntary or involuntary dissolution, liquidation, or winding up of the Company.
If at the time of exercise there is no qualified offering statement or effective registration statement, or the offering circular or prospectus, as applicable, contained therein is not available for the issuance of the underlying shares to the holder, in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of common shares determined according to a formula set forth in the full text of the Regulation A Warrant.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Regulation A Warrants. As to any fraction of a share which the holder would otherwise be entitled to purchase upon such exercise, we shall, at our election, either pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the exercise price of the Regulation A Warrants or round the number of shares to be received by the holder up to the next whole number.
The Regulation A Warrants contain a contractual provision stating that all questions concerning the construction, validity, enforcement and interpretation of the Regulation A Warrants are governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law.
This summary of the Regulation A Warrants is not complete, and is qualified in its entirety by, the full text of the Regulation A Warrants and Warrant Agency Agreement in respect of the Regulation A Warrants, copies of which have been filed with the SEC as exhibits to the registration statement of which this prospectus forms a part and are incorporated in this prospectus by reference.
Warrants
Upon completion of this offering we expect to have warrants outstanding. Each warrant will be exercisable for one common share at an exercise price of 100% of the price of each unit sold in the offering and will be exercisable at any time up for a period of five years following the date of issuance. We are also registering the common shares issuable from time to time upon exercise of the warrants offered hereby.
The number of warrants outstanding, and the exercise price of those securities, will be adjusted proportionately in the event of a consolidation or share split of our common shares, a recapitalization or reclassification of our common shares, payment of dividends or distributions in common shares to our common shareholders, or similar transactions. In the event that the Company effects a rights offering to its common shareholders or a pro rata distribution of its assets among its common shareholders, then the holders of warrants will have the right to participate in such distribution and rights offering to the extent of their pro rata share of the Company's outstanding common shares assuming they owned the number of common shares issuable upon the exercise of their warrants. In the event of a "Fundamental Transaction" by the Company, such as a merger or consolidation of it with another company, the sale or other disposition of all or substantially all of the Company's assets in one or a series of related transactions, a purchase offer, tender offer or exchange offer, or any reclassification, reorganization or recapitalization of the common shares, then the warrant holders will have the right to receive, for each common share issuable upon the exercise of a warrant, at the option of the holder, the number of common shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration payable as a result of the Fundamental Transaction, that would have been issued or conveyed to the warrant holder had the holder exercised the warrant immediately preceding the closing of the Fundamental Transaction.
The Company will promptly notify the warrant holders in writing of any adjustment to the exercise price or to the number of the outstanding warrants, declaration of a dividend or other distribution, a special non-recurring cash dividend on or a redemption of the common shares, the authorization of a rights offering, the approval of the shareholders required for any proposed reclassification of the common shares, a consolidation or merger by the Company, sale of all or substantially all of the assets of the Company, any compulsory share exchange, or the authorization of any voluntary or involuntary dissolution, liquidation, or winding up of the Company.
If at the time of exercise there is no effective registration statement or prospectus, as applicable, contained therein is not available for the issuance of the underlying shares to the holder, in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of common shares determined according to a formula set forth in the full text of the form of warrant.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the warrants. As to any fraction of a share which the holder would otherwise be entitled to purchase upon such exercise, we shall, at our election, either pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the exercise price of the warrants or round the number of shares to be received by the holder up to the next whole number.
The warrants will contain a contractual provision stating that all questions concerning the construction, validity, enforcement and interpretation of the warrants are governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law.
This summary of the warrants is not complete, and is qualified in its entirety by, the full text of the form of warrant and form of warrant agency agreement, copies of which have been filed with the SEC as exhibits to this prospectus and incorporated in this prospectus by reference.
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following description is not intended to constitute a complete analysis of all tax considerations relating to the acquisition, ownership and disposition of Units, consisting of our common shares and warrants, pursuant to this offering, and (if applicable) Warrant Shares (as defined herein) upon the exercise of warrants. You are urged to consult your own tax advisor concerning the tax considerations relevant to you having regard to your own circumstances, including tax considerations that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
The following discussion describes certain material U.S. federal income tax consequences relating to the acquisition, ownership and disposition of our common shares and warrants, which we refer to collectively as our securities. Because the components of a Unit are issued separately in this offering, a holder that acquires Units in this offering should be treated, for U.S. federal income tax purposes, as acquiring common shares and a warrant. This discussion applies to holders that purchase securities pursuant to this offering and hold such securities as capital assets within the meaning of Section 1221 of the Code (generally, assets held for investment purposes). This discussion is based on the Code, U.S. Treasury regulations promulgated thereunder (“Treasury Regulations”) and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect.
This discussion does not address all of the U.S. federal income tax considerations that may be relevant to specific holders in light of their particular circumstances or to holders subject to special treatment under U.S. federal income tax law such as certain financial institutions, thrifts, insurance companies, broker-dealers and traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, governmental organizations, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, holders who hold securities as part of a "straddle", "hedge", "conversion transaction", "synthetic security" or integrated investment, holders whose "functional currency" (as defined in the Code) is not the U.S. dollar, corporations that accumulate earnings to avoid U.S. federal income tax, persons who acquired our shares through the exercise or cancellation of employee stock options or otherwise as compensation for their services, partnerships and other pass-through entities (or arrangements treated as a partnership for U.S. federal income tax purposes), and investors in such pass-through entities. In addition, this discussion does not address the tax treatment of partnerships (or entities or arrangements that are treated as partnerships for U.S. federal income tax purposes) or persons that hold our securities through such partnerships. If a partnership, including any entity or arrangement treated as a partnership for U.S. federal income tax purposes, holds our securities, the U.S. federal income tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Such partners and partnerships are urged to consult their tax advisors regarding the tax consequences of the ownership and disposition of our securities. This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative minimum tax consequences or the requirements of Section 451 of the Code with respect to conforming the timing of income accruals to financial statements. We have not requested, and will not request, a ruling from the IRS with respect to any of the U.S. federal income tax consequences described below, and as a result there can be no assurance that the IRS will not disagree with or challenge any of the conclusions described herein.
As used in this discussion, the term "U.S. Holder" means a beneficial owner of securities that is, (1) an individual who is a citizen or resident alien of the United States for U.S. federal income tax purposes, (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate the income of which is subject to U.S. federal income tax regardless of its source or (4) a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (y) that has elected under applicable Treasury Regulations to be treated as a domestic trust for U.S. federal income tax purposes, and the term "Non-U.S. Holder" means a beneficial owner of our securities that is neither a U.S. Holder nor a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes.
The following discussion is for general information only and is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of securities and no opinion or representation with respect to the U.S. federal income tax consequences to any such holder or prospective holder is made. Persons considering an investment in securities are urged to consult their own tax advisors as to the particular tax consequences applicable to them relating to the purchase, ownership and disposition of securities, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
Treatment as a Domestic Corporation for U.S. Federal Income Tax Purposes
Even though we are organized as a corporation existing under the laws of Ontario, as a result of the Business Combination, we believe we are treated as a domestic corporation for U.S. federal income tax purposes pursuant to Section 7874 of the Code. As such, we will generally be subject to U.S. federal income tax as if we were organized under the laws of the United States or a state thereof. The remaining discussion contained in this "U.S. Federal Income Tax Considerations" assumes that we will be treated as a domestic corporation for all U.S. federal income tax purposes.
General Treatment of Units
The acquisition of a Unit should be treated for U.S. federal income tax purposes as the acquisition of one common share and one warrant. For U.S. federal income tax purposes, each holder that acquires a Unit must allocate the purchase price paid by such holder for such Unit between the common share and the warrant based on the relative fair market value of each at the time of issuance. A holder's initial tax basis in the common share and the warrant included in each Unit should equal the portion of the purchase price of the Unit allocated thereto.
Tax Considerations Applicable to U.S. Holders
Distributions on Common Shares
If we pay distributions or make constructive distributions (other than certain distributions of our stock or rights to acquire our stock) to U.S. Holders, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid or deemed paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder's adjusted tax basis in our common shares. Any remaining excess will be treated as gain realized on the sale or other disposition of the common shares and will be treated as described under "-Dispositions" below.
Dividends we pay to a U.S. Holder that is taxable as a corporation will generally qualify for the dividends received deduction if the required holding period is satisfied. Dividends we pay to a non-corporate U.S. Holder will generally constitute "qualified dividends" which are subject to tax at preferential long-term capital gains rates provided certain holding period and other requirements are met. If the holding period requirements are not satisfied, a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and non-corporate holders may be subject to tax on such dividend at ordinary income tax rates instead of the preferential rates that apply to qualified dividend income.
If a U.S. Holder is subject to Canadian withholding tax on dividends paid on common shares to the U.S. Holder, the dividends will be considered U.S. source income, which could limit the ability of a U.S. Holder to claim a foreign tax credit for the Canadian withholding taxes imposed in respect of such a dividend. See "-Foreign Tax Credit Limitations" below.
Dispositions of a Common Share
A U.S. Holder generally will recognize gain or loss on the sale, taxable exchange or other taxable disposition of our common shares. Any such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder's holding period for the common shares so disposed of exceeds one year. The amount of gain or loss recognized will generally be equal to the difference between (1) the sum of the amount of cash and the fair market value of any property received in such disposition and (2) the U.S. Holder's adjusted tax basis in its common shares so disposed of. A U.S. Holder's adjusted tax basis in its common shares will generally equal the U.S. Holder's acquisition cost for such common shares (or, in the case of common shares received upon exercise of a warrant, the U.S. Holder's initial basis for such common shares, as discussed below), less any prior distributions treated as a return of capital. Long-term capital gains recognized by non-corporate U.S. Holders are generally eligible for reduced rates of tax. If the U.S. Holder's holding period for the common shares so disposed of is one year or less, any gain on a sale or other taxable disposition of the shares would be subject to short-term capital gain treatment and would be taxed at ordinary income tax rates. The deductibility of capital losses is subject to limitations.
To the extent a U.S. Holder pays any Canadian tax on a sale, exchange or disposition of our common shares, a U.S. foreign tax credit may not be available. See "-Foreign Tax Credit Limitations" below.
Exercise of a Warrant
Except as discussed below with respect to the cashless exercise of a warrant, a U.S. Holder generally will not recognize taxable gain or loss upon exercise of a warrant for cash. The U.S. Holder's initial tax basis in our common shares received upon the exercise of the warrant will generally be an amount equal to the sum of the U.S. Holder's adjusted tax basis in the warrant and the exercise price of such warrant. A U.S. Holder's adjusted tax basis in a warrant would generally equal the U.S. Holder's acquisition cost of the warrant (i.e., the portion of the U.S. Holder's purchase price for a Unit that is allocated to the warrant, as described under "-General Treatment of Units"), increased by the amount of any constructive dividends included in income by such U.S. Holder, as described under "-Possible Constructive Distributions." It is unclear whether a U.S. Holder's holding period for the common shares received upon exercise of the warrant would commence on the date of exercise of the warrant or the day following the date of exercise of the warrant; however, in either case the holding period will not include the period during which the U.S. Holder held the warrants.
The tax consequences of a cashless exercise of a warrant are not clear under current tax law. A cashless exercise may be nontaxable, either because the exercise is not a realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either situation, a U.S. Holder's initial tax basis in the common shares received would generally equal the holder's adjusted tax basis in the warrant exchanged therefor. If the cashless exercise were treated as not being a realization event, it is unclear whether a U.S. Holder's holding period for the common shares would commence on the date of exercise of the warrant or the day following the date of exercise of the warrant. If, however, the cashless exercise were treated as a recapitalization, the holding period of the common shares would include the holding period of the warrant. Although we expect a U.S. Holder's cashless exercise of our warrants (including after we provide notice of our intent to redeem warrants for cash) to be treated as a recapitalization, a cashless exercise could alternatively be treated as a taxable exchange in which gain or loss would be recognized.
It is also possible that a cashless exercise could be treated in part as a taxable exchange in which gain or loss is recognized. In such event, a portion of the warrants to be exercised on a cashless basis could, for U.S. federal income tax purposes, be deemed to have been surrendered in consideration for the exercise price of the remaining warrants, which would be deemed to be exercised. For this purpose, a U.S. Holder would be deemed to have surrendered a number of warrants having an aggregate value equal to the exercise price for the total number of warrants deemed exercised. The U.S. Holder would recognize capital gain or loss in an amount equal to the difference between exercise price for the total number of warrants deemed exercised and the U.S. Holder's tax basis in the warrants deemed surrendered. Such gain or loss would be long-term or short-term depending on the U.S. Holder's holding period in the warrants deemed surrendered. In this case, a U.S. Holder's initial tax basis in the common shares received would equal the sum of the U.S. Holder's adjusted tax basis in the warrants deemed exercised and the exercise price of such warrants. It is unclear whether a U.S. Holder's holding period for the common shares would commence on the date of exercise of the warrant or the day following the date of exercise of the warrant; in either case, the holding period would not include the period during which the U.S. Holder held the warrant.
Dispositions of a Warrant
Upon a sale, exchange (other than by exercise), or expiration of a warrant, a U.S. Holder will recognize taxable gain or loss in an amount equal to the difference between (1) the amount realized upon such disposition or expiration and (2) the U.S. Holder's adjusted tax basis in the warrant. Such gain or loss generally will be treated as long-term capital gain or loss if the warrant is held by the U.S. Holder for more than one year at the time of such disposition or expiration.
If a warrant is allowed to lapse unexercised, a U.S. Holder will generally recognize a capital loss equal to such holder's adjusted tax basis in the warrant. Any such loss generally will be a capital loss and will be long-term capital loss if the warrant is held for more than one year. The deductibility of capital losses is subject to certain limitations.
Distributions on Warrants
We may make distributions on warrants in certain circumstances, as described above under "Description of Securities-Public Warrants." We expect any distributions on the warrants to be taxable to a U.S. Holder as ordinary income at the time the U.S. Holder actually or constructively receives such distribution. However, the treatment of distributions on warrants is not entirely clear and U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of receiving distributions on the warrants.
Possible Constructive Distributions
The terms of the warrants provide for an adjustment to the number of common shares for which the warrant may be exercised or to the exercise price of the warrant in certain events. An adjustment which has the effect of preventing dilution generally should not be a taxable event. Nevertheless, a U.S. Holder of warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases the holder's proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of common shares for which the warrant may be exercised or an adjustment to the exercise price of the warrant) as a result of a taxable dividend to the holders of our common shares. Such constructive distribution would be subject to tax as described above under "-Distributions" in the same manner as if such U.S. Holder received a cash distribution from us on common shares equal to the fair market value of such increased interest.
Receipt of Foreign Currency
The gross amount of any payment in a currency other than U.S. dollars will be included by each U.S. Holder in income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day such U.S. Holder actually or constructively receives the payment in accordance with its regular method of accounting for U.S. federal income tax purposes regardless of whether the payment is in fact converted into U.S. dollars at that time. If the non-U.S. currency is converted into U.S. dollars on the date of the payment, the U.S. Holder should not be required to recognize any foreign currency gain or loss with respect to the receipt of non-U.S. currency. If, instead, the foreign currency is converted at a later date, any currency gains or losses resulting from the conversion of the foreign currency will be treated as U.S. source ordinary income or loss for U.S. foreign tax credit purposes. U.S. Holders are urged to consult their own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit Limitations
Because the Company is subject to tax both as a U.S. domestic corporation and as a Canadian corporation, a U.S. Holder may pay, through withholding, Canadian tax, as well as U.S. federal income tax, with respect to dividends paid on its common shares. For U.S. federal income tax purposes, a U.S. Holder may elect for any taxable year to receive either a credit or a deduction for foreign income taxes paid by the holder during the year. Complex limitations apply to the foreign tax credit, including a general limitation that the credit cannot exceed the proportionate share of a taxpayer's U.S. federal income tax that the taxpayer's foreign source taxable income bears to the taxpayer's worldwide taxable income. In applying this limitation, items of income and deduction must be classified, under complex rules, as either foreign source or U.S. source.
The status of the Company as a U.S. domestic corporation for U.S. federal income tax purposes will cause dividends paid by the Company to be treated as U.S. source rather than foreign source income for this purpose. As a result, a foreign tax credit may be unavailable for any Canadian tax paid on dividends received from the Company. Similarly, to the extent a sale or disposition of common shares by a U.S. Holder results in Canadian tax payable by the U.S. Holder (for example, because the common shares constitute taxable Canadian property within the meaning of the Tax Act), a U.S. foreign tax credit may be unavailable to the U.S. Holder for such Canadian tax. In each case, however, the U.S. Holder may be able to take a deduction for the U.S. Holder's Canadian tax paid, provided that the U.S. Holder has not elected to credit other foreign taxes during the same taxable year. The foreign tax credit rules are complex, and each U.S. Holder is urged to consult its own tax advisor regarding these rules.
Additional Tax on Net Investment Income
U.S. Holders that are individuals, estates or trusts are required to pay an additional 3.8% tax on the lesser of (1) the U.S. Holder's "net investment income" for the relevant taxable year and (2) the excess of the U.S. Holder's modified adjusted gross income for the taxable year over a certain threshold. A U.S. Holder's "net investment income" generally includes, among other things, dividends and net gains from disposition of property (other than property held in the ordinary course of the conduct of a trade or business).
Accordingly, dividends on and capital gain from the sale, exchange or other taxable disposition of common shares may be subject to this additional tax. U.S. Holders are urged to consult their own tax advisors regarding the additional tax on passive income.
Information Reporting and Backup Withholding.
In general, information reporting requirements may apply to distributions paid to a U.S. Holder and to the proceeds of the sale or other disposition of our common shares, unless the U.S. Holder is an exempt recipient. Backup withholding may apply to such payments if a U.S. Holder does not establish, in the manner provided by law, an exemption from backup withholding, or fails to provide a correct taxpayer identification number or make any other required certifications.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. U.S. Holders are urged to consult their own tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.
Tax Considerations Applicable to Non-U.S. Holders
Distributions on Common Shares
Distributions of cash or property that we pay in respect of our common shares will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Subject to the discussions below under "-U.S. Trade or Business Income," "-Information Reporting and Backup Withholding" and "-FATCA," Non-U.S. Holders generally will be subject to U.S. federal withholding tax at a 30% rate, or at a reduced rate prescribed by an applicable income tax treaty, on any dividends received in respect of our common shares. If the amount of the distribution exceeds our current and accumulated earnings and profits, such excess first will be treated as a return of capital to the extent of the Non-U.S. Holder's tax basis in our common shares, and thereafter will be treated as capital gain and will be treated as described below under "-Dispositions." However, except to the extent that we elect (or the paying agent or other intermediary through which a Non-U.S. Holder holds its common shares elects) otherwise, we (or the intermediary) must generally withhold at the applicable rate on the entire distribution, in which case the Non-U.S. Holder would be entitled to a refund from the IRS for the withholding tax on the portion, if any, of the distribution that exceeded our current and accumulated earnings and profits.
In order to obtain a reduced rate of U.S. federal withholding tax under an applicable income tax treaty, Non-U.S. Holders will be required to provide a properly executed IRS Form W-8BEN or Form W-8BEN-E (or, in each case, a successor form) certifying the Non-U.S. Holder's entitlement to benefits under such treaty. If a Non-U.S. Holder is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty, it may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. Non-U.S. Holders are urged to consult their own tax advisors regarding their possible entitlement to benefits under an applicable income tax treaty.
Dispositions of Common Shares or Warrants
Subject to the discussions below under "-U.S. Trade or Business Income," "-Information Reporting and Backup Withholding" and "-FATCA," Non-U.S. Holders generally will not be subject to U.S. federal income or withholding tax in respect of any gain on a sale, exchange or other taxable disposition of our common shares or warrants unless:
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the gain is U.S. trade or business income (as defined below), in which case, such gain will be taxed as described in "-U.S. Trade or Business Income" below; |
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the Non-U.S. Holder is an individual who is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, in which case the Non-U.S. Holder will be subject to U.S. federal income tax at a rate of 30% (or a reduced rate under an applicable income tax treaty) on the amount by which certain capital gains allocable to U.S. sources exceed certain capital losses allocable to U.S. sources, provided the Non-U.S. Holder has timely filed its U.S. federal income tax return with respect to such losses; or |
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we are or have been a "United States real property holding corporation" (a "USRPHC") under Section 897 of the Code at any time during the shorter of the five-year period ending on the date of the disposition and the Non-U.S. Holder's holding period for such common shares, in which case, subject to the exception set forth in the last sentence of the next paragraph, such gain will be subject to U.S. federal income tax as described in "-U.S. Trade or Business Income" below. |
In general, a corporation is a USRPHC if the fair market value of its "United States real property interests" equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. We believe that we are not currently, and we do not anticipate becoming in the future, a USRPHC for U.S. federal income tax purposes. In the event that we are determined to be a USRPHC, gain arising from the sale, exchange or other taxable disposition of common shares or warrants by a Non-U.S. Holder will, nonetheless, not be subject to tax as U.S. trade or business income if our common shares are “regularly traded” (as defined by applicable Treasury Regulations) on an established securities market unless the Non-U.S. Holder's holdings (direct and indirect, taking into account certain constructive ownership rules) exceed certain thresholds.
Exercise or Lapse of a Warrant
The U.S. federal income tax treatment of a Non-U.S. Holder's exercise of a warrant or the lapse of a warrant held by a Non-U.S. Holder generally will correspond to the U.S. federal income tax treatment of the exercise, lapse, or redemption of a warrant by a U.S. Holder, as described under "-U.S. Holders-Exercise of a Warrant" or "-U.S. Holders-Dispositions of a Warrant," although to the extent a cashless exercise results in a taxable exchange, the tax consequences to the Non-U.S. Holder would be the same as those described under "-Non-U.S. Holders-Dispositions of Common Shares or Warrants." A Non-U.S. Holder's adjusted tax basis in a warrant would generally equal the Non-U.S. Holder's acquisition cost of the warrant (i.e., the portion of the Non-U.S. Holder's purchase price for a Unit that is allocated to the warrant, as described under "-General Treatment of Units"), increased by the amount of any constructive dividends included in income by such Non-U.S. Holder, as described under "-Possible Constructive Distributions."
Distributions on Warrants
We may make distributions on warrants in certain circumstances, as described above under "Description of Securities-Public Warrants." We expect to treat any distributions on the warrants as U.S.-source "fixed or determinable annual or periodical gains, profits and income." As a result, subject to the discussions below under "-U.S. Trade or Business Income," "-Information Reporting and Backup Withholding" and "-FATCA," Non-U.S. Holders generally will be subject to U.S. federal withholding tax at a 30% rate, or at a reduced rate prescribed by an applicable income tax treaty, on such distributions. However, the treatment of distributions on warrants is not entirely clear and Non-U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of receiving distributions on the warrants.
In order to obtain a reduced rate of U.S. federal withholding tax under an applicable income tax treaty, Non-U.S. Holders will be required to provide a properly executed IRS Form W-8BEN or Form W-8BEN-E (or, in each case, a successor form) certifying the Non-U.S. Holder's entitlement to benefits under such treaty. If a Non-U.S. Holder is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty, or otherwise determines that we over-withheld from distributions to the Non-U.S. Holder, it may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. Non-U.S. Holders are urged to consult their own tax advisors regarding their possible entitlement to benefits under an applicable income tax treaty.
Possible Constructive Distributions
The terms of each warrant provide for an adjustment to the number of shares of common shares for which the warrant may be exercised or to the exercise price of the warrant in certain events. An adjustment which has the effect of preventing dilution is generally not a taxable event. Nevertheless, a Non-U.S. Holder of warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases the holder's proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of common shares that would be obtained upon exercise or through a decrease in the exercise price of the warrants), including as a result of a distribution of cash or other property, such as securities, to the holders of common shares, or as a result of the issuance of a stock dividend to holders of shares of our common shares, in each case which is taxable to such Non-U.S. Holders as described under "-Non-U.S. Holders-Distributions." A Non-U.S. Holder would be subject to U.S. federal income tax withholding under that section in the same manner as if such Non-U.S. Holder received a cash distribution from us equal to the fair market value of such increased interest. Generally, a Non-U.S. Holder's adjusted tax basis in its warrant would be increased to the extent any such constructive distribution is treated as a dividend.
U.S. Trade or Business Income
For purposes of this discussion, dividends paid in respect of common shares and gain on the sale, exchange or other taxable disposition of common shares or warrants will be considered to be "U.S. trade or business income" if (A)(i) such dividends or gain is effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States and (ii) the Non-U.S. Holder is eligible for the benefits of an applicable income tax treaty and such treaty requires that such dividends or gain is attributable to a permanent establishment (or, if the Non-U.S. Holder is an individual, a fixed base) that the Non-U.S. Holder maintains in the United States or (B) with respect to gain, we are or have been a USRPHC at any time during the shorter of the five-year period ending on the date of the disposition of our common shares or warrants and the Non-U.S. Holder's holding period for our common shares or warrants (subject to the exception set forth above in the last sentence of the second paragraph of "-Dispositions"). Generally, a Non-U.S. Holder's U.S. trade or business income is not subject to U.S. federal withholding tax (provided that the Non-U.S. Holder complies with applicable certification and disclosure requirements, including providing a properly executed IRS Form W-8ECI (or successor form)); instead, the Non-U.S. Holder is subject to U.S. federal income tax on a net basis at regular U.S. federal income tax rates (generally in the same manner as a United States person) on the Non-U.S. Holder's U.S. trade or business income. Any U.S. trade or business income received by a corporate Non-U.S. Holder may also be subject to a "branch profits tax" at a 30% rate, or at a lower rate prescribed by an applicable income tax treaty.
Information Reporting and Backup Withholding
We must annually report to the IRS and to each Non-U.S. Holder any dividends paid in respect of our common shares that is subject to U.S. federal withholding tax or that is exempt from such withholding tax pursuant to an income tax treaty. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which a Non-U.S. Holder resides or is established. Under certain circumstances, the Code imposes a backup withholding obligation on certain reportable payments. Dividends paid to a Non-U.S. Holder will generally be exempt from backup withholding if the Non-U.S. Holder certifies its non-U.S. status by providing a properly executed IRS Form W-8BEN, Form W-8BEN-E or Form W-8ECI (or, in each case, a successor form) or otherwise establish an exemption, and the applicable withholding agent does not have actual knowledge or reason to know that the Non-U.S. Holder is a United States person or that the conditions of such other exemption are not, in fact, satisfied.
The payment of the proceeds from a Non-U.S. Holder's sale, exchange or other taxable disposition of our common shares to or through the U.S. office of any broker (U.S. or non-U.S.) will be subject to information reporting and, depending on the circumstances, backup withholding unless the Non-U.S. Holder certifies as to its non-U.S. status under penalties of perjury by providing the certification described above to the broker or otherwise establish an exemption, and the broker does not have actual knowledge or reason to know that the Non-U.S. Holder is a United States person or that the conditions of any other exemption are not, in fact, satisfied. The payment of proceeds from a Non-U.S. Holder's sale, exchange or other taxable disposition of our common shares to or through a non-U.S. office of a non-U.S. broker will not be subject to information reporting or backup withholding unless the non-U.S. broker has certain types of relationships with the United States (a "U.S. related financial intermediary"). In the case of the payment of proceeds from a Non-U.S. Holder's sale, exchange or other taxable disposition of our common shares to or through a non-U.S. office of a broker that is either a United States person or a U.S. related financial intermediary, information reporting and, depending on the circumstances, backup withholding will apply on the payment unless the broker has documentary evidence, such as the certifications described above, in its files certifying that the Non-U.S. Holder is not a United States person and the broker has no knowledge to the contrary. Non-U.S. Holders are urged to consult their own tax advisors regarding the application of information reporting and backup withholding in light of their particular circumstances.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be refunded or credited against the Non-U.S. Holder's U.S. federal income tax liability, if any, provided that the required information is timely furnished to the IRS.
FATCA
Pursuant to Sections 1471 through 1474 of the Code, commonly referred to as the Foreign Account Tax Compliance Act ("FATCA"), "foreign financial institutions" and "non-financial foreign entities" (each as defined in the Code) that do not otherwise qualify for an exemption must comply with information reporting rules with respect to their U.S. account holders and investors or be subject to a withholding tax on certain types of U.S.-source payments made to them (whether received as a beneficial owner or as an intermediary for another party).
More specifically, a foreign financial institution or non-financial foreign entity that does not comply with the FATCA reporting requirements or otherwise qualify for an exemption will generally be subject to a 30% withholding tax with respect to any "withholdable payments." For this purpose, withholdable payments generally include dividends on, or (subject to the proposed Treasury Regulations discussed below) gross proceeds from the disposition of, our common shares paid to a foreign financial institution or non-financial foreign entity. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Withholding under FATCA currently applies to dividends paid in respect of our common shares. Proposed Treasury Regulations, the preamble to which state that they can be relied upon until final Treasury Regulations are issued, exempt from FATCA withholding gross proceeds from the dispositions of stock. To prevent withholding on dividends, Non-U.S. Holders may be required to provide the Company (or its withholding agents) with applicable tax forms or other information. Non-U.S. Holders are urged to consult with their own tax advisors regarding the effect, if any, of FATCA to them based on their particular circumstances.
PLAN OF DISTRIBUTION
Maxim Group LLC has agreed to act as our exclusive placement agent in connection with this offering on a reasonable best efforts basis subject to the terms and conditions of the placement agency agreement dated , 2025. The placement agent is not purchasing or selling any of the securities offered by this prospectus, nor is it required to arrange for the purchase and sale of any specific number or dollar amount of such securities, other than to use its reasonable “best efforts” to arrange for the sale of such securities by us. Therefore, we may not sell all of the securities being offered pursuant to this prospectus. The securities will be offered at a fixed price and are expected to be issued in a single closing. We will enter into a securities purchase agreement directly with certain investors, at the investor’s option, who purchase our securities in this offering. Investors who do not enter into a securities purchase agreement shall rely solely on this prospectus in connection with the purchase of our securities in this offering. The placement agent may engage one or more subagents or selected dealers in connection with this offering.
We are offering on a “best efforts” basis up to 1,375,000 Units, each consisting of one common share and one warrant.
Each warrant will be exercisable for one common share. The exercise price of each warrant will equal the per Unit offering price hereunder, which we have assumed to be $7.29 based on the closing price of our common shares rounded to the nearest whole cent on the Nasdaq Capital Market on May 23, 2025. The warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised until the fifth anniversary of the date of issuance.
The following table shows the public offering price, placement agent fees and proceeds, before expenses, to us.
| Per Unit |
|||
| Public offering price | $ | ||
| Placement agent fees | $ | ||
| Proceeds to us, before expenses | $ |
We estimate that the total expenses of the offering, including registration, filing and listing fees, printing fees, legal and accounting expenses, expenses for background ground checks, travel and lodging expenses associated with road show trips, but excluding the placement agent fees, will be approximately $250,000, all of which are payable by us.
There is no minimum amount of proceeds that is a condition to closing of this offering. The actual amount of gross proceeds, if any, in this offering could vary substantially from the gross proceeds from the sale of the maximum amount of securities being offered in this prospectus.
Because this is a best-efforts offering, the placement agent does not have an obligation to purchase any securities. This offering will terminate on August 16, 2025, unless we decide to terminate the offering (which we may do at any time in our discretion) prior to that date. We expect that the offering will settle delivery versus payment (“DVP”)/receipt versus payment (“RVP”). Accordingly, we and the placement agent have not made any arrangements to place investor funds in an escrow account or trust account since the placement agent will not receive investor funds in connection with the sale of the securities offered hereunder.
Placement Agent Fees, Commissions and Expenses
Pursuant to the placement agency agreement, we will pay the placement agent, concurrently with each closing of this offering, a cash placement fee equal to seven and one-half percent (7.5%) of the gross proceeds of such closing except for with respect to proceeds received from investors introduced by the Company, for which a cash placement fee equal to three percent (3.0%) of the gross proceeds attributable to such investors in the applicable closing shall be payable to the placement agent. In addition, we will also pay the placement agent up to $75,000 for fees and expenses of legal counsel and other out-of-pocket expenses out of the proceeds of the closing.
We or the placement agent may also ask other FINRA member broker-dealers that are registered with the SEC to participate as soliciting dealers for this offering. The placement agency agreement provides that the placement agent’s obligations are subject to conditions contained in the placement agency agreement.
We will deliver the securities being issued to the investors upon receipt of investor funds for the purchase of the securities offered pursuant to this prospectus. We expect to deliver the securities being offered pursuant to this prospectus on or about , 2025.
Indemnification
We have agreed to indemnify the placement agent against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and warranties contained in the placement agency agreement, or to contribute to payments that the placement agent may be required to make in respect of those liabilities.
Lock-Up Agreements
Each of our Directors and executive officers have agreed to a thirty (30) day “lock-up” period from the date of this prospectus with respect to the common shares that they beneficially own. This means that, for a period of thirty (30) days following the date of this prospectus, such persons may not offer, issuer, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities, subject to certain exceptions, without the prior written consent of the placement agent. We have also agreed, subject to certain exceptions (including with respect to the SEPA), to similar restrictions on the issuance, sale, disposal and registration of our securities for thirty (30) days following the date of this prospectus, without the prior written consent of the placement agent.
The placement agent has no present intention to waive or shorten the lock-up period; however, the terms of the lock-up agreements may be waived at its discretion. In determining whether to waive the terms of the lock-up agreements, the placement agent may base its decision on its assessment of the relative strengths of the securities markets and companies similar to ours in general, and the trading pattern of, and demand for, our securities in general.
Regulation M
The placement agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale of the securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the placement agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of our securities by the placement agent acting as principal. Under these rules and regulations, the placement agent (i) may not engage in any stabilization activity in connection with our securities and (ii) may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.
Certain Relationships
The placement agent and its affiliates have and may in the future provide, from time to time, investment banking and financial advisory services to us in the ordinary course of business, for which they may receive customary fees and commissions.
Listing
Our common shares are currently listed on Nasdaq under the symbol “MDCX”. We do not intend to list the warrants on any securities exchange or other trading market.
Affiliations
The placement agent and its respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The placement agent and its affiliates may from time to time in the future engage with us and perform services for us or in the ordinary course of their business for which they will receive customary fees and expenses. In the ordinary course of their various business activities, the placement agent and its respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of us. The placement agent and its respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of these securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in these securities and instruments.
Electronic Distribution
A prospectus in electronic format may be made available on websites or through other online services maintained by the placement agent of this offering, or by its affiliates. Other than the prospectus in electronic format, the information on the placement agent’s website and any information contained in any other website maintained by the placement agent is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the placement agent in its capacity as the placement agent, and should not be relied upon by investors.
In connection with this offering, the placement agent or certain securities dealers may distribute prospectuses by electronic means, such as e-mail.
Selling Restrictions Outside the United States
No action may be taken in any jurisdiction other than the United States that would permit a public offering of our securities or the possession, circulation, or distribution of this prospectus in any jurisdiction where action for that purpose is required. Accordingly, our securities may not be offered or sold, directly or indirectly, and neither the prospectus nor any other offering material or advertisements in connection with our securities may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable laws, rules and regulations of any such country or jurisdiction. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of our securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Notice to Prospective Investors in Canada
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering. Our securities may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of our securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Notice to Prospective Investors in the United Kingdom
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any such securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
| (a) | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
| (b) | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; | |
| (c) | by the underwriters to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or | |
| (d) | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of these securities shall result in a requirement for the publication by the issuer or the underwriters of a prospectus pursuant to Article 3 of the Prospectus Directive. |
For the purposes of this provision, the expression an “offer to the public” in relation to any of the securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any such securities to be offered so as to enable an investor to decide to purchase any such securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
The representative has represented, warranted and agreed that:
| (a) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the FSMA)) received by it in connection with the issue or sale of any of the securities in circumstances in which section 21(1) of the FSMA does not apply to the issuer; and | |
| (b) | it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom. |
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our securities may not be circulated or distributed, nor may our securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act 2001 (the “SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA (where applicable) and Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018 of Singapore, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the offered securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
| (a) | a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or | |
| (b) | a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the offered securities pursuant to an offer made under Section 275 of the SFA except: |
| (1) | to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; | |
| (2) | where no consideration is or will be given for the transfer; | |
| (3) | where the transfer is by operation of law; | |
| (4) | as specified in Section 276(7) of the SFA; or | |
| (5) | as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018 of Singapore. |
In connection with Section 309B of the SFA and the Securities and Futures (Capital Markets Products) Regulations 2018 (the “CMP Regulations 2018”), unless otherwise specified before an offer of the offered securities, the Company has determined, and hereby notifies all relevant persons (as defined in Section 309A(1) of the SFA) (where applicable), that the offered securities are “prescribed capital markets products” (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Notice to Prospective Investors in the People’s Republic of China
This prospectus may not be circulated or distributed in China and our securities may not be offered or sold, and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of China except pursuant to applicable laws, rules and regulations of China. For the purpose of this paragraph only, China does not include Taiwan and the special administrative regions of Hong Kong and Macau.
Notice to Prospective Investors in Hong Kong
Our securities may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to our securities be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to our securities which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Israel
This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the offered securities is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals”, each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.
Notice to Prospective Investors in Taiwan
Our securities have not been and will not be registered with the Financial Supervisory Commission of Taiwan, pursuant to relevant securities laws and regulations and may not be offered or sold in Taiwan through a public offering or in any manner which would constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or would otherwise require registration with or the approval of the Financial Supervisory Commission of Taiwan.
Notice to Prospective Investors in the Cayman Islands
No invitation, whether directly or indirectly may be made to the public in the Cayman Islands to subscribe for our securities. This prospectus does not constitute a public offer of our securities, whether by way of sale or subscription, in the Cayman Islands. Our securities have not been offered or sold, and will not be offered or sold, directly or indirectly, in the Cayman Islands.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area (each a “Member State”), none of our securities have been offered or will be offered pursuant to the offering to the public in that Member State prior to the publication of a prospectus in relation to our securities which has been approved by the competent authority in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that offers of our securities may be made to the public in that Member State at any time under the following exemptions under the Prospectus Regulation:
-
to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
-
to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriter for any such offer; or
-
in any other circumstances falling within Article 1(4) of the Prospectus Regulation.
provided that no such offer of our securities shall require us or any of our representatives to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any of our securities or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the representatives and us that it is a “qualified investor” as defined in the Prospectus Regulation.
In the case of any of our securities being offered to a financial intermediary as that term is used in Article 5 of the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that our securities acquired by it in the offer have not been acquired on a nondiscretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any of our securities to the public other than their offer or resale in a Member State to qualified investors as so defined or in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer to the public” in relation to any of our securities in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any of our securities to be offered so as to enable an investor to decide to purchase or subscribe for any of our securities, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended).
Stamp Taxes
If you purchase our securities offered by this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the public offering price listed on the cover page of this prospectus.
EXPERTS AND LEGAL MATTERS
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the securities was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the Company or its subsidiaries. Nor was any such person connected with the Company or any of its subsidiaries as a promoter, managing or principal underwriters, voting trustee, director, officer or employee.
The consolidated balance sheets of the Company and its subsidiaries as of December 31, 2024, and the related consolidated statements of operations and comprehensive loss, shareholders' equity, and cash flows for the year then ended, have been audited by EisnerAmper LLP, independent registered public accounting firm, as stated in their report which is included herein which report includes an explanatory paragraph about the existence of substantial doubt concerning the Company's ability to continue as a going concern. Such financial statements have been included herein in reliance on the report of such firm given upon their authority as experts in accounting and auditing.
The consolidated balance sheets of the Company and subsidiaries as of December 31, 2023, and the related consolidated statements of operations and comprehensive loss, shareholders' equity, and cash flows for the year then ended, have been audited by MNP LLP, independent registered public accounting firm, as stated in their report which is included herein.
The validity of the issuance of our common shares offered in this prospectus and certain other legal matters as to Canadian law will be passed upon for us by Bennett Jones LLP, Toronto, Canada. Certain legal matters governed by U.S. law, including with respect to the warrants offered in this prospectus, will be passed upon for us by Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York. The agent is being represented by Pryor Cashman LLP, New York, New York.
ENFORCEMENT OF CIVIL LIABILITIES
We are incorporated under the laws of Ontario, Canada. Service of process upon us and upon certain of our directors and officers and the experts named in this prospectus, who reside outside the United States, may be difficult to obtain within the United States. Furthermore, because a substantial amount of our assets and certain of our directors and officers are located outside the United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible within the United States.
In addition, there is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based on the U.S. federal securities laws or "blue sky" laws of any state within the United States and as to the enforceability in Canadian courts of judgments of U.S. courts obtained in actions based on the civil liability provisions of the U.S. federal securities laws or any such state securities or blue sky laws. There can be no assurance that U.S. investors will be able to enforce against us, members of our board of directors, officers or certain experts named herein who are residents of Canada or other countries outside the United States, any judgments in civil and commercial matters, including judgments under the federal securities laws.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement (including amendments and exhibits to the registration statement) on Form S-1 under the Securities Act. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the registration statement. For further information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit. You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part completely. The SEC maintains an internet site at www.sec.gov, from which you can electronically access the registration statement and its exhibits.
INDEX TO FINANCIAL STATEMENTS
Medicus Pharma Ltd.
Consolidated Financial Statements
For the years ended December 31, 2024 and 2023
(expressed in United States dollars, except number of shares)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Medicus Pharma Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Medicus Pharma Ltd. and Subsidiaries (the “Company”) as of December 31, 2024, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company experienced negative cash flows from operating activities and has incurred operating losses that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. 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 audit. 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 audit 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit 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 audit 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 audit provides a reasonable basis for our opinion.
/s/ EisnerAmper LLP
We have served as the Company’s auditor since 2024.
EISNERAMPER LLP
Philadelphia, Pennsylvania
March 28, 2025
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Medicus Pharma Ltd. (formerly ‘Interactive Capital Partners Corp.)
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Medicus Pharma Ltd. (formerly Interactive Capital Partners Corp.) (the “Company”) as of December 31, 2023 and the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity (deficiency), and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2023, and the results of its consolidated operations and its consolidated cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. 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 audit 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 consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ MNP LLP
Chartered Professional Accountants
Licensed Public Accountants
We have served as the Company’s auditor since 2014.
Mississauga, Canada
March 28, 2025
Medicus Pharma Ltd.
Consolidated Financial Statements
For the years ended December 31, 2024 and 2023
(expressed in United States dollars, except number of shares)
Medicus Pharma Ltd.
Consolidated Balance Sheets
(expressed in United States dollars)
| December 31, | ||||||
| 2024 | 2023 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 4,164,323 | $ | 1,719,338 | ||
| Prepaid expenses | 1,213,984 | 173,719 | ||||
| Total current assets | 5,378,307 | 1,893,057 | ||||
| Operating lease right-of-use assets | 268,571 | - | ||||
| Total assets | 5,646,878 | 1,893,057 | ||||
| Liabilities and Shareholder's equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | 1,284,612 | 210,842 | ||||
| Accrued expenses and other current liabilities | 762,835 | 404,817 | ||||
| Related party payable | 142,459 | 165,950 | ||||
| Operating lease liability, current | 116,323 | - | ||||
| Total current liabilities | 2,306,229 | 781,609 | ||||
| Operating lease liability, non-current | 205,945 | - | ||||
| Total liabilities | 2,512,174 | 781,609 | ||||
| Commitments and contingencies (Note 12) | ||||||
| Shareholders' equity | ||||||
| Common shares, no par value; 11,816,721 and 8,076,673 shares authorized, issued and outstanding at December 31, 2024 and 2023, respectively | 30,518,195 | 18,761,250 | ||||
| Additional paid-in capital | 1,520,412 | 98,585 | ||||
| Accumulated deficit | (28,903,903 | ) | (17,748,387 | ) | ||
| Total shareholders' equity | 3,134,704 | 1,111,448 | ||||
| Total liabilities and shareholders' equity | 5,646,878 | 1,893,057 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
Medicus Pharma Ltd.
Consolidated Statements of Operations and Comprehensive Loss
(expressed in United States dollars, except number of shares)
| Years Ended December 31, | ||||||
| 2024 | 2023 | |||||
| Operating expenses: | ||||||
| General and administrative | $ | 7,653,116 | $ | 4,536,367 | ||
| Research and development | 3,527,786 | 193,578 | ||||
| Total operating expenses | 11,180,902 | 4,729,945 | ||||
| Loss from operations | (11,180,902 | ) | (4,729,945 | ) | ||
| Other (income) expense | ||||||
| Finance (income) expense, net | (25,386 | ) | 584,820 | |||
| Total other (income) expense | (25,386 | ) | 584,820 | |||
| Net loss and comprehensive loss for the year | (11,155,516 | ) | (5,314,765 | ) | ||
| Net loss per share attributable to common shareholders - basic and diluted | (1.16 | ) | (1.53 | ) | ||
| Weighted average number of common shares outstanding - basic and diluted | 9,619,184 | 3,479,494 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
Medicus Pharma Ltd.
Consolidated Statements of Changes in Shareholders' Equity
(expressed in United States dollars, except number of shares)
| Common shares | Additional paid-in capital |
Accumulated deficit |
Total | ||||||||||||
| # | $ | $ | $ | $ | |||||||||||
| Balance as of December 31, 2022 | 1,884,900 | 194,538 | - | (12,383,622 | ) | (12,189,084 | ) | ||||||||
| Issuance of common shares upon acquisition of Interactive Capital Partners Ltd. | 287,471 | - | - | (50,000 | ) | (50,000 | ) | ||||||||
| Issuance of common shares upon conversion of preferred shares | 3,952,366 | 10,506,903 | - | - | 10,506,903 | ||||||||||
| Issuance of common shares upon conversion of promissory notes | 647,224 | 2,799,859 | - | - | 2,799,859 | ||||||||||
| Issuance of common shares upon conversion of note payable | 27,286 | 150,000 | - | - | 150,000 | ||||||||||
| Issuance of common shares in connection with financing | 1,277,426 | 5,109,950 | - | - | 5,109,950 | ||||||||||
| Stock-based compensation | - | - | 98,585 | - | 98,585 | ||||||||||
| Net loss and comprehensive loss for the year | - | - | - | (5,314,765 | ) | (5,314,765 | ) | ||||||||
| Balance as of December 31, 2023 | 8,076,673 | 18,761,250 | 98,585 | (17,748,387 | ) | 1,111,448 | |||||||||
| Issuance of common shares upon conversion of debt | 1,308,798 | 5,210,962 | - | - | 5,210,962 | ||||||||||
| Issuance of common shares in connection with a private placement, net of issuance costs of $375,000 | 1,461,250 | 5,470,000 | - | - | 5,470,000 | ||||||||||
| Issuance of common shares and warrants in connection with initial public offering, net of issuance costs of $2,218,014 | 970,000 | 1,075,983 | 708,708 | - | 1,784,691 | ||||||||||
| Stock-based compensation | - | - | 713,119 | - | 713,119 | ||||||||||
| Net loss and comprehensive loss for the year | - | - | - | (11,155,516 | ) | (11,155,516 | ) | ||||||||
| Balance as of December 31, 2024 | 11,816,721 | 30,518,195 | 1,520,412 | (28,903,903 | ) | 3,134,704 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Medicus Pharma Ltd.
Consolidated Statements of Cash Flows
(expressed in United States dollars)
| Years Ended December 31, | ||||||
| 2024 | 2023 | |||||
| Cash flows from operating activities: | ||||||
| Net loss for the year | $ | (11,155,516 | ) | $ | (5,314,765 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Stock-based compensation expense | 713,119 | 98,585 | ||||
| Non-cash interest expense | 74,005 | 584,820 | ||||
| Change in operating lease right-of-use assets | 88,234 | - | ||||
| Changes in operating assets and liabilities: | ||||||
| Prepaid expenses | (1,040,265 | ) | (158,719 | ) | ||
| Accounts payable | 808,745 | 79,088 | ||||
| Accrued expenses and other current liabilities | 358,018 | 386,777 | ||||
| Operating lease liability | (70,080 | ) | - | |||
| Related party payable | (23,491 | ) | 165,950 | |||
| Net cash used in operating activities | (10,247,231 | ) | (4,158,264 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from issuance of convertible promissory notes | 5,172,500 | 500,000 | ||||
| Proceeds from initial public offering, net of offering expenses | 2,049,716 | - | ||||
| Proceeds from issuance of common shares, net of issuance costs | 5,470,000 | - | ||||
| Proceeds from concurrent financing | - | 5,109,950 | ||||
| Net cash provided by financing activities | 12,692,216 | 5,609,950 | ||||
| Net increase in cash and cash equivalents during the year | 2,444,985 | 1,451,686 | ||||
| Cash and cash equivalents, beginning of the year | 1,719,338 | 267,652 | ||||
| Cash and cash equivalents, end of the year | 4,164,323 | 1,719,338 | ||||
| Supplemental information | ||||||
| Cash paid for interest | $ | 40,563 | - | |||
| Supplemental disclosure of non-cash investing and financing activities | ||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | 356,805 | - | |||
| Accrued interest converted into common shares | $ | 38,462 | - | |||
|
Issuance costs included in accounts payable |
$ |
265,025 | - | |||
The accompanying notes are an integral part of these consolidated financial statements.
| Medicus Pharma Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 and 2023 [expressed in United States dollars, except share amounts] |
1. Description of business
Medicus Pharma Ltd. (the "Company" or "Medicus Pharma"), formerly Interactive Capital Partners Corporation ("Interactive"), is a clinical stage, multi-strategy holding company focused on investing in and accelerating novel life sciences and bio-technology companies through FDA approved clinical trials.
The Company is a public limited Company originally incorporated pursuant to the provisions of the Business Corporations Act (Ontario) on April 30, 2008, as a private company named Interactive Capital Partners Corporation, with nominal assets and liabilities. The Company's registered office is located at 100 King Street West, Suite 3400, One First Canadian Place, Toronto, Ontario, Canada.
Business Combination Agreement
On March 17, 2023, and as amended on May 12, 2023 and August 29, 2023, the Company entered into a Business Combination Agreement ("BCA") with RBx Capital, LP ("RBx") and SkinJect, Inc. ("SkinJect") under which the Company entered into a reverse takeover ("RTO") with SkinJect on September 29, 2023. SkinJect converted all its shares of equity and securities convertible into equity into common shares to facilitate the RTO.
RBx, a family office controlled by the Company's Executive Chairman and CEO, played a foundational role in the Company's development, dating back to the identification and evaluation of the SkinJect technology and negotiation of a proposed merger and Canadian listing transaction with the SkinJect principals. RBx participated as lead investor in financings leading up to the Business Combination. It also identified Interactive as a suitable Canadian reporting issuer vehicle to combine with SkinJect in the Business Combination (Interactive subsequently changed its name to "Medicus Pharma Ltd.").
RBx was a party to the Business Combination Agreement prior to Interactive being identified and designated as the acquisition vehicle. The Business Combination Agreement was later amended to include Interactive as acquiror.
Liquidity and Going Concern
The Company has incurred significant operating losses and cash outflows from operating activities since its inception. As of December 31, 2024 and 2023, the Company had an accumulated deficit of $28,903,903 and $17,748,387, respectively.
From the Company's inception through the year ended December 31, 2024, the Company has funded its operations primarily through equity and debt financings.
On February 10, 2025, the Company announced that it had entered into the SEPA (as defined below). Subject to the satisfaction of certain conditions, Yorkville (as defined below) has committed to purchase the Company’s common shares up to an aggregate gross sales price of $15,000,000 during the 36 months following the date of the SEPA. See Note 14 for further details.
The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. In addition to the SEPA, management believes that the Company has access to additional capital resources through public and/or private equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, if the Company is unable to secure additional capital, it may be required to take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These measures could cause significant delays or entirely prevent the Company’s continued efforts to commercialize its current or future products, which are critical to the realization of its business plan and the future operations of the Company. This uncertainty, along with the Company’s history of losses, indicates that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The accompanying consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
Reverse Share Split
On June 25, 2024, the Company's shareholders approved an amendment to the Company's articles of incorporation to provide for the share consolidation, or reverse share split, of the Company's issued and outstanding common shares at such a consolidation ratio to be determined by the Board of Directors of the Company in its sole discretion, to permit the Company to satisfy all conditions and necessary regulatory approvals to list the common shares on a U.S. national securities exchange as the Board of Directors of the Company may determine in its sole direction (the "Share Consolidation"). The Board of Directors of the Company approved the Share Consolidation on October 15, 2024, and the Share Consolidation was completed by the Company on October 28, 2024, at the ratio of 1-for-2.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
After the completion of the Share Consolidation, the number of the Company's issued and outstanding common shares decreased from 21,693,560 to 10,846,721. The par value of the Company's common shares remains unchanged at $0 per share after the Share Consolidation.
Share and per share data presented in these consolidated financial statements for all periods presented has been adjusted for the Share Consolidation.
2. Summary of significant accounting policies
Basis of presentation
The accompanying consolidated financial statements ("financial statements") are presented in United States dollars, and are prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for financial information.
Basis of consolidation
These financial statements include the financial statements of the Company and its wholly-owned subsidiaries, SkinJect, Inc. and Medicus Pharma Inc. All intercompany balances and transactions have been eliminated on consolidation. The functional currency of the Company and its wholly-owned subsidiaries is the United States dollar.
Use of estimates
The preparation of these financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Such estimates include the valuation of stock-based awards and the incremental borrowing rate used to discount the Company's operating lease liabilities, and the valuation allowance relating to the Company's deferred tax assets, all of which are management's best estimates. Estimates are based on historical experience, where applicable, and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in estimates in future years could be significant. Management believes that the estimates utilized in preparing the financial statements are reasonable, however, actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents include cash held at financial institutions and short-term investments in highly liquid marketable securities, having an original maturity of three months or less.
The Company holds money market accounts with maturities of three months or less. These money market accounts are included in cash and cash equivalents on the accompanying consolidated balance sheets.
Prepaid expenses
Prepaid expenses include payments for goods or services to be received in the future, insurance, subscription services and professional services.
Leases
The Company assess whether a contract is, or contains, a lease at inception of the contract and reassesses that conclusion if the contract is modified. The Company accounts for a contract as a lease when the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
The Company recognizes a right-of-use ("ROU") asset and a lease liability at the lease commencement date. The ROU asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentives received. The assets are amortized to the earlier of the end of the useful life of the ROU asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. The lease term includes periods covered by an option to extend if the Company is reasonably certain to exercise that option.
The lease liability is initially measured at the present value of the future lease payments at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate.
Variable lease components and non-lease components are excluded from the lease payments used to calculate the right-of-use assets and lease liabilities and are recorded in the period in which the obligation for the payment is incurred.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the ROU asset or is recorded in profit or loss if the carrying amount of the ROU asset has been reduced to zero.
The Company's operating lease cost for lease component payments is recognized on a straight-line basis over the lease term within general and administrative expenses.
The Company has elected to apply the practical expedient not to recognize ROU assets and lease liabilities for short term leases that have a lease term of 12 months or less. The lease payments for short-term leases are recognized as an expense.
Research and development
All research and development costs are expensed as incurred. Research and development costs consist primarily of salaries, employee benefits, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services). Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites, and others. Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones. For the latter, the Company accrues the expenses as goods or services are used or rendered. Clinical trial site costs related to patient enrollment are accrued as patients enter and progress through the trial. Upfront costs, such as costs associated with setting up clinical trial sites for participation in the trials, are expensed immediately once incurred as research and development expenses.
Stock-based compensation
The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company records the expense for stock-based compensation awards subject to vesting over the requisite service period. The Company estimates the fair value of stock option grants and shares purchasable under the Company's Equity Incentive Plan (the "Plan") using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment. The Company accounts for forfeitures as they occur. All stock-based compensation costs are recorded in the statements of operations and comprehensive loss based upon the underlying employees or non-employee's roles within the Company.
Net loss per share
Basic net loss per share is calculated by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the sum of the weighted average number of shares outstanding and all additional shares that would have been outstanding if potentially dilutive shares had been exercised at the beginning of the period.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
Financial instruments
Financial instruments, including cash and cash equivalents and accounts payable are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The fair value of lease obligations approximates their carrying amounts as a market rate of interest is attached to their repayment. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value:
Level 1-Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for identical assets or liabilities as of the reporting date.
Level 2- Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3-Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment are used to measure fair value. These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions. The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity.
Concentration of credit risk
Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company's cash and cash equivalents are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. The Company maintains its cash equivalents in money market funds that invest in U.S. Treasury and agency securities.
Foreign currency transactions
Foreign exchange transaction gains and losses are included in general and administrative expense in the Company's consolidated statement of operations and comprehensive loss.
Income taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes, which provides for deferred taxes using an asset and liability approach. Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
Tax benefits claimed or expected to be claimed on a tax return are recorded in the Company's consolidated financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Uncertain tax positions have had no impact on the Company's consolidated financial condition, results of comprehensive loss or cash flows.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
Operating segments
Operating segments are identified as components of an entity about which separate discrete financial information is available for evaluation by the chief operating decision-maker ("CODM") in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment.
Recently adopted accounting pronouncements
In August 2020, the FASB issued ASU 2020-06 "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)" to simplify the accounting for convertible instruments by reducing the number of accounting models and to improve the information provided to the financial statement users by reducing the complexity and diversity of accounting practices. ASU 2020-06 is effective for our annual periods beginning January 1, 2024. The impact of adopting the amendment on the Company's financial statements was not significant.
In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" to expand the disclosures required by public entities for reportable segments, thereby responding to stakeholders' requests for more detailed information about expenses within each reportable segment. The expanded disclosures now require public entities to disclose significant expenses for reportable segments in both interim and in annual reporting periods, while entities with only a single reportable segment must now provide all segment disclosures required both in ASC 280 and under the amendments in ASU 2023-07. ASU 2023-07 is effective for our annual periods beginning January 1, 2024. See Note 13 for enhanced segment reporting disclosures.
Recently issued accounting pronouncements
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
In November 2024, the FASB issued ASU 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures" to provide greater transparency about the components of specific expense categories in the income statements. The effective dates of ASU 2024-03 were subsequently clarified by ASU 2025-01. ASU 2025-01 is effective for our annual period beginning January 1, 2027, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
In November 2024, the FASB issued ASU 2024-04 "Debt-Debt with Conversion and Other Options (Subtopic 470-20: Induced Conversions of Convertible Debt Instruments", to improve consistency and relevance of accounting for induced conversions of convertible debt instruments and it addresses scenarios involving convertible debt instruments and cash conversion features and those not currently convertible. ASU 2024-04 is effective for our annual period beginning January 1, 2026, with early adoption permitted for entities that adopted the amendment in ASU 2020-06. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
There were no other significant updates to the recently issued accounting standards which may be applicable to the Company. Although there are several other new accounting pronouncements issued or proposed by the FASB, the Company does not believe any of those accounting pronouncements have had or will have a material impact on its financial position or operating results.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
3. Reverse takeover transaction
On September 29, 2023, the Company executed the BCA with RBx and SkinJect, pursuant to which Interactive and SkinJect completed the RTO. Effective September 29, 2023, Interactive changed its name to Medicus Pharma Ltd.
On May 12, 2023, as amended on August 29, 2023, the Company entered into a BCA with RBX and SkinJect to combine Interactive and SkinJect via the purchase of SkinJect which constituted a reverse takeover of Interactive by the shareholders of SkinJect. Interactive acquired all of the issued and outstanding SkinJect shares from the SkinJect shareholders and issued to each SkinJect shareholder (other than Interactive) the number of common shares in the capital of the Company as described below. In connection with and as a closing condition of the RTO, Interactive raised aggregate gross proceeds of $5,109,950 through the issuance of 1,277,426 common shares at a price of $4.00 per share.
Pursuant to the terms of the RTO, all outstanding financial instruments of SkinJect were converted into shares of SkinJect common stock. The SkinJect preferred shares, convertible promissory notes and note payable were converted into 15,423,561 shares of SkinJect common stock which were then consolidated into 4,626,876 shares of SkinJect common stock on a 3.413443-to-1 basis, with the exception of $1,000,000 of convertible promissory notes, which converted into 261,781 of the Company's common shares on a one-to-one basis. In addition, 6,434,000 shares of SkinJect common stock were consolidated on a 3.413443-to-one basis, into 1,884,900 shares of SkinJect common stock.
Immediately prior to the completion of the RTO, the 7,249,999 Interactive common shares were consolidated into 287,471 common shares on a 25.219932-to-1 basis.
The substance of the acquisition is a reverse takeover as the shareholders of SkinJect held 80.62% of the resulting issuer shares and Interactive shareholders held 3.56% of the resulting issuer shares. The remaining 15.82% of the resulting issuer shares are held by former holders of subscription receipts. Accordingly, for accounting purposes, it was determined that SkinJect was the accounting acquirer and Interactive was the accounting acquiree. As SkinJect was deemed to be the acquirer for accounting purposes, its assets, liabilities and operations since incorporation are included in these consolidated financial statements at their historical carrying values. Interactive's results of operations have been included from September 29, 2023. SkinJect incurred $270,419 of legal costs related to the RTO for the year ended December 31, 2023, included in general and administrative expense on the consolidated statements of loss and comprehensive loss.
The consideration paid to acquire Interactive consisted of net liabilities assumed of $50,000, recognized directly in shareholder’s equity on completion of the RTO.
Upon closing of the transaction, the Company assumed liabilities of $2,071,580 for costs incurred by RBx that related to the BCA and RTO. The assumed liabilities have been expensed and included in the line item 'general and administrative' in the statement of operations and comprehensive loss for the year ended December 31, 2023.
4. Balance sheet components
Prepaid expenses include the following:
| Year ended December 31, | ||||||
| 2024 | 2023 | |||||
| Insurance | $ | 583,561 | $ | 163,500 | ||
| Contract research organizations | 455,810 | - | ||||
| Professional services | 144,643 | - | ||||
| Prepaid services | 29,970 | 10,219 | ||||
| $ | 1,213,984 | $ | 173,719 | |||
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
| Year ended December 31, | ||||||
| 2024 | 2023 | |||||
| Accrued legal fees | $ | 495,016 | $ | 359,011 | ||
| Accrued compensation and benefits | 140,989 | 27,766 | ||||
| Accrued other | 126,830 | 18,040 | ||||
| $ | 762,835 | $ | 404,817 | |||
5. Leases
As of December 31, 2024, the Company had one operating lease for its corporate office that commenced in 2024, for which the Company recorded a right-of-use asset and lease liability as of the commencement date. The Company's lease does not contain a purchase option. Where the Company's lease contains an option to extend the lease term, the extended lease term is only included in the measurement of the lease when it is reasonably certain to remain in the lease beyond the non-cancellable term. The Company's lease also contains variable lease costs, which pertain to common area maintenance and other operating charges, that are expensed as incurred.
Balance sheet information related to the Company's lease is presented below:
|
Year Ended December 31, |
|||
| 2024 | |||
| Operating lease | |||
| Operating lease right-of-use assets | $ | 268,571 | |
| Operating lease liabilities - current | 116,323 | ||
| Operating lease liabilities - non-current | 205,945 |
Other information related to leases is presented below:
|
Year Ended |
|||
| 2024 | |||
| Lease cost | |||
| Operating lease cost | $ | 123,777 | |
| Other information | |||
| Operating cash flows used in operating leases | (70,080 | ) | |
| Remaining lease term (in years) | 2.42 | ||
| Discount rate | 10% | ||
As of December 31, 2024, the annual future minimum lease payments of the Company's operating lease liabilities were as follows:
| Year ending December 31, | |||
| 2025 | $ | 142,262 | |
| 2026 | 146,530 | ||
| 2027 | 74,348 | ||
| Total future minimum lease payments, undiscounted | 363,140 | ||
| Present value discount | (40,872 | ) | |
| Total lease liability | $ | 322,268 |
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
6. Share capital
Authorized
The Company has authorized an unlimited number of common shares participating, voting and without par value. Each holder of common shares is entitled to one vote for each share owned on all matters voted upon by shareholders.
Conversion of preferred shares
Prior to the RTO, the Company had 13,491,174 of Series A and Series A-1 preferred shares issued and outstanding with no par value. The preferred shares were convertible at any time at the option of the holder into common shares at the series conversion rate unless there is a recapitalization event, in which case an anti-dilutive effect is triggered. As a result, the preferred shares were classified as a financial liability. Each share entitled the holder to the number of votes per share equal to the common shares into which the preferred shares convert. Preferred shares had several liquidity event triggers that required conversion to common shares and have liquidation preference over any other classes of shares.
Holders of preferred shares were entitled to accrue dividends at a dividend rate of 8% of the original issue price per annum, and participate in any dividend declared on common shares, whether or not declared by the Board of Directors. Dividends were payable only when and if declared by the Board of Directors, out of funds, common shares or other property.
The preferred shares were redeemable as of March 30, 2022, at the option of holders that together hold at least 75% of the issued and outstanding preferred shares. The redemption price is equal to the original issue price plus any unpaid dividends accrued at the redemption request date.
To facilitate the closing of the RTO, the preferred shares outstanding were converted into 7,904,731 common shares on a 1.706721-to-1 basis. On October 28, 2024, the Company completed a reverse share split at the ratio of 1-for-2, resulting in 3,952,366 common shares after conversion.
Conversion of promissory notes
From July 2021 to May 2023, the Company issued convertible promissory notes in the principal amount of $2,500,000. The convertible promissory notes accrued interest at the rate of 8% per annum and had a maturity date of December 31, 2023. At maturity the notes were payable in full, including unpaid accrued interest, or the convertible note holder could elect to convert to preferred shares. $1,500,000 of the convertible promissory notes could be converted into preferred shares at a price of $2.64122, and $1,000,000 could be converted at a price determined by dividing $25,000,000 by the fully diluted outstanding shares at the time of conversion, excluding other dilutive instruments.
In the event of a financing greater than $3,000,000 prior to maturity, the outstanding principal of the convertible debentures of $2,500,000 and any unpaid accrued interest automatically converted into preferred shares at the lesser of 80% of the price per share paid by other purchasers or the base conversion rate. The Company determined that the conversion options did not meet the criteria for separation and the convertible promissory notes would be accounted for as a single, hybrid instrument.
The promissory notes were converted immediately prior to the RTO transaction for 1,294,447 common shares of SkinJect. On October 28, 2024, the Company completed a reverse share split at the ratio of 1-for-2, resulting in 647,224 common shares after conversion.
On May 3, 2024, the Company issued convertible notes in the principal amount of $5,172,500. The convertible notes accrued interest at the rate of 10% per annum, payable in-kind semi-annually in arrears in the form of either cash or common shares of the Company, at the election of the holder, and had a maturity date of December 31, 2025.
Prior to January 1, 2025, the convertible notes would automatically convert to common shares in the event that the Company completed an initial public offering in the United States, at a conversion price equal to the greater of (i) a 20% discount to the initial public offering price and (ii) $4.00; or if there had been a change of control, at a conversion price of $4.00 per common share. On or after January 1, 2025, conversion would be at the option of the holder at a conversion price of $4.00 per common share. The Company had the option to redeem all or any portion of the convertible notes at a price equal to 100% of the outstanding principal plus accrued and unpaid interest up to but not including the date of redemption. In the event of a change of control, the Company would offer to repurchase the convertible notes at a price equal to 101% of the principal plus accrued and unpaid interest up to but not including the date of repurchase. The Company elected to account for the convertible notes in their entirety at fair value through profit and loss.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
Subsequently, the note holders were given the option to convert at a conversion price of $4.00 per share prior to July 31, 2024. On June 28, 2024, all of the holders of the convertible notes elected to convert to common shares. The Company paid cash interest of $40,563 and accrued interest of $38,462 was converted, along with the principal amount of $5,172,500, into 1,308,798 common shares.
Conversion of notes payable
On December 6, 2022, SkinJect issued a simple agreement for future equity ("SAFE") to a related party for proceeds of $150,000. In the event of an equity financing greater than $3 million, the SAFE is convertible to preferred shares at the lower of the SAFE valuation cap divided by the capitalization of the Company immediately prior to the equity financing and the lowest price per share sold in the equity financing. The SAFE was redeemed immediately prior to the RTO transaction for 54,571 common shares of SkinJect. On October 28, 2024, the Company completed a reverse share split at the ratio of 1-for-2, resulting in 27,286 common shares after conversion.
Private placement
On June 28, 2024, the Company issued 1,461,250 common shares as part of a private placement for total proceeds of $5,845,000 at $4.00 per common share. The company incurred finders' fees of $375,000, which were recognized in equity as deduction from the gross proceeds received.
Initial Public Offering
On November 14, 2024, the Company completed the sale of 970,000 Units, with each Unit consisting of one common share and one warrant to purchase one common share (the "Unit") at the price of $4.125 per Unit. In addition, the underwriters exercised an option to purchase 145,500 warrants (the 'Overallotment Warrants") at a price of $0.01 per warrant.
Total gross proceeds from the IPO were $4,002,705, including the proceeds from the Overallotment Warrants. The Company incurred total issuance costs of $2,218,014, including underwriter fees, and legal and other professional fees incurred directly related to the issuance.
The incremental costs directly associated with the issuance were recognized as a deduction in equity and allocated based on the relative fair values of the warrants and common shares on a standalone basis.
The fair value of the common shares was based on the Company's stock price on the day of issuance of $2.65 and the fair value of the warrants was $1.7419 per warrant. The warrants were recognized in additional paid-in capital as they met the criteria for equity classification.
The fair value of the warrants was estimated using the Black-Scholes option pricing model with the following inputs:
| 2024 | |||
| Valuation date share price | $ | 2.65 | |
| Exercise price | $ | 4.64 | |
| Expected dividend yield | - | ||
| Risk-free interest rate | 4.32% | ||
| Expected term (in years) | 5 years | ||
| Expected volatility | 95% |
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
The number of warrants outstanding during the year ended December 31, 2024:
| Warrants outstanding | ||
| Expiry date | Exercise price | Number outstanding |
| November 15, 2029 | $ 4.64 | 1,115,500 |
7. Stock-based compensation
In 2023, the Company approved the Equity Incentive Plan (the "Plan"). The Plan provides both for the direct award or sale of shares and for the grant of options to purchase shares. Under the plan the total number of shares available for options cannot exceed 10% of the Company's issued and outstanding common shares at the time of any grant. The Company is authorized to issue options to employees, non-employee directors and consultants under the plan.
On June 25, 2024, the Board of Directors approved the acceleration of vesting for all outstanding share options to June 25, 2024, resulting in the Company recognizing the remaining expense for all share options outstanding and unvested as of that date.
The following table summarizes option transactions for the Plan:
|
Number of options |
Weighted average exercise price C$ |
Weighted average remaining contractual life (years) |
Aggregate intrinsic value C$ |
|||||||||
| Outstanding at December 31, 2022 | - | - | - | - | ||||||||
| Granted | 812,500 | 1.16 | 4.82 | 2.84 | ||||||||
| Outstanding at December 31, 2023 | 812,500 | 1.16 | 4.82 | 2.84 | ||||||||
| Granted | 485,000 | 3.83 | - | - | ||||||||
| Forfeited | (112,500 | ) | 3.20 | - | - | |||||||
| Outstanding at December 31, 2024 | 1,185,000 | 2.06 | 4.18 | 1.89 | ||||||||
| Exercisable at December 31, 2024 | 875,000 | 1.32 | 3.92 | 2.63 | ||||||||
| Unvested at December 31, 2024 | 310,000 | 3.72 | 4.94 | 0.23 |
The weighted average grant-date fair value of options granted during the years ended December 31, 2024 and December 31, 2023 was C$2.82 and C$0.73, respectively. The weighted average grant-date fair value of options forfeited during the year ended December 31, 2024 was C$2.36.
As of December 31, 2024 and December 31, 2023, there were $565,986 and $335,812 of unrecognized stock-based compensation cost related to share options outstanding, which is expected to be recognized over a weighted-average period of 2.25 and 4.82 years, respectively.
For the years ended December 31, 2024 and 2023, stock-based compensation expense was $713,119 and $98,585, respectively. Stock-based compensation expense has been reported in the Company's consolidated statements of operations and comprehensive loss within the line items 'general and administrative' and 'research and development' expenses.
The following table presents the assumptions that were used in the Black-Scholes option pricing model to determine the fair value of share options granted during the period:
| 2024 | 2023 | |||||
| Expected dividend yield | - | - | ||||
| Risk-free interest rate | 2.95% - 4.24% | 4.24% | ||||
| Expected term (in years) | 5 years | 5 years | ||||
| Expected volatility | 95% - 100% | 93.10% |
The expected volatility is based on the share price volatility observed for comparable publicly traded companies over a period similar to the life of the options. The expected option life represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on Canadian government bonds with a remaining term equal to the expected life of the options.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
8. Net loss per share
Basic and diluted net loss per share attributable to ordinary shareholders was calculated as follows:
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net loss attributable to shareholders | $ | (11,155,516 | ) | $ | (5,314,765 | ) | ||
| Weighted average number of common shares outstanding during the year | 9,619,184 | 3,479,494 | ||||||
| Basic and diluted net loss per share attributable to shareholders | $ | (1.16 | ) | $ | (1.53 | ) | ||
The Company’s potentially dilutive securities as of December 31, 2024 and 2023, include stock options, warrants, notes payable, convertible promissory notes and preferred shares. The Company excluded the potential ordinary shares outstanding at each period end from the computation of diluted net loss per share attributable to ordinary shareholders for the period ended December 31, 2024 and 2023 because including them would have had an anti-dilutive effect.
9. Income taxes
For the years ended December 31, 2024 and 2023, the total net loss and comprehensive loss is as follows:
| Year ended December 31, | ||||||
| 2024 | 2023 | |||||
| Loss attributed to US foreign operations | (4,968,344 | ) | (2,023,786 | ) | ||
| Loss attributed to Canadian operations | (6,187,172 | ) | (3,290,979 | ) | ||
| Loss before income taxes | (11,155,516 | ) | (5,314,765 | ) | ||
A reconciliation from the US statutory income tax rate of 21% to the Company’s effective income tax rate, is as follows:
| Year ended December 31, | ||||||
| 2024 | 2023 | |||||
| Income tax recovery at the statutory tax rate | (2,956,212 | ) | (1,408,413 | ) | ||
| Permanent differences | 189,075 | 796,707 | ||||
| Impact of tax rate changes | 42,865 | 436,994 | ||||
| Change in valuation allowance | 2,724,272 | 174,712 | ||||
| - | - | |||||
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
The tax effect of temporary differences between US GAAP accounting and income tax accounting creating deferred income tax assets and liabilities were as follow:
| Year ended December 31, | ||||||
| 2024 | 2023 | |||||
| Non-capital losses carry forward - Canada | 1,973,535 | 561,698 | ||||
| Net operating losses carry forward - US | 2,678,919 | 2,208,235 | ||||
| Intangible assets | 10,855 | 11,810 | ||||
| Accrued expenses | 994,653 | 170,598 | ||||
| Research and Development Tax credits | 242,190 | 242,190 | ||||
| Other | 14,230 | 25,290 | ||||
| Financing charges and interest | 668,701 | - | ||||
| Total deferred tax assets | 6,583,083 | 3,219,821 | ||||
| Less: valuation allowance | (6,583,083 | ) | (3,219,821 | ) | ||
| Deferred tax assets, net | - | - | ||||
The Company has a valuation allowance on all of its deferred tax assets at December 31, 2024 and 2023, which based in the judgement of management are not more-likely than-not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that all or some portion of the deferred assets will not be realized. This ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those deductible temporary difference become deductible. Based on the history of losses and projections for future taxable income, management believes that it is not more-likely than-not that the Company will realize the benefits of these deductible temporary differences (e.g. deferred tax assets).
The Company has $242,190 of US Research and Development Tax Credits which are available to reduce future US taxes payable and begin to expire in 2036.
In addition, the Company has gross Canadian non-capital loss carryforwards of $7,447,301. To the extent that the non-capital loss carryforwards are not used, they begin to expire in 2028. The Company also has gross US Federal net operating loss carryforward of $11,037,837, of which approximately $1,253,000 begin to expire in 2035, while approximately $9,514,000 has an indefinite life.
In addition, the Company has approximately $11,222,000 of gross US State net operating losses, which begin to expire in 2035.
The US NOL carryforwards may be, or become subject to, an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. If and when the Company utilizes the NOL carryforwards in a future period, it will perform an analysis to determine the effect, if any, of these loss limitation rules on the NOL carryforward balances.
The Company files income tax returns with Canada and its provinces and territories and is generally subject to routine examinations by the Canada Revenue Agency ("CRA"). Income tax returns filed with various provincial jurisdictions are generally open to examination for periods of four to five years subsequent to the filing of the respective returns.
The Company also files income tax returns for our U.S. operations and subsidiary with the U.S. federal and state tax jurisdictions. Generally, we are subject to routine examination by taxing authorities in the U.S. jurisdictions, which all years since inception are open to examination due to net operating losses.
There are presently no examinations of our Canadian, U.S. federal and U.S. state jurisdictions.
10. Related party transactions
The Company had an agreement with Velocity Fund Management, LLC ("VFM"), an affiliate of a shareholder of the Company, that provided for certain managerial positions to be filled from within VFM. These employees were not deemed employees of the Company, and VFM was responsible for the payment and provision of all wages, bonuses, commissions and benefits. Reimbursable salaries paid to VFM was $180,000 during the period ended December 31, 2023. This agreement was terminated on September 29, 2023.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
[expressed in United States dollars, except share amounts]
On October 18, 2023, the Company signed an agreement with RBx, that provides for certain managerial positions to be filled from within RBx. RBx is responsible for the payment and provision of all wages, bonuses, and benefits for these positions. Reimbursable salaries paid to RBx pursuant to this agreement are $125,000 per month. In December 2024, reimbursable salaries were changed to $100,000 per month. Reimbursable salaries paid to RBx were $1,300,000 and $400,000 during the years ended December 31, 2024 and 2023, respectively. Additional expenses of $180,857 and $736,690 were incurred by RBx on behalf of the Company during the years ended December 31, 2024 and 2023, respectively. The Company paid $1,623,316 and $970,740 to RBx during the years ended December 31, 2024 and 2023. The total amount of accounts payable to RBx was $142,459 and $165,950 as of December 31, 2024 and 2023, respectively.
In connection with the convertible notes issued by the Company on May 3, 2024 (Note 6), related parties consisting of key management personnel subscribed for 168,750 convertible notes in the principal amount of $675,000. Upon conversion the Company settled the convertible notes, along with accrued but unpaid interest, with 172,953 common shares.
11. Fair value measurements
The accounting guidance for fair value establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, or which require the reporting entity to develop its own assumptions
The Company's cash equivalents are classified as Level 1. The fair value of the Company's cash and cash equivalents is determined based on market pricing that is both objective and publicly available. As of December 31, 2024 and 2023, the fair value of the Company's cash equivalents was $4,164,323 and $1,719,338, respectively.
The Company did not reclassify any investments between levels in the fair value hierarchy during the periods presented.
As of December 31, 2024 and 2023, the carrying amounts of the Company's other financial instruments, which include cash, accounts payable, and accrued expenses, approximate fair values because of their short-term maturities.
12. Commitment and contingencies
Commitments
As of December 31, 2024, the Company had no long-term commitments.
Contingencies
In the ordinary course of business, from time to time, the Company may be involved in various claims related to operations, rights, commercial, employment or other claims. Although such matters cannot be predicted with certainty, management does not consider the Company's exposure to such claims to be material to these consolidated financial statements.
13. Segment reporting
The Company manages the business activities on a consolidated basis and operates as one reportable segment that constitutes all of the consolidated entity, which is the business of advancing the clinical development program of the Company's product, while opportunistically identifying, evaluating, and acquiring accretive assets, properties or businesses. The Company's CODM is its Chief Executive Officer. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The CODM uses consolidated net loss to measure segment loss, allocate resources and assess performance. The significant segment expense categories (general and administrative and research and development) are consistent with those presented on the face of the statements of operations and comprehensive loss. Other segment items are finance (income) expense which are consistent with those presented on the face of the statements of operations and comprehensive loss. Additionally, the CODM reviews cash forecast models to determine where the Company will invest in planned research and development activities.
14. Subsequent events
On February 10, 2025, the Company also announced that it had entered into a Standby Equity Purchase Agreement (the "SEPA") with YA II PN, Ltd. ("Yorkville"). Pursuant to the SEPA and subject to the satisfaction of certain conditions, Yorkville has committed to purchase the Company's common shares, no par value, in increments (each purchase, an "Advance") up to an aggregate gross sales price of up to $15,000,000 during the 36 months following the date of the SEPA (such shares, the "Shares"). The Shares will be sold at the Company's option pursuant to the SEPA at 97% of the Market Price (as defined pursuant to the SEPA) and purchases are subject to certain limitations set forth in the SEPA.
On March 10, 2025, the Company closed its Tier II Regulation A offering of $4.2 million. The Company issued 1,490,000 units at a price of $2.80 per unit. Each unit consisted of one common share of the Company and one warrant to purchase one common share. The warrants have an exercise price of $2.80 per share and will expire 5 years from the date of issuance.
Medicus Pharma Ltd.
Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2025 and 2024
(unaudited) (expressed in United States dollars, except number of shares)
MEDICUS PHARMA LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2025 | December 31, 2024 | |||||
| (unaudited) | ||||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 3,982,430 | $ | 4,164,323 | ||
| Prepaid expenses and other current assets | 1,105,345 | 1,213,984 | ||||
| Total current assets | 5,087,775 | 5,378,307 | ||||
| Operating lease right-of-use assets | 245,091 | 268,571 | ||||
| Deferred issuance costs | 325,000 | - | ||||
| Total assets | $ | 5,657,866 | $ | 5,646,878 | ||
| Liabilities and Shareholder's equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 2,035,364 | $ | 1,284,612 | ||
| Accrued expenses and other current liabilities | 1,062,040 | 762,835 | ||||
| Related party payable | 118,215 | 142,459 | ||||
| Operating lease liability, current | 120,296 | 116,323 | ||||
| Total current liabilities | 3,335,915 | 2,306,229 | ||||
| Operating lease liability, non-current | 174,397 | 205,945 | ||||
| Total liabilities | 3,510,312 | 2,512,174 | ||||
| Commitments and contingencies (Note 10) | ||||||
| Shareholders' equity | ||||||
| Common shares, no par value; unlimited shares authorized; 13,417,561 and 11,816,721 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively | 32,908,702 | 30,518,195 | ||||
| Additional paid-in capital | 3,245,163 | 1,520,412 | ||||
| Accumulated deficit | (34,006,311 | ) | (28,903,903 | ) | ||
| Total shareholders' equity | 2,147,554 | 3,134,704 | ||||
| Total liabilities and shareholders' equity | $ | 5,657,866 | $ | 5,646,878 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
MEDICUS PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| Three months ended March 31, | ||||||
| 2025 | 2024 | |||||
| Operating expenses: | ||||||
| General and administrative | $ | 3,120,060 | $ | 1,385,981 | ||
| Research and development | 2,006,214 | 321,377 | ||||
| Total operating expenses | 5,126,274 | 1,707,358 | ||||
| Loss from operations | (5,126,274 | ) | (1,707,358 | ) | ||
| Other income | ||||||
| Finance income | 23,866 | - | ||||
| Total other income | 23,866 | - | ||||
| Net loss and comprehensive loss for the year | $ | (5,102,408 | ) | $ | (1,707,358 | ) |
| Net loss per share attributable to common shareholders - basic and diluted | $ | (0.42 | ) | $ | (0.21 | ) |
| Weighted average number of common shares outstanding - basic and diluted | 12,240,437 | 8,076,673 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
MEDICUS PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
| Common shares | Additional | Accumulated | |||||||||||||
| Shares | Amount | paid-in capital | deficit | Total | |||||||||||
| Balance as of December 31, 2024 | 11,816,721 | $ | 30,518,195 | $ | 1,520,412 | $ | (28,903,903 | ) | $ | 3,134,704 | |||||
| Issuance of common shares and warrants in connection with Regulation A, net of issuance costs of $483,020 | 1,490,000 | 2,076,507 | 1,612,474 | - | 3,688,981 | ||||||||||
| Issuance of common shares in connection with SEPA offering costs | 105,840 | 300,000 | - | - | 300,000 | ||||||||||
| Issuance of common shares upon exercise of stock warrants | 5,000 | 14,000 | - | - | 14,000 | ||||||||||
| Stock-based compensation | - | - | 112,277 | - | 112,277 | ||||||||||
| Net loss and comprehensive loss for the period | - | - | - | (5,102,408 | ) | (5,102,408 | ) | ||||||||
| Balance as of March 31, 2025 | 13,417,561 | $ | 32,908,702 | $ | 3,245,163 | $ | (34,006,311 | ) | $ | 2,147,554 | |||||
| Common shares | Additional | Accumulated | |||||||||||||
| Shares | Amount | paid-in capital | deficit | Total | |||||||||||
| Balance as of December 31, 2023 | 8,076,673 | $ | 18,761,250 | $ | 98,585 | $ | (17,748,387 | ) | $ | 1,111,448 | |||||
| Stock-based compensation | - | - | 35,953 | - | 35,953 | ||||||||||
| Net loss and comprehensive loss for the period | - | - | - | (1,707,358 | ) | (1,707,358 | ) | ||||||||
| Balance as of March 31, 2024 | 8,076,673 | $ | 18,761,250 | $ | 134,538 | $ | (19,455,745 | ) | $ | (559,957 | ) | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
MEDICUS PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three months ended March 31, | ||||||
| 2025 | 2024 | |||||
| Cash flows from operating activities: | ||||||
| Net loss for the period | $ | (5,102,408 | ) | $ | (1,707,358 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Stock-based compensation expense | 112,277 | 35,953 | ||||
| Change in operating lease right-of-use assets | 23,480 | 30,945 | ||||
| Changes in operating assets and liabilities: | ||||||
| Prepaid expenses | 122,639 | 61,643 | ||||
| Accounts payable | 655,634 | 364,275 | ||||
| Accrued expenses and other current liabilities | 299,203 | (9,657 | ) | |||
| Operating lease liability | (27,575 | ) | - | |||
| Related party payable | (24,244 | ) | 47,266 | |||
| Net cash used in operating activities | (3,940,994 | ) | (1,176,933 | ) | ||
| Cash flows from financing activities: | ||||||
| Net proceeds from issuance of common shares and warrants in connection with Regulation A | 3,784,101 | - | ||||
| Cash paid for financing costs in connection with SEPA | (25,000 | ) | - | |||
| Net cash provided by financing activities | 3,759,101 | - | ||||
| Net decrease in cash and cash equivalents during the period | (181,893 | ) | (1,176,933 | ) | ||
| Cash and cash equivalents, beginning of the year | 4,164,323 | 1,719,338 | ||||
| Cash and cash equivalents, end of the year |
$ |
3,982,430 |
$ |
542,405 | ||
| Supplemental disclosure of non-cash investing and financing activities | ||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | - |
$ |
356,805 | ||
| Receivable for proceeds of warrant exercises | $ | 14,000 |
$ |
- | ||
| Issuance costs included in accounts payable | $ | 95,120 |
$ |
- | ||
| Deferred issuance costs on issued shares related to SEPA agreement | $ | 300,000 |
$ |
|||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
MEDICUS PHARMA LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of business
Medicus Pharma Ltd. (the "Company" or "Medicus Pharma"), formerly Interactive Capital Partners Corporation ("Interactive"), is a clinical stage, multi-strategy holding company focused on investing in and accelerating novel life sciences and bio-technology companies through FDA approved clinical trials.
The Company is a public limited Company originally incorporated pursuant to the provisions of the Business Corporations Act (Ontario) on April 30, 2008, as a private company named Interactive Capital Partners Corporation, with nominal assets and liabilities. The Company's registered office is located at 100 King Street West, Suite 3400, One First Canadian Place, Toronto, Ontario, Canada.
Liquidity and Going Concern
The Company has incurred significant operating losses and cash outflows from operating activities since its inception. The Company incurred net losses of $5,102,408 and $1,707,358 for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, the Company had an accumulated deficit of $34,006,311. Since inception, the Company has funded its operations primarily through equity and debt financings.
On February 10, 2025, the Company announced that it had entered into the SEPA (as defined below). Subject to the satisfaction of certain conditions, Yorkville (as defined below) has committed to purchase the Company's common shares up to an aggregate gross sales price of $15,000,000 during the 36 months following the date of the SEPA. See Note 6 for further details.
On March 10, 2025, the Company closed its Tier II Regulation A offering for gross proceeds of approximately $4,200,000. The Company issued 1,490,000 units at a price of $2.80 per unit. Each unit consists of one common share of the Company and one warrant to purchase one common share.
The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. In addition to accessing public markets through the exercise of outstanding warrants, additional Regulation A financings and the SEPA, management believes that the Company has access to additional capital resources through public and/or private equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, if the Company is unable to secure additional capital, it may be required to take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These measures could cause significant delays or entirely prevent the Company's continued efforts to commercialize its current or future products, which are critical to the realization of its business plan and the future operations of the Company. This uncertainty, along with the Company's history of losses, indicates that there is substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued. The accompanying condensed consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
Reverse Share Split
On June 25, 2024, the Company's shareholders approved an amendment to the Company's articles of incorporation to provide for the share consolidation, or reverse share split, of the Company's issued and outstanding common shares at such a consolidation ratio to be determined by the Board of Directors of the Company in its sole discretion, to permit the Company to satisfy all conditions and necessary regulatory approvals to list the common shares on a U.S. national securities exchange as the Board of Directors of the Company may determine in its sole direction (the "Share Consolidation"). The Board of Directors of the Company approved the Share Consolidation on October 15, 2024, and the Share Consolidation was completed by the Company on October 28, 2024, at the ratio of 1-for-2.
After the completion of the Share Consolidation, the number of the Company's issued and outstanding common shares decreased from 21,693,560 to 10,846,721. The par value of the Company's common shares remains unchanged at $0 per share after the Share Consolidation.
Share and per share data presented in these consolidated financial statements for all periods presented has been adjusted for the Share Consolidation.
2. Summary of significant accounting policies
Basis of presentation and consolidation
The accompanying unaudited condensed consolidated financial statements included herein have been prepared in conformity with generally accepted accounting principles in the United States ("GAAP") and under the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim reporting. The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, that are necessary to present fairly the Company's financial position, results of operations, and cash flows. The condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosures of the Company normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted under the SEC's rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the year ended December 31, 2024, included in the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2025 (the "2024 Annual Report"). These financial statements include the financial statements of the Company and its wholly-owned subsidiaries, SkinJect, Inc. and Medicus Pharma Inc. All intercompany balances and transactions have been eliminated on consolidation. The functional currency of the Company and its wholly-owned subsidiaries is the United States dollar.
Use of estimates
The preparation of these condensed consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of income and expenses during the reporting period. Such estimates include the valuation of stock-based awards, the incremental borrowing rate used to discount the Company's operating lease liabilities, and the valuation allowance relating to the Company's deferred tax assets, all of which are management's best estimates. Estimates are based on historical experience, where applicable, and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in estimates in future years could be significant. Management believes that the estimates utilized in preparing the financial statements are reasonable, however, actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents include cash held at financial institutions and short-term investments in highly liquid marketable securities, having an original maturity of three months or less. The Company holds money market accounts with maturities of three months or less. These money market accounts are included in cash and cash equivalents on the accompanying consolidated balance sheets.
Research and development
All research and development costs are expensed as incurred. Research and development costs consist primarily of salaries, employee benefits, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services). Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites, and others. Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones. For the latter, the Company accrues the expenses as goods or services are used or rendered. Clinical trial site costs related to patient enrollment are accrued as patients enter and progress through the trial. Upfront costs, such as costs associated with setting up clinical trial sites for participation in the trials, are expensed immediately once incurred as research and development expenses.
Stock-based compensation
The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company records the expense for stock-based compensation awards subject to vesting over the requisite service period. The Company estimates the fair value of stock option grants and shares purchasable under the Company's Equity Incentive Plan (the "Plan") using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment. The Company accounts for forfeitures as they occur. All stock-based compensation costs are recorded in the statements of operations and comprehensive loss based upon the underlying employees or non-employee's roles within the Company.
Net loss per share
Basic net loss per share is calculated by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the sum of the weighted average number of shares outstanding and all additional shares that would have been outstanding if potentially dilutive shares had been exercised at the beginning of the period.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes, which provides for deferred taxes using an asset and liability approach. Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. For the three months ended March 31, 2025 and 2024, the Company recorded zero income tax expense. No tax benefit has been recorded in relation to the pre-tax loss for the three months ended March 31, 2025 and 2024, due to a full valuation allowance to offset any deferred tax asset related to net operating loss carry forwards attributable to the losses.
Fair value of financial instruments
Financial instruments, including cash and cash equivalents and accounts payable are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The fair value of lease obligations approximates their carrying amounts as a market rate of interest is attached to their repayment. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value:
Level 1-Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for identical assets or liabilities as of the reporting date.
Level 2- Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3-Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment are used to measure fair value. These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions. The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity.
Concentration of credit risk
Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company's cash and cash equivalents are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. The Company maintains its cash equivalents in money market funds that invest in U.S. Treasury and agency securities.
Foreign currency transactions
Foreign exchange transaction gains and losses are included in general and administrative expense in the Company's consolidated statement of operations and comprehensive loss.
Operating segments
Operating segments are identified as components of an entity about which separate discrete financial information is available for evaluation by the chief operating decision-maker ("CODM") in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment.
Recently adopted accounting pronouncements
In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" to expand the disclosures required by public entities for reportable segments, thereby responding to stakeholders' requests for more detailed information about expenses within each reportable segment. The expanded disclosures now require public entities to disclose significant expenses for reportable segments in both interim and in annual reporting periods, while entities with only a single reportable segment must now provide all segment disclosures required both in ASC 280 and under the amendments in ASU 2023-07. ASU 2023-07 is effective for interim periods beginning January 1, 2025. See Note 11 for enhanced segment reporting disclosures.
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. The disclosures will be implemented as required for the year-ended December 31, 2025. The Company is currently evaluating the impact of adopting this guidance.
Recently issued accounting pronouncements
In November 2024, the FASB issued ASU 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures" to provide greater transparency about the components of specific expense categories in the income statements. The effective dates of ASU 2024-03 were subsequently clarified by ASU 2025-01. ASU 2025-01 is effective for our annual period beginning January 1, 2027, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
In November 2024, the FASB issued ASU 2024-04 "Debt-Debt with Conversion and Other Options (Subtopic 470-20: Induced Conversions of Convertible Debt Instruments", to improve consistency and relevance of accounting for induced conversions of convertible debt instruments and it addresses scenarios involving convertible debt instruments and cash conversion features and those not currently convertible. ASU 2024-04 is effective for our annual period beginning January 1, 2026, with early adoption permitted for entities that adopted the amendment in ASU 2020-06. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
There were no other significant updates to the recently issued accounting standards which may be applicable to the Company. Although there are several other new accounting pronouncements issued or proposed by the FASB, the Company does not believe any of those accounting pronouncements have had or will have a material impact on its financial position or operating results.
3. Balance sheet components
Prepaid expenses and other current assets include the following:
| March 31, 2025 | December 31, 2024 | |||||
| (Unaudited) | ||||||
| Insurance | $ | 408,938 | $ | 583,561 | ||
| Contract research organizations | 355,810 | 455,810 | ||||
| Professional services | 250,109 | 144,643 | ||||
| Prepaid services | 76,488 | 29,970 | ||||
| Receivable for proceeds of warrant exercises | 14,000 | - | ||||
| $ | 1,105,345 | $ | 1,213,984 |
Accrued expenses and other current liabilities include the following:
| March 31, 2025 | December 31, 2024 | |||||
| (Unaudited) | ||||||
| Accrued legal fees | $ | 553,835 | $ | 495,016 | ||
| Accrued compensation and benefits | 89,701 | 140,989 | ||||
| Accrued other | 418,504 | 126,830 | ||||
| $ | 1,062,040 | $ | 762,835 |
4. Leases
As of March 31, 2025, the Company had one operating lease for its corporate office that commenced in 2024, for which the Company recorded a right-of-use asset and lease liability as of the commencement date. The Company's lease does not contain a purchase option. Where the Company's lease contains an option to extend the lease term, the extended lease term is only included in the measurement of the lease when it is reasonably certain to remain in the lease beyond the non-cancellable term. The Company's lease also contains variable lease costs, which pertain to common area maintenance and other operating charges, that are expensed as incurred.
Balance sheet information related to the Company's lease is presented below:
| Three Months Ended March 31, |
Year Ended December 31, |
|||||
| 2025 | 2024 | |||||
| Operating lease | ||||||
| Operating lease right-of-use assets | $ | 245,091 | $ | 268,571 | ||
| Operating lease liabilities - current | 120,296 | 116,323 | ||||
| Operating lease liabilities - non-current | 174,397 | 205,945 |
Other information related to leases is presented below:
| Three Months Ended March 31, |
Three Months Ended March 31, |
|||||
| 2025 | 2024 | |||||
| Lease cost | ||||||
| Operating lease cost | $ | 30,945 | $ | 30,945 | ||
| Other information | ||||||
| Operating cash flows used in operating leases | 35,040 | - | ||||
| Remaining lease term (in years) | 2.17 | 3.17 | ||||
| Discount rate | 10% | 10% |
As of March 31, 2025, the annual future minimum lease payments of the Company's operating lease liabilities were as follows:
| 2025 | $ | 143,314 | |
| 2026 | 147,613 | ||
| 2027 | 37,174 | ||
| Total future minimum lease payments, undiscounted | 328,101 | ||
| Present value discount | (33,408 | ) | |
| Total lease liability | $ | 294,693 |
5. Share capital
Authorized
The Company has authorized an unlimited number of common shares participating, voting and without par value. Each holder of common shares is entitled to one vote for each share owned on all matters voted upon by shareholders.
On October 28, 2024, the Company completed a reverse share split at the ratio of 1-for-2, resulting in 3,952,366 common shares after conversion.
Conversion of promissory notes
On May 3, 2024, the Company issued convertible notes in the principal amount of $5,172,500. The convertible notes accrued interest at the rate of 10% per annum, payable in-kind semi-annually in arrears in the form of either cash or common shares of the Company, at the election of the holder, and had a maturity date of December 31, 2025.
Prior to January 1, 2025, the convertible notes would automatically convert to common shares in the event that the Company completed an initial public offering in the United States, at a conversion price equal to the greater of (i) a 20% discount to the initial public offering price and (ii) $4.00; or if there had been a change of control, at a conversion price of $4.00 per common share. On or after January 1, 2025, conversion would be at the option of the holder at a conversion price of $4.00 per common share. The Company had the option to redeem all or any portion of the convertible notes at a price equal to 100% of the outstanding principal plus accrued and unpaid interest up to but not including the date of redemption. In the event of a change of control, the Company would offer to repurchase the convertible notes at a price equal to 101% of the principal plus accrued and unpaid interest up to but not including the date of repurchase. The Company elected to account for the convertible notes in their entirety at fair value through profit and loss.
Subsequently, the note holders were given the option to convert at a conversion price of $4.00 per share prior to July 31, 2024. On June 28, 2024, all of the holders of the convertible notes elected to convert to common shares. The Company paid cash interest of $40,563 and accrued interest of $38,462 was converted, along with the principal amount of $5,172,500, into 1,308,798 common shares.
Private placement
On June 28, 2024, the Company issued 1,461,250 common shares as part of a private placement for total proceeds of $5,845,000 at $4.00 per common share. The company incurred finders' fees of $375,000, which were recognized in equity as deduction from the gross proceeds received.
Regulation A Offering
On March 10, 2025, the Company closed its Tier II Regulation A offering with gross proceeds of $4,200,000. The Company issued 1,490,000 units at a price of $2.80 per unit. Each unit consisted of one common share of the Company and one warrant to purchase one common share (the "Regulation A Warrants"). The Regulation A Warrants have an exercise price of $2.80 per share and will expire 5 years from the date of issuance. The Company incurred total issuance costs of $483,020, including legal fees and placement fees incurred directly related to the issuance. The issuance costs incurred were recognized as a reduction in equity and allocated based on the relative fair values of the Regulation A Warrants and common shares on a standalone basis. The fair values of the common shares was based on the Company's stock price on the day of issuance of $3.40 and the fair value of the Regulation A Warrants was $2.64 per warrant. The Regulation A Warrants were recognized in additional paid-in capital as they met the criteria for equity classification.
The fair value of the Regulation A Warrants was estimated using the Black-Scholes model with the following assumptions:
| Issue Date March 10, 2025 |
||||||
| Valuation date share price | $ | 3.40 | ||||
| Exercise price | $ | 2.80 | ||||
| Dividend yield | - | |||||
| Risk-free interest rate | 3.98% | |||||
| Expected warrant life | 5.00 years | |||||
| Expected volatility | 97.81% |
As of March 31, 2025, 5,000 of the 1,490,000 Regulation A Warrants have been exercised. The Company recorded a receivable of $14,000 related to the warrant exercises which is included in prepaid expenses and other currents on the Company’s condensed consolidated balance sheet as of March 31, 2025.
Initial Public Offering
On November 14, 2024, the Company completed the sale of 970,000 Units, with each Unit (the "Unit") consisting of one common share and one warrant (the "Public Warrants") to purchase one common share at the price of $4.125 per Unit. In addition, the underwriters exercised an option to purchase 145,500 Public Warrants (the 'Overallotment Warrants") at a price of $0.01 per warrant.
Total gross proceeds from the IPO were $4,002,705, including the proceeds from the Overallotment Warrants. The Company incurred total issuance costs of $2,218,014, including underwriter fees, and legal and other professional fees incurred directly related to the issuance.
The incremental costs directly associated with the issuance were recognized as a deduction in equity and allocated based on the relative fair values of the Public Warrants and common shares on a standalone basis.
The fair value of the common shares was based on the Company's stock price on the day of issuance of $2.65 and the fair value of the Public Warrants was $1.7419 per warrant. The Public Warrants were recognized in additional paid-in capital as they met the criteria for equity classification.
The fair value of the Public Warrants was estimated using the Black-Scholes option pricing model with the following inputs:
| 2024 | |||
| Valuation date share price | $ | 2.65 | |
| Exercise price | $ | 4.64 | |
| Expected dividend yield | - | ||
| Risk-free interest rate | 4.32% | ||
| Expected term (in years) | 5 years | ||
| Expected volatility | 95% |
The number of Public Warrants outstanding as of March 31, 2025:
| Public Warrants outstanding | ||||||
| Expiry date | Exercise price | Number outstanding | ||||
| November 15, 2029 | $ | 4.64 | 1,115,500 | |||
| March 10, 2030 | $ | 2.80 | 1,485,000 | |||
Standby Equity Purchase Agreement
On February 10, 2025, the Company also announced that it had entered into a Standby Equity Purchase Agreement (the "SEPA") with YA II PN, Ltd. ("Yorkville"). Pursuant to the SEPA and subject to the satisfaction of certain conditions, Yorkville has committed to purchase the Company's common shares, no par value, in increments (each purchase, an "Advance") up to an aggregate gross sales price of up to $15,000,000 during the 36 months following the date of the SEPA (such shares, the "Shares"). The Shares will be sold at the Company's option pursuant to the SEPA at 97% of the Market Price (as defined pursuant to the SEPA) and purchases are subject to certain limitations set forth in the SEPA. As consideration for Yorkville's commitment to purchase the common shares pursuant to the SEPA, the Company paid Yorkville a structuring fee in the amount of $25,000 and issued to Yorkville 105,840 common shares with a stock price of $2.83 at issuance. These costs together are classified as deferred issuance costs on the accompanying condensed consolidated balance sheet and will be recorded as a reduction of common shares when a financing under the SEPA occurs. As of March 31, 2025, there have been no sales made under the SEPA.
6. Stock-based compensation
At March 31, 2025 the Company had in place a stock option plan for employee, non-employee directors, and consultants of the Company ("the Plan"). The Plan provides both for the direct award or sale of shares and for the grant of options to purchase shares. Under the plan the total number of shares available for options cannot exceed 10% of the Company's issued and outstanding common shares at the time of any grant. The Company is authorized to issue options to employees, non-employee directors and consultants under the plan.
On June 25, 2024, the Board of Directors approved the acceleration of vesting for all outstanding share options to June 25, 2024, resulting in the Company recognizing the remaining expense for all share options outstanding and unvested as of that date.
The following table summarizes option transactions for the Plan:
| Number of options |
Weighted average exercise price C$ |
Weighted average remaining contractual life (years) |
Aggregate intrinsic value C$ |
|||||||||
| Outstanding at December 31, 2024 | 1,185,000 | 2.06 | 4.18 | 1.89 | ||||||||
| Outstanding at March 31, 2025 | 1,185,000 | 2.06 | 3.94 | 1.66 | ||||||||
| Exercisable at March 31, 2025 | 927,500 | 1.46 | 3.59 | 2.26 | ||||||||
| Unvested at March 31, 2025 | 257,500 | 3.68 | 4.69 | 0.04 |
As of March 31, 2025 there were $455,175 of unrecognized stock-based compensation cost related to share options outstanding, which is expected to be recognized over a weighted-average period of 2.00.
For the three months ended March 31, 2025 and 2024, stock-based compensation expense was $112,277 and $35,953, respectively. Stock-based compensation expense has been reported in the Company's condensed consolidated statements of operations and comprehensive loss within the line items 'general and administrative' and 'research and development' expenses.
7. Net loss per share
Basic and diluted net loss per share attributable to ordinary shareholders was calculated as follows:
| Three months ended March 31, | ||||||
| 2025 | 2024 | |||||
| Net loss attributable to shareholders | $ | (5,102,408 | ) | $ | (1,707,358 | ) |
| Weighted average number of common shares outstanding during the year | 12,240,437 | 8,076,673 | ||||
| Basic and diluted net loss per share attributable to shareholders | $ | (0.42 | ) | $ | (0.21 | ) |
The Company's potentially dilutive securities for the three months ended March 31, 2025 and 2024, include stock options, warrants, and notes payable. The Company excluded the potential ordinary shares outstanding at each period end from the computation of diluted net loss per share attributable to ordinary shareholders for the three months ended March 31, 2025 and 2024 because including them would have had an anti-dilutive effect.
8. Related party transactions
On October 18, 2023, the Company signed an agreement with RBx Capital, LP (“RBx”), a family office controlled by the Company’s Executive Chairman and CEO, that provides for certain managerial positions to be filled from within RBx. RBx is responsible for the payment and provision of all wages, bonuses, and benefits for these positions. Reimbursable salaries paid to RBx pursuant to this agreement are $125,000 per month. In December 2024, reimbursable salaries were changed to $100,000 per month. Reimbursable salaries paid to RBx were both $300,000 during the three months ended March 31, 2025 and 2024, respectively. Additional expenses of $40,865 and $213,216 were incurred by RBx on behalf of the Company during the three months ended March 31, 2025 and 2024, respectively. The total amount of accounts payable to RBx was $118,215 and $142,459 as of March 31, 2025 and December 31, 2024, respectively.
9. Fair value measurements
The accounting guidance for fair value establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, or which require the reporting entity to develop its own assumptions
The following table presents information about the Company's financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:
| March 31, 2025 | ||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Current assets: | ||||||||||||
| Money market funds | $ | 2,587,501 | $ | - | $ | - | $ | 2,587,501 | ||||
| Total assets measured at fair value | $ | 2,587,501 | $ | - | $ | - | $ | 2,587,501 | ||||
| December 31, 2024 | ||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Current assets: | ||||||||||||
| Money market funds | $ | 4,164,323 | $ | - | $ | - | $ | 4,164,323 | ||||
| Total assets measured at fair value | $ | 4,164,323 | $ | - | $ | - | $ | 4,164,323 | ||||
The Company's cash equivalents are classified as Level 1. The fair value of the Company's cash and cash equivalents is determined based on market pricing that is both objective and publicly available.
The Company did not reclassify any investments between levels in the fair value hierarchy during the periods presented.
As of March 31, 2025 and December 31, 2024, the carrying amounts of the Company's other financial instruments, which include cash, accounts payable, and accrued expenses, approximate fair values because of their short-term maturities.
10. Commitment and contingencies
Commitments
As of March 31, 2025, the Company had no long-term commitments.
Contingencies
In the ordinary course of business, from time to time, the Company may be involved in various claims related to operations, rights, commercial, employment or other claims. Although such matters cannot be predicted with certainty, management does not consider the Company's exposure to such claims to be material to these consolidated financial statements.
11. Segment reporting
The Company manages the business activities on a consolidated basis and operates as one reportable segment that constitutes all of the consolidated entity, which is the business of advancing the clinical development program of the Company's product, while opportunistically identifying, evaluating, and acquiring accretive assets, properties or businesses. The Company's CODM is its Chief Executive Officer. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The CODM uses consolidated net loss to measure segment loss, allocate resources and assess performance. The significant segment expense categories (general and administrative and research and development) are consistent with those presented on the face of the statements of operations and comprehensive loss. Other segment items are finance (income) expense which are consistent with those presented on the face of the statements of operations and comprehensive loss. Additionally, the CODM reviews cash forecast models to determine where the Company will invest in planned research and development activities.
12. Subsequent Events
On April 26, 2025, the Company signed a binding Letter of Intent to acquire Antev Ltd., a UK-based late clinical-stage drug development company. The deal is expected to close in June 2025. Per the terms of the agreement, the Company will acquire all issued and outstanding shares of Antev Ltd., on a fully diluted basis, in exchange for 2,666,600 (or approximately 19% in aggregate) of the Company's issued and outstanding common shares. Antev Ltd. shareholders will be entitled to receive up to $65 million in additional contingent consideration. No assurances can be made that the parties will successfully negotiate and enter into a definitive agreement, or that the proposed transactions will be consummated on the terms or timeframe currently contemplated, or at all.
On May 2, 2025, the Company entered into a securities purchase agreement (the "Purchase Agreement") with Yorkville in connection with the issuance and sale by the Company of debentures (the "Debentures") issuable in an aggregate principal amount of up to $5,000,000 (the "Subscription Amount"). Yorkville purchased and the Company issued $1,250,000 in aggregate principal amount of Debentures upon the signing of the Purchase Agreement, for net proceeds to the company of $1,125,000. An additional $3,750,000 is available to the Company in accordance with the Purchase Agreement at the Company's election and upon the achievement of certain triggers. The Debenture is guaranteed by each of the Company's subsidiaries pursuant to a global guaranty agreement. Interest will accrue on the outstanding principal amount of each Debenture at an annual rate of 8.00%, subject to a potential increase to 18.00% per annum upon the occurrence of certain events of default. The Debentures will mature on February 2, 2026.
1,375,000 Units
Consisting of an Aggregate of 1,375,000 Common
Shares and
1,375,000 Warrants to Purchase One Common Share
1,375,000 Common Shares Issuable upon the Exercise of the Warrants
MEDICUS PHARMA LTD.
PRELIMINARY PROSPECTUS
Maxim Group LLC
, 2025
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, if any, which are expected to be incurred in connection with the sale of the securities being registered. With the exception of the registration fee payable to the SEC and the filing fee payable to FINRA, all amounts are estimates.
| Itemized expenses | Amount | |||
| SEC Registration Fee | $ | 3,070 | ||
| FINRA filing fee | 3,500 | |||
| Printing expenses | 20,000 | |||
| Legal fees and expenses | 175,000 | |||
| Accounting fees and expenses | 35,000 | |||
| Miscellaneous fees and expenses | 13,430 | |||
| Total | $ | 250,000 |
______________________
Item 14. Indemnification of Directors and Officers
Under the Business Corporations Act (Ontario), or the OBCA, the registrant may indemnify a present or former director or officer or a person who acts or acted at the registrant's request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by that individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the registrant or other entity; provided that the individual acted honestly and in good faith with a view to the best interests of the registrant or, as the case may be, to the best interests of such other entity and, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that the individual's conduct was lawful. Such indemnification may be made in connection with a derivative action only with court approval. An individual is entitled to indemnification from the registrant as a matter of right if the individual was not judged by a court or other competent authority to have committed any fault or omitted to do anything that the individual ought to have done and the individual fulfilled the conditions set forth above. Under the OBCA, the registrant may advance money to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to above, but the individual must repay the money if the individual does not fulfil the conditions set forth above.
In accordance with and subject to the OBCA, the by-laws of the registrant provide for indemnification of a director or officer of the registrant, a former director or officer of the registrant, or a person who acts or acted at the registrant's request as a director or officer, or an individual acting in a similar capacity, of another entity, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the registrant or other entity, if he acted honestly and in good faith with a view to the best interests of the registrant or, as the case may be, to the best interests of the other entity for which he acted as a director or officer or in a similar capacity at the registrant's request.
The directors and officers of the registrant are covered by directors' and officers' insurance policies.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.
Item 15. Recent Sales of Unregistered Securities
In the prior three years, we have issued and sold the securities described below (giving effect to the Share Consolidation) without registering the securities under the Securities Act. None of these transactions involved any underwriter's underwriting discounts or commissions, or any public offering. We believe that each of the following issuances was exempt from registration under the Securities Act in reliance on Regulation S promulgated under the Securities Act regarding sales by an issuer in offshore transactions, Regulation D under the Securities Act, Regulation A under the Securities Act, Rule 701 under the Securities Act or pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering.
-
The Registrant granted 812,500 stock options on October 24, 2023, each having an exercise price of C$1.16 and an expiry date of October 24, 2028, of which 50,000 were forfeited on March 15, 2024.
-
The Registrant granted 62,500 stock options on April 1, 2024, each having an exercise price of C$4.84 and an expiry date of April 1, 2029.
-
The Registrant granted 37,500 stock options on April 1, 2024, each having an exercise price of C$4.80 and an expiry date of April 1, 2029.
-
The Registrant issued $5,172,500 aggregate principal amount of 2025 Convertible Notes on May 3, 2024.
-
The Registrant granted 25,000 stock options on June 25, 2024, each having an exercise price of C$3.34 and an expiry date of June 25, 2029.
-
The Registrant issued approximately 2,770,047 common shares on June 28, 2024, including 1,461,250 common shares issued at $4.00 per share in the 2024 Equity Offering, 1,293,125 common shares issued upon conversion of the 2025 Convertible Notes at a conversion price of $4.00 per share and approximately 15,672 common shares issued in respect of accrued and unpaid interest on the 2025 Convertible Notes at a price of C$3.36 per share.
-
The Registrant granted 100,000 stock options on November 14, 2024, each having an exercise price of C$3.25 and an expiry date of November 14, 2029.
-
The Registrant granted 50,000 stock options on November 20, 2024, each having an exercise price of C$2.70 and an expiry date of November 20, 2029.
-
The Registrant granted 210,000 stock options on December 17, 2024, each having an exercise price of C$3.95 and an expiry date of December 17, 2029.
- The Registrant issued 105,840 common shares to Yorkville as commitment shares pursuant to the SEPA on February 10, 2025.
-
The Registrant issued 1,490,000 units, each unit consisting of one common share and one warrant to purchase one common share, on March 10, 2025 pursuant to Tier II of Regulation A under the Securities Act.
Item 16. Exhibits and Financial Statement Schedules
(a) The Exhibit Index is hereby incorporated herein by reference.
(b) Financial Statement Schedules.
All schedules have been omitted because they are not required, are not applicable or the information is otherwise set forth in the Financial Statements and related notes thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the United States Securities and Exchange Commission ("SEC") such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
provided, however, that: Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act, that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act to any purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
EXHIBIT INDEX
____________________________
+ Indicates a management contract or compensatory plan.
# Schedules and certain other private or confidential information (as indicated therein) have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the SEC.
† Certain private or confidential information (as indicated therein) have been redacted pursuant to Item 601(a)(6) of Regulation S-K.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in W. Conshohocken, Pennsylvania this 27th day of May, 2025.
| MEDICUS PHARMA LTD. | ||
| By: | /s/ Raza Bokhari | |
| Name: Dr. Raza Bokhari Title: Executive Chairman and Chief Executive Officer |
||
POWERS OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dr. Raza Bokhari or James Quinlan, or any of them, with full power to act alone, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments or supplements to this registration statement, whether pre-effective or post-effective, including any subsequent registration statement for the same offering which may be filed under Rule 462(b) under the Securities Act and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the SEC, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated below.
| Signature | Title | Date | ||
| /s/ Raza Bokhari | Executive Chairman and Chief Executive Officer (Principal Executive Officer) |
May 27, 2025 | ||
| Dr. Raza Bokhari | ||||
| /s/ James Quinlan |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
May 27, 2025 | ||
| James Quinlan | ||||
/s/ Larry Kaiser |
Director | May 27, 2025 | ||
| Dr. Larry Kaiser | ||||
/s/ Robert J. Ciaruffoli |
Director | May 27, 2025 | ||
| Robert J. Ciaruffoli | ||||
/s/ Frank Lavelle |
Director | May 27, 2025 | ||
| Frank Lavelle | ||||
/s/ William L. Ashton |
Director | May 27, 2025 | ||
| William L. Ashton | ||||
/s/ Barry Fishman |
Director | May 27, 2025 | ||
| Barry Fishman | ||||
| /s/ Sara R. May | Director | May 27, 2025 | ||
| Dr. Sara R. May | ||||
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act, the undersigned has signed this registration statement solely in the capacity of the duly authorized representative of Medicus Pharma Ltd. in the United States on May 27, 2025.
| MEDICUS PHARMA, INC. |
||
| By: | /s/ Raza Bokhari | |
| Name: Dr. Raza Bokhari Title: Chief Executive Officer |
||
PLACEMENT AGENCY AGREEMENT
[-], 2025
Maxim Group LLC
300 Park Avenue, 16th Floor
New York, NY 10022
As Representative of the Placement Agents
named on Schedule A hereto
Dear Ladies and Gentleman:
This agreement (the "Agreement") constitutes the agreement between the several placement agents (such placement agents, for whom Maxim Group LLC ("Maxim" or the "Representative") is acting as representative, the "Placement Agents" and each a "Placement Agent" ) and Medicus Pharma Ltd., a corporation organized under the laws of Ontario, Canada (the "Company"), that the Placement Agents shall serve as the exclusive placement agents for the Company, on a "commercially reasonable efforts" basis, in connection with the registered best-efforts public offering (the "Offering") of units (the "Units"), with each Unit consisting of one of the Company's common shares, no par value (the "Shares"), and one warrant to purchase one Share (the "Warrants," and the shares issuable upon exercise of the Warrants, the "Warrant Shares" and the Shares, the Units, the Warrants and the Warrant Shares, collectively, the "Securities"). The terms of the Offering shall be mutually agreed upon by the Company, Maxim and the purchasers of the Securities (each, a "Purchaser" and collectively, the "Purchasers") and nothing herein constitutes that Maxim would have the power or authority to bind the Company or any Purchaser or an obligation for the Company to issue any Securities or complete the Offering. This Agreement and the documents executed and delivered by the Company and the Purchasers in connection with the Offering, including but not limited to, the Subscription Agreement (as defined below) and the Warrants shall be collectively referred to herein as the "Transaction Documents." The date of the closing of the Offering shall be referred to herein as a "Closing Date." The Company expressly acknowledges and agrees that the Placement Agents' obligations hereunder are on a commercially reasonable efforts basis only and that the execution of this Agreement does not constitute a legal or binding commitment by the Placement Agents to purchase the Securities or introduce the Company to investors and does not ensure the successful placement of the Securities or any portion thereof or the success of the Placement Agents with respect to securing any other financing on behalf of the Company. The Placement Agents may retain other brokers or dealers to act as sub-agents or selected-dealers on its behalf in connection with the Offering, subject to the Company's approval. The sale of the Securities to any Purchaser will be evidenced by a subscription agreement (the "Subscription Agreement") between the Company and such Purchaser in a form reasonably acceptable to the Company and Maxim. Capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Subscription Agreement. Prior to the signing of the Subscription Agreement, officers of the Company will be available to answer inquiries from prospective Purchasers.
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY; COVENANTS OF THE COMPANY. The Company hereby represents, warrants and covenants to the Placement Agents as of the date hereof, and as of each Closing Date, as follows:
(a) Securities Law Filings.
(i) An registration statement on Form S-1 (File No. 333-[-]) relating to the Units, Warrants and Warrant Shares, including a preliminary prospectus and such amendments to such registration statement as may have been required prior to the date of this Agreement, has been prepared by the Company under the provisions of the Act, and the rules and regulations (collectively referred to as the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder, and has been filed with the Commission. Electronic copies of such registration statement and of each amendment thereto, if any, including the related preliminary prospectus, heretofore filed by the Company with the Commission have been delivered to the Placement Agents. The term "Registration Statement" means such registration statement on Form S-1 as amended at the time it becomes or became effective, including financial statements, all exhibits and any information deemed to be included or incorporated by reference therein, including any information deemed to be included pursuant to Rule 430A or Rule 430B of the Rules and Regulations, as applicable. If the Company files a registration statement to register a portion of the Securities, Warrants or Warrant Shares and relies on Rule 462(b) of the Rules and Regulations for such registration statement to become effective upon filing with the Commission (the "Rule 462 Registration Statement"), then any reference to the "Registration Statement" shall be deemed to include the Rule 462 Registration Statement, as amended from time to time. The term "preliminary prospectus" as used herein means a preliminary prospectus as contemplated by Rule 430 or Rule 430A of the Rules and Regulations included at any time as part of, or deemed to be part of or included in, the Registration Statement. The term "Prospectus" means the final prospectus in connection with this Offering as first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no such filing is required, the form of final prospectus included in the Registration Statement at the effective date, except that if any revised prospectus or prospectus supplement shall be provided to the Representative by the Company for use in connection with the Securities which differs from the Prospectus (whether or not such revised prospectus or prospectus supplement is required to be filed by the Company pursuant to Rule 424(b)), the term "Prospectus" shall also refer to such revised prospectus or prospectus supplement, as the case may be, from and after the time it is first provided to the Representative for such use. Any reference herein to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include: (i) the filing of any document under the Securities Exchange Act of 1934, as amended, and together with the rules and regulations promulgated thereunder (collectively, the "Exchange Act") after the effective date of the Registration Statement, the date of such preliminary prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference, and (ii) any such document so filed.
(ii) The Registration Statement, any Rule 462 Registration Statement and any post-effective amendment thereto have been declared effective by the Commission under the Act or have become effective pursuant to Rule 462 of the Rules and Regulations. The Company has responded to all requests, if any, of the Commission for additional or supplemental information. No stop order suspending the effectiveness of the Registration Statement or any Rule 462 Registration Statement is in effect and no proceedings for such purpose have been instituted or are pending or, to the knowledge of the Company, are threatened by the Commission.
(iii) Each of the Registration Statement, any Rule 462 Registration Statement and any post-effective amendment thereto, at the time it became effective, when any document filed under the Exchange Act was or is filed and at all subsequent times, complied and will comply in all material respects with the Act and the Rules and Regulations, and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. The Prospectus, as amended or supplemented, as of its date and at all subsequent times when a prospectus is delivered or required (or, but for the provisions of Rule 172, would be required) by applicable law to be delivered in connection with sales of Securities, complied and will comply in all material respects with the Act, the Exchange Act and the Rules and Regulations, and did not or will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, in the light of the circumstances under which they were made. Each preliminary prospectus (including the preliminary prospectus or prospectuses filed as part of the Registration Statement or any amendment thereto) complied when so filed in all material respects with the Act, the Exchange Act and the Rules and Regulations, and each preliminary prospectus and the Prospectus delivered to the Representative for use in connection with this Offering is identical to the electronically transmitted copies thereof filed with the Commission on EDGAR, except to the extent permitted by Regulation S-T. The foregoing representations and warranties in this Section 3(c) do not apply to any statements or omissions made in reliance on and in conformity with information relating to the Placement Agents furnished in writing to the Company by the Placement Agents specifically for inclusion in the Registration Statement or Prospectus or any amendment or supplement thereto.
(iv) As of the Applicable Time, neither (i) the Issuer General Use Free Writing Prospectus(es) (as defined below) issued at or prior to the Applicable Time, the most recent preliminary prospectus related to this Offering, and the information included on Schedule II hereto, all considered together (collectively, the "Time of Sale Disclosure Package"), nor (ii) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the Time of Sale Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Time of Sale Disclosure Package based upon and in conformity with written information furnished to the Company by the Placement Agents specifically for use therein.
(1) "Applicable Time" means 5:00p.m. (Eastern time) on the date of this Agreement;
(2) "Issuer Free Writing Prospectus" means any "issuer free writing prospectus," as defined in Rule 433 of the Rules and Regulations, relating to the Securities that (i) is required to be filed with the Commission by the Company, (ii) is "a written communication that is a road show" within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company's records pursuant to Rule 433(g).
(3) "Issuer General Use Free Writing Prospectus" means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its being specified in Schedule I hereto.
(4) "Issuer Limited Use Free Writing Prospectus" means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
(v) Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the Prospectus Delivery Period (as defined below), does not include any information that conflicts with the information contained in the Registration Statement. If at any time following the issuance of an Issuer Free Writing Prospectus there occurred an event or development as a result of which such Issuer Free Writing Prospectus conflicted with the information contained in the Registration Statement relating to the Securities or included an untrue statement of material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances prevailing at that subsequent time, not misleading, the Company has promptly notified the Representative and has promptly amended or supplemented, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(b) Offering Materials. The Company has not distributed and will not distribute, prior to the later of the Closing Date and the completion of the Offering of the Units, any offering material in connection with the offering or sale of the Units other than, the Registration Statement, the preliminary prospectus, the Permitted Free Writing Prospectuses reviewed and consented to by the Representative and included in Schedule I hereto, and the Prospectus. None of the materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Securities, including any roadshow or investor presentations made to investors by the Company (whether in person or electronically) (collectively, Marketing Materials"), as of their respective issue dates and at all subsequent times through the Prospectus Delivery Period (as defined below), include any information that conflicts with the information contained in the Registration Statement. If at any time following the issuance of any Marketing Material there occurred an event or development as a result of which such Marketing Material conflicted with the information contained in the Registration Statement relating to the Securities or included an untrue statement of material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances prevailing at that subsequent time, not misleading, the Company has promptly notified the Representative and has promptly amended or supplemented, at its own expense, such Marketing Material to eliminate or correct such conflict, untrue statement or omission.
(c) Subsidiaries. All of the direct and indirect material subsidiaries of the Company (each, a "Subsidiary") are set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other similar restriction (each, a "Lien"), except as would not reasonably be expected to result in a Material Adverse Effect.
(d) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of this Agreement, the Warrant Agreement (as hereinafter defined) or the Warrants (collectively, the "Transaction Documents"), (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company's ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and no action, claim, suit or proceeding (including, without limitation, a partial proceeding, such as a deposition), whether commenced or, to the knowledge of the Company, threatened (each, a "Proceeding") has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(e) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the board of directors of the Company (the "Board of Directors") or the Company's shareholders in connection herewith or therewith other than in connection with the Required Approvals (as hereinafter defined in Section 1(h)). This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, assuming due authorization, execution and delivery by the other parties thereto, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(f) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not reasonably be expected to result in a Material Adverse Effect.
(g) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filing with the Commission of the Registration Statement and the Prospectus, (ii) such filings, if any, as are required to be made under applicable state securities laws or Canadian securities laws, (iii) such notices, filings or authorizations as are required to be obtained or made under applicable rules of the Financial Industry Regulatory Authority, Inc. ("FINRA") and The Nasdaq Capital Market, and (iv) such notices, filings or authorizations as have been obtained, given or made as of the date hereof (collectively, the "Required Approvals").
(h) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.
(i) Capitalization. The capitalization of the Company as of the date stated therein is as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus. Except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, the Company has not issued any capital stock, other than pursuant to the Company's equity incentive plans, the issuance of Shares to employees, directors or consultants pursuant to the Company's equity incentive plans and pursuant to the conversion and/or exercise of any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Shares, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Shares ("Common Share Equivalents"). No individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind (each, a "Person") has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities or as disclosed in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Shares or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional Shares or Common Share Equivalents or capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue Shares or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no securities of the Company or any Subsidiary that have any anti-dilution or similar adjustment rights (other than adjustments for stock splits, recapitalizations, and the like) to the exercise or conversion price, have any exchange rights, or reset rights. Except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, there are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance in all material respects with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any shareholder, the Board of Directors or others is required for the issuance and sale of the Securities. Except for the support agreement, dated September 28, 2023, between the Company and Velocity Fund Partners, LP, there are no shareholders agreements, voting agreements or other similar agreements with respect to the Company's capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company's shareholders.
(j) Financial Statements. As of their respective dates, the Registration Statement, the Time of Sale Disclosure Package and the Prospectus complied in all material respects with the requirements of the Act and the Exchange Act, as applicable, and none of the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States as issued by the Financial Accounting Standards Board applied on a consistent basis during the periods involved ("GAAP"), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. The agreements and documents described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Act and the rules and regulations thereunder to be described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement to which the Company is a party is material to the Company's business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefore may be brought. Except as disclosed in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, none of such agreements has been assigned by the Company, and neither the Company nor, to the best of the Company's knowledge, any other party is in default thereunder and, to the best of the Company's knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a material default thereunder. To the best of the Company's knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a material violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to environmental laws and regulations.
(k) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company equity incentive plans or as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Units contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed as of the date that this representation is made.
(l) Litigation. There is no action, suit, inquiry, notice of violation or proceeding pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (U.S. or Canadian federal, provincial, state, county, local or foreign) (collectively, an "Action") which (i) would reasonably be expected to adversely affect the legality, validity or enforceability of this Agreement, the Warrant Agreement or any of the Securities or (ii) would reasonably be expected to result in a Material Adverse Effect. Except as disclosed in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Act.
(m) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which would reasonably be expected to result in a Material Adverse Effect. None of the Company's or its Subsidiaries' employees is a member of a union that relates to such employee's relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(n) Compliance. Except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including, without limitation, all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in the case of each of clauses (i), (ii) and (iii), as would not reasonably be expected to result in a Material Adverse Effect.
(o) Environmental Laws. The Company and its Subsidiaries (i) are in compliance in all material respects with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, "Hazardous Materials") into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder ("Environmental Laws"); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(p) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect ("Material Permits"), and neither the Company nor any Subsidiary has received any written notice of proceedings relating to the revocation or modification of any Material Permit.
(q) Title to Assets. The Company and its Subsidiaries have good and marketable title to all real property owned by them, if any, and good and marketable title in all personal property owned by them, in each case, that is material to the business of the Company and the Subsidiaries, and in such case free and clear of all Liens, except for Liens that (i) are described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, (ii) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, (iii) do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries, or (iv) are for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under leases with which the Company and the Subsidiaries are in compliance in all material respects and such leases are, to the knowledge of the Company, enforceable against the counterparties thereto, except in each case as would not reasonably be expected to have a Material Adverse Effect.
(r) Intellectual Property. To the knowledge of the Company, the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus and which the failure to so have could have a Material Adverse Effect (collectively, the "Intellectual Property Rights"). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or be abandoned, within two (2) years from the date of this Agreement, except where such action would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights, except as would not reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has no knowledge that it lacks or will be unable to obtain any rights or licenses to use all Intellectual Property Rights that are necessary to conduct its business.
(s) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(t) Transactions With Affiliates and Employees. Except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of US$120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.
(u) Internal Accounting Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.
(v) Certain Fees. Except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, no brokerage or finder's fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. To the Company's knowledge, there are no other arrangements, agreements or understandings of the Company or, to the Company's knowledge, any of its shareholders that may affect the Placement Agents' compensation, as determined by FINRA. Except as disclosed by the Company via press release or a Current Report on Form 8-K or other filing with the Commission or with any Canadian securities commission, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to (i) any person, as a finder's fee, investing fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who provided capital to the Company, (ii) any FINRA member, or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member within the 12-month period prior to the date on which the Registration Statement was filed with the Commission (the "Filing Date") or thereafter. To the Company's knowledge, no (i) officer or director of the Company or its subsidiaries, (ii) owner of 10% or more of the Company's unregistered securities or that of its subsidiaries or (iii) owner of any amount of the Company's unregistered securities acquired within the 180-day period prior to the Filing Date, has any direct or indirect affiliation or association with any FINRA member. The Company will advise the Placement Agents and their respective counsel if it becomes aware that any officer or director of the Company or its subsidiaries is or becomes an affiliate or associated person of a FINRA member participating in the Offering.
(w) Investment Company. The Company is not, and immediately after receipt of payment for the Units, will not be, required to register as an "investment company" within the meaning of the Investment Company Act of 1940, as amended.
(x) Registration Rights. Except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, no Person has any right to cause the Company or any Subsidiary to effect the registration under the Act of any securities of the Company or any Subsidiary.
(y) Listing and Maintenance Requirements. The Shares are registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to have the effect of, terminating the registration of the Shares under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Shares are currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of any applicable invoiced fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of The Nasdaq Capital Market.
(z) [Reserved].
(aa) Material Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by this Agreement and the transactions contemplated pursuant to the preliminary prospectus, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Investors or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Time of Sale Disclosure Package. The Company understands and confirms that the Investors will rely on the foregoing representation in effecting transactions in securities of the Company.
(bb) No Integrated Offering. Neither the Company or any Person acting on its behalf, nor, to the Company's knowledge, any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Company (as such terms are used in and construed under Rule 405 under the Act) (each, an "Affiliate") or any Person acting on their behalf, has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Units to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions of The Nasdaq Capital Market.
(cc) Solvency. The Company does not have an existing intention to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). Except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, the Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. The Registration Statement, the Time of Sale Disclosure Package and the Prospectus sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, "Indebtedness" means (x) any liabilities for borrowed money or amounts owed in excess of US$50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company's consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of US$50,000 due under leases required to be capitalized in accordance with GAAP. Except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(dd) Tax Status. Except for matters that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each of the Company and its Subsidiaries (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.
(ee) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of Foreign Corrupt Practices Act of 1977, as amended.
(ff) [Reserved].
(gg) Accountants. The Company's current accounting firm is EisnerAmper LLP. To the knowledge and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) has been appointed by the Company to express its opinion with respect to the financial statements to be included in the Company's Annual Report for the fiscal year ending December 31, 2024. The Company's former accounting firm is MNP LLP. To the knowledge and belief of the Company, for all relevant times, such accounting firm (i) was a registered public accounting firm as required by the Exchange Act and (ii) was appointed by the Company to express its opinion with respect to the financial statements of the Company for the fiscal year ended December 31, 2023.
(hh) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Placement Agents in connection with the Offering.
(ii) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent, employee or Affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ("OFAC").
(jj) [Reserved].
(kk) [Reserved].
(ll) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the "Money Laundering Laws"), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
(mm) Share Option Plan. Each share option granted by the Company under the Company's share option plan was granted in accordance with the terms of the Company's share option plan. No share option granted under the Company's share option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, share options prior to, or otherwise knowingly coordinate the grant of share options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.
(nn) Certificates. Any certificate signed by an officer of the Company and delivered to the Representative or to counsel for the Representative shall be deemed to be a representation and warranty by the Company to the Placement Agents as to the matters set forth therein.
SECTION 2. REPRESENTATIONS OF THE PLACEMENT AGENTS. Each of the Placement Agents represents and warrants that it (i) is a member in good standing of FINRA, (ii) is registered as a broker/dealer under the Exchange Act, (iii) is licensed as a broker/dealer under the laws of the states applicable to the offers and sales of the Securities by such Placement Agent, (iv) is and will be a body corporate validly existing under the laws of its place of incorporation, and (v) has full power and authority to enter into and perform its obligations under this Agreement. Each Placement Agent will immediately notify the Company in writing of any change in its status as such. Each Placement Agent covenants that it will use its reasonable best efforts to conduct the Offering hereunder in compliance with the provisions of this Agreement and the requirements of applicable law.
SECTION 3. COMPENSATION. In consideration of the services to be provided for hereunder, the Company shall pay to the Placement Agents the following compensation with respect to the Securities which they are placing:
a) A cash fee (the "Cash Fee") equal to an aggregate of seven and one-half percent (7.5%) of the aggregate gross proceeds raised in the Offering. The Cash Fee shall be paid at the closing of the Offering (the "Closing").
b) Subject to compliance with FINRA Rule 5110(f)(2)(D), the Company also agrees, in case of Closing of the Offering, to reimburse the Placement Agents for all travel and other out-of-pocket expenses incurred, including the reasonable fees, costs and disbursements of its legal counsel, in an amount not to exceed an aggregate of $75,000 (inclusive of any advances received by the Placement Agents from the Company) in the event of a Closing of the Offering. The Company will reimburse the Placement Agents directly upon the Closing of the Offering from the gross proceeds raised in the Offering. In the event that this Agreement shall terminate prior to the consummation of the Offering, Maxim shall nevertheless still be entitled to reimbursement for its actual expenses; provided, however, that such expenses shall not exceed $10,000, in the aggregate.
c) The Placement Agents reserve the right to reduce any item of compensation or adjust the terms thereof as specified herein in the event that a determination shall be made by FINRA to the effect that the Placement Agents' aggregate compensation is in excess of FINRA rules or that the terms thereof require adjustment; provided, however, the aggregate compensation otherwise to be paid to the Placement Agent by the Company may not be increased above the amounts stated herein without the approval of the Company.
d) The tail financing provision in Section 4(k)(ii) of the Underwriting Agreement by and between the Company and Maxim, dated November 13, 2024 (the "Underwriting Agreement") shall remain in full force and effect. Nothing in this Agreement shall be construed to void or abridge or extend the terms of such Tail-Financing provision.
e) The right of first refusal provision in Section 4(k)(iii) of the Underwriting Agreement shall remain in full force and effect. Nothing in this Agreement shall be construed to void or abridge or extend the terms of such right of first refusal provision.
SECTION 4. INDEMNIFICATION.
a) Indemnification of the Placement Agents. The Company shall indemnify and hold harmless each Placement Agent, its affiliates, the directors, officers, employees and agents of such Placement Agent and each person, if any, who controls such Placement Agent within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), to which they, or any of them, may become subject under the Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Rules and Regulations, as applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, any preliminary prospectus supplement or the Prospectus (or any amendment or supplement to any of the foregoing) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iii) any untrue statement or alleged untrue statement of a material fact contained in the Marketing Materials or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iv) in whole or in part any inaccuracy in any material respect in the representations and warranties of the Company contained herein; provided, however, that the Company shall not be liable to the extent that such loss, claim, liability, expense or damage is based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information furnished in writing by the Placement Agents to the Company expressly for use therein. This indemnity agreement will be in addition to any liability that the Company might otherwise have.
b) Indemnification of the Company. Each Placement Agent, severally and not jointly, agrees to indemnify and hold harmless the Company, its affiliates, the directors, officers, employees and agents of the Company and each other person or entity, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever, as incurred (including but not limited to reasonable attorneys' fees and any and all reasonable expenses whatsoever, incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement at the time of effectiveness and at any subsequent time pursuant to the Rules and Regulations, any preliminary prospectus, the Prospectus, or any amendment or supplement to any of them, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense (or action in respect thereof) arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon information furnished in writing by the Placement Agents to the Company expressly for use therein.
c) Indemnification Procedures. Any party that proposes to assert the right to be indemnified under this Section 4 shall, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 4, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party shall not relieve the indemnifying party from any liability that it may have to any indemnified party under the foregoing provisions of this Section 4 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable out-of-pocket costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by one of the indemnifying parties in connection with the defense of such action and that indemnifying party agrees to pay the fees and expenses of such counsel, (ii) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) the indemnified party has reasonably concluded that a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party), (iv) the indemnifying party does not diligently defend the action after assumption of the defense, or (v) the indemnifying party has not in fact employed counsel satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel shall be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges shall be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party shall not be liable for any settlement of any action or claim effected without its written consent. No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 4 (whether or not any indemnified party is a party thereto), unless (x) such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party, and (y) the indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment.
d) Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 4 is applicable in accordance with its terms but for any reason is held to be unavailable, the Company and the Placement Agents shall contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than the Placement Agents, such as persons who control the Company within the meaning of the Act, officers of the Company who signed the Registration Statement and directors of the Company, who may also be liable for contribution), to which the Company and the Placement Agents may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Placement Agents on the other from the offering of the Securities pursuant to this Agreement. The relative benefits received by the Company and the Placement Agents shall be deemed to be in the same proportion as (x) the total proceeds from the Offering (net of the Cash Fee but before deducting expenses) received by the Company bears to (y) the Cash Fee received by the Placement Agents, in each case as set forth in the table on the cover page of the Prospectus. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and the Placement Agents, on the other, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Placement Agents, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Placement Agents agree that it would not be just and equitable if contributions pursuant to this Section 4(d) were to be determined by pro rata allocation or by any other method of allocation (even if the Placement Agents were treated as one entity for such purpose) which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 4(d) shall be deemed to include, for purpose of this Section 4(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4(d), the Placement Agents shall not be required to contribute any amount in excess of the Cash Fee received by it. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4(d), any person who controls a party to this Agreement within the meaning of the Act will have the same rights to contribution as that party, and each officer of the Company who signed the Registration Statement will have the same rights to contribution as the Company, and each director, officer, employee, counsel or agent of a Placement Agent will have the same rights to contribution as such Placement Agent, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 4(d), will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 4(d). The obligations of the Placement Agents to contribute pursuant to this Section 4(d) are several in proportion to the respective number of Securities to be purchased by each of the Placement Agents hereunder and not joint. No party will be liable for contribution with respect to any action or claim settled without its written consent.
e) Survival. The indemnity and contribution agreements contained in this Section 4 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Placement Agent or any controlling Person thereof, (ii) acceptance of any of the Securities and payment therefor or (iii) any termination of this Agreement.
SECTION 5. ENGAGEMENT TERM. The Placement Agents' engagement hereunder shall be until the earlier of (i) the final Closing Date of the Offering and (ii) the date a party terminates the engagement according to the terms of the next sentence (such date, the "Termination Date"). The Agreement may be terminated at any time by either party upon ten (10) days' written notice to the other party, effective upon receipt of written notice to that effect by the other party. The Agreement may not be earlier terminated other than for Cause (as defined in the Engagement Agreement). Notwithstanding anything to the contrary contained herein, the provisions concerning confidentiality and indemnification and contribution contained herein will survive any expiration or termination of this Agreement. The Placement Agents agree not to use any confidential information concerning the Company provided to the Placement Agents by the Company for any purposes other than those contemplated under this Agreement.
SECTION 6. PLACEMENT AGENTS' INFORMATION. The Company agrees that any information or advice rendered by each Placement Agent in connection with this engagement is for the confidential use of the Company only in their evaluation of the Offering and, except as otherwise required by law, the Company will not disclose or otherwise refer to the advice or information in any manner without the Placement Agents' prior written consent.
SECTION 7. NO FIDUCIARY RELATIONSHIP. This Agreement does not create, and shall not be construed as creating rights enforceable by any person or entity not a party hereto, except those entitled hereto by virtue of the indemnification provisions hereof. The Company acknowledges and agrees that the Placement Agents are not and shall not be construed as a fiduciary of the Company and shall have no duties or liabilities to the equity holders or the creditors of the Company or any other person by virtue of this Agreement or the retention of such Placement Agents hereunder, all of which are hereby expressly waived.
SECTION 8. CLOSING. The obligations of the Placement Agents, and the closing of the sale of the Securities hereunder are subject to the accuracy, when made and on the Closing Date, of the representations and warranties on the part of the Company and its subsidiaries contained herein and in the Subscription Agreement, to the accuracy of the statements of the Company and its subsidiaries made in any certificates pursuant to the provisions hereof, to the performance by the Company and its subsidiaries of their obligations hereunder, and to each of the following additional terms and conditions, except as otherwise disclosed to and acknowledged and waived by the Placement Agents to the Company:
a) (i) No stop order suspending or revoking the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall be pending or are, to the knowledge of the Company, threatened by the Commission, (ii) no order suspending the effectiveness or registration of the Units under the securities or Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such purpose shall be pending before or threatened or contemplated by the authorities of any such jurisdiction, (iii) any request for additional information on the part of the staff of the Commission or any such authorities shall have been complied with to the satisfaction of the staff of the Commission or such authorities and (iv) after the date hereof no amendment or supplement to the Registration Statement or the Prospectus shall have been filed unless a copy thereof was first submitted to the Representative and the Representative did not object thereto in good faith, and the Representative shall have received certificates, dated the Closing Date and signed by the Chief Executive Officer or the Chairman of the Board of Directors and the Chief Financial Officer of the Company in their capacities as such, and not individually, (who may, as to proceedings threatened, certify to their knowledge), to the effect of clauses (i), (ii) and (iii).
b) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus (i) there shall not have been a Material Adverse Effect, (ii) the Company shall not have incurred any material liabilities or obligations, direct or contingent, (iii) the Company shall not have entered into any material transactions not in the ordinary course of business other than pursuant to this Agreement and the transactions referred to herein, (iv) the Company shall not have issued any securities (other than the Securities or the Shares issued in the ordinary course of business pursuant to existing employee benefit plans of the Company referred to in the Registration Statement, Time of Sale Disclosure Package and the Prospectus) or declared or paid any dividend or made any distribution in respect of its capital stock of any class or debt (long-term or short-term), and (v) no material amount of the assets of the Company shall have been pledged, mortgaged or otherwise encumbered.
c) Since the respective dates as of which information is given in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, and except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, there shall have been no actions, suits or proceedings instituted, or to the Company's knowledge, threatened against or affecting, the Company or its subsidiaries or any of their respective officers in their capacity as such, before or by any federal, state or local court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, that are required to be disclosed in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, and that have not been disclosed.
d) Each of the representations and warranties of the Company contained herein shall be true and correct as of the date of the Agreement and at the Closing Date as if made at the Closing Date, as the case may be, and all covenants and agreements contained herein to be performed by the Company and all conditions contained herein to be fulfilled or complied with by the Company at or prior to the Closing Date, shall have been duly performed, fulfilled or complied with.
e) On each Closing Date, the Representative shall have received the opinions and letters, each dated the Closing Date, each reasonably satisfactory in form and substance to the Representative and counsel for the Representative, from each of Bennett Jones LLP and Paul, Weiss, Rifkind, Wharton and Garrison LLP, as respective Canadian and U.S. corporate/securities counsel and DLA Piper USA as intellectual property counsel.
f) On the date of the Prospectus, the Representative shall have received from MNP LLP a letter dated the date of its delivery, addressed to the Representative, in form and substance reasonably satisfactory to the Representative and counsel to the Representative, containing statements and information of the type ordinarily included in accountant's "comfort letters" to underwriters, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited and unaudited financial statements and certain financial information contained in the Registration Statement and the Prospectus. At the Closing Date, the Representative shall have received from MNP LLP a letter dated such date, in form and substance reasonably satisfactory to the Representative and counsel to the Representative, to the effect that they reaffirm the statements made in the letter furnished by them pursuant to the preceding sentence and have conducted additional procedures with respect to certain financial figures included in the Prospectus, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Closing Date.
g) At the Closing Date, there shall be furnished to the Representative a certificate, dated the date of its delivery, signed by each of the Chief Executive Officer and the Chief Financial Officer of the Company, in their capacities as such, and not individually, in form and substance reasonably satisfactory to the Representative and counsel to the Representative, to the effect that (1) each signer of such certificate has carefully examined the Registration Statement and the Prospectus; (2) there has not been a Material Adverse Effect; and (3) with respect to the matters set forth in Sections 8(A)(i) and 8(D).
h) The Company and Odyssey Transfer and Trust Company, as warrant agent for the Warrants, shall have executed and delivered a warrant agency agreement (the "Warrant Agreement") and the Warrant Agreement shall be in full force and effect.
i) At or prior to the Closing Date, the Shares shall be eligible for clearance and settlement through the facilities of the DTC.
j) At the date of this Agreement, the Representative shall have received the executed "lock-up" agreements referred to in Section 9(l) hereof from the Company's officers and directors.
k) The Securities shall be qualified for sale in such states and jurisdictions as the Representative may reasonably request, including, without limitation, qualification for exemption from registration or prospectus and prospectus delivery requirements in the provinces and territories of Canada and other jurisdictions outside the United States, and each such qualification shall be in effect and not subject to any stop order or other proceeding on the Closing Date.
l) [Reserved].
m) [Reserved].
n) At the Closing Date, the Company shall have furnished to the Representative satisfactory evidence of the good standing (or its equivalent) of the Company in its jurisdiction of organization.
o) The Company shall have furnished to the Representative such certificates, in addition to those specifically mentioned herein, as the Representative may have reasonably requested as to the accuracy and completeness at the Closing Date of any statement in the Registration Statement, the Time of Sale Disclosure Package or the Prospectus, as to the accuracy at the Closing Date of the representations and warranties of the Company herein, as to the performance by the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to the obligations hereunder of the Representative and Placement Agents.
p) FINRA has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements relating to the offering of the Units.
q) The Company shall have entered into a Subscription Agreement with each of the Purchasers and such agreements shall be in full force and effect and shall contain representations, warranties and covenants of the Company as agreed between the Company and the Purchasers.
If any of the conditions specified in this Section 8 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to the Representative or to Representative's counsel pursuant to this Section 8 shall not be reasonably satisfactory in form and substance to the Representative and to Representative's legal counsel, all obligations of the Representative and Placement Agent hereunder may be cancelled by the Representative at, or at any time prior to, the consummation of the Closing. Notice of such cancellation shall be given to the Company in writing or orally. Any such oral notice shall be confirmed promptly thereafter in writing.
SECTION 9. AGREEMENTS OF THE COMPANY.
a) Amendments and Supplements to Registration Statement. The Company shall not, either prior to any effective date or thereafter during such period as the Prospectus is required by law to be delivered (whether physically or through compliance with the Rule 172 of the Rules and Regulations or any similar rule) (the "Prospectus Delivery Period") in connection with placement of the Securities by the Placement Agents, amend or supplement the Registration Statement, the Time of Sale Disclosure Package or the Prospectus, unless a copy of such amendment or supplement thereof shall first have been submitted to the Representative within a reasonable period of time prior to the filing or, if no filing is required, the use thereof and the Representative shall not have objected thereto in good faith.
b) Amendments and Supplements to the Registration Statement, the Time of Sale Disclosure Package, and the Prospectus and Other Act Matters. During the Prospectus Delivery Period, the Company will comply with all requirements imposed upon it by the Act, as now and hereafter amended, and by the Rules and Regulations, as from time to time in force, and by the Exchange Act so far as necessary to permit the continuance of sales of or dealings in the Securities as contemplated by the provisions hereof, the Time Of Sale Disclosure Package, the Registration Statement and the Prospectus. If, during the Prospectus Delivery Period, any event or development shall occur or condition exist as a result of which the Time of Sale Disclosure Package or the Prospectus, as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing or under which they were made, as the case may be, not misleading, or if it shall be necessary to amend or supplement the Time of Sale Disclosure Package or the Prospectus in order to make the statements therein, in the light of the circumstances then prevailing or under which they were made, as the case may be, not misleading, or if in the opinion of the Representative it is otherwise necessary to amend or supplement the Registration Statement, the Time of Sale Disclosure Package or the Prospectus, or to file a new registration statement containing the Prospectus, in order to comply with the Act, the Rules and Regulations, the Exchange Act or the Exchange Act Rules, including in connection with the delivery of the Prospectus, the Company agrees to (i) promptly notify the Representative of any such event or condition and (ii) promptly prepare (subject to Section 9(a) and 9(f) hereof), file with the Commission (and use its best efforts to have any amendment to the Registration Statement or any new registration statement to be declared effective) and furnish at its own expense to the Representative (and, if applicable, to dealers), amendments or supplements to the Registration Statement, the Time of Sale Disclosure Package or the Prospectus, or any new registration statement, necessary in order to make the statements in the Time of Sale Disclosure Package or the Prospectus as so amended or supplemented, in the light of the circumstances then prevailing or under which they were made, as the case may be, not misleading, or so that the Registration Statement or the Prospectus, as amended or supplemented, will comply with the Act, the Rules and Regulations, the Exchange Act or the Exchange Act Rules or any other applicable law.
c) Notifications to the Placement Agents. The Company shall use its best efforts to cause the Registration Statement to become effective, and shall notify the Representative promptly, and shall confirm such advice in writing, (i) when any post-effective amendment to the Registration Statement has become effective and when any post-effective amendment thereto becomes effective, (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (iii) of the commencement by the Commission or by any state securities commission of any proceedings for the suspension of the qualification of any of the Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose, including, without limitation, the issuance by the Commission of any stop order suspending or revoking the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose or the threat thereof, (iv) of the happening of any event during the Prospectus Delivery Period that in the judgment of the Company makes any statement made in the Registration Statement or the Prospectus misleading (including by omission) or untrue or that requires the making of any changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances in which they are made, not misleading (including by omission), and (v) of receipt by the Company or any representative of the Company of any other communication from the Commission relating to the Company, the Prospectus, any preliminary prospectus or the Prospectus. If at any time the Commission shall issue any order suspending or revoking the effectiveness of the Registration Statement, the Company shall use best efforts to obtain the withdrawal of such order at the earliest possible moment. The Company shall comply with the provisions of and make all requisite filings with the Commission pursuant to Rules 424(b), 430A, 430B and 462(b) of the Rules and Regulations and to notify the Representative promptly of all such filings.
d) Executed Registration Statement. The Company shall furnish to the Representative, without charge, one signed copy of the Registration Statement, and of any post-effective amendment thereto, including financial statements and schedules, and all exhibits thereto, and shall furnish to the Representative, without charge, a copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules but without exhibits, provided, however, that the Representative agrees that any Registration Statement filed with the Commission via EDGAR shall suffice.
e) Undertakings. The Company shall comply with all the provisions of any undertakings contained and required to be contained in the Registration Statement.
f) Prospectus. The Company shall prepare the Prospectus in a form approved by the Representative and shall file such Prospectus with the Commission pursuant to Rule 424(b) of the Rules and Regulations with a filing date not later than the second business day following the execution and delivery of this Agreement. Promptly after the effective date of the Registration Statement, and thereafter from time to time during the period when the Prospectus is required to be delivered, the Company shall deliver to the Representative, without charge, as many electronic copies of the Prospectus and any amendment or supplement thereto as the Representative may reasonably request. The Company consents to the use of the Prospectus and any amendment or supplement thereto by the Representative and by all dealers to whom the Securities may be sold, both in connection with the offering or sale of the Securities and for any period of time thereafter during the Prospectus Delivery Period. If, during the Prospectus Delivery Period any event shall occur that in the judgment of the Company or counsel to the Placement Agents should be set forth in the Prospectus in order to make any statement therein, in the light of the circumstances under which it was made, not misleading (including by omission), or if it is necessary to supplement or amend the Prospectus to comply with law, the Company shall forthwith prepare and duly file with the Commission an appropriate supplement or amendment thereto, and shall deliver to the Representative, without charge, such number of electronic copies thereof as the Representative may reasonably request.
g) Compliance with Blue Sky Laws. Prior to any placement of the Securities by the Placement Agents, the Company shall cooperate with the Representative and counsel to the Representative in connection with the registration or qualification (or the obtaining of exemptions from the application thereof) of the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representative may request limitation, provided, however, that in no event shall the Company be obligated to qualify a public offering outside the United States or to do business as a foreign corporation in any jurisdiction where it is not now so qualified, to qualify or register as a dealer in securities, to take any action which would subject it to general service of process in any jurisdiction where it is not now so subject or subject itself to ongoing taxation in respect of doing business in any jurisdiction in which it is not so subject.
h) Delivery of Financial Statements. During a period of one year commencing on the effective date of the Registration Statement, the Company shall furnish to the Representative and each other Placement Agent who may so request copies of such financial statements and other periodic and special reports as the Company may from time to time distribute generally to the holders of any class of its capital stock, and will furnish to the Representative and each other Placement Agent who ay so request a copy of each annual or other report it shall be required to file with the Commission; provided, however, that the availability of electronically transmitted copies filed with the Commission pursuant to EDGAR or with the Canadian Securities Administrators on the SEDAR+ system (or its successor) shall satisfy the Company's obligation to furnish copies hereunder.
i) Availability of Earnings Statements. The Company shall make generally available to holders of its securities as soon as may be practicable but in no event later than the last day of the fifteenth (15th) full calendar month following the calendar quarter in which the most recent effective date occurs in accordance with Rule 158 of the Rules and Regulations, an earnings statement (which need not be audited but shall be in reasonable detail) for a period of twelve (12) months ended commencing after the qualification date, and satisfying the provisions of Section 11(a) of the Act (including Rule 158 of the Rules and Regulations).
j) No Stabilization or Manipulation. The Company shall not at any time, directly or indirectly, take any action intended to cause or result in, or which might reasonably be expected to cause or result in, or which will constitute, stabilization or manipulation, under the Act or otherwise, of the price of the Shares or the Securities to facilitate the sale or resale of any of the Securities.
k) Use of Proceeds. The Company shall apply the net proceeds from the offering and sale of the Securities to be sold by the Company in the manner set forth in the Time of Sale Disclosure Package and the Prospectus under "Use of Proceeds" and shall file such reports with the Commission with respect to the sale of the Securities and the application of the proceeds therefrom as may be required in accordance with Rule 463 under the Act.
l) Lock-Up Agreements of Company and Management. The Company shall not, for a period of thirty (30) days after the Closing Date (the "Company Lock-Up Period"), without the prior written consent of Maxim (which consent may be withheld in its sole discretion), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, or file with the Commission a registration statement or offering statement under the Act to register or qualify any Shares, warrants, or any securities convertible into or exercisable or exchangeable for Shares or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, directly or indirectly, any of the economic benefits or risks of ownership of Shares, or Warrants, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Shares, Warrants or other securities, in cash or otherwise, or publicly disclose the intention to enter into any transaction described in clause (1) or (2) above. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder, or (B) the issuance of Shares upon the exercise or conversion of options, warrants or convertible securities outstanding, and as in effect, on the date of this Agreement, provided that such options, warrants or convertible securities have not been amended since the date of this Agreement to increase the number of such options or warrants or option shares or warrant shares or the amount of such convertible securities or to decrease the exercise or conversion price of such options, warrants or convertible securities or to extend the term of such options, warrants or convertible securities (including the filing of a registration statement on Form S-1 relating to the exercise of outstanding Warrants and delivery of Shares upon exercise thereof), (C) any Shares, dividend equivalent rights or other equity based awards issued, or options to purchase Shares granted, pursuant to any employee benefit plans of the Company referred to in the Registration Statement, the Time of Sale Disclosure Package or the Prospectus or subsequently approved by the shareholders of the Company as required by applicable rules of The Nasdaq Capital Market (including the filing of a registration statement on Form S-8 relating to such employee benefit plans of the Company), (D) securities issued pursuant to acquisitions or strategic transactions, or (E) the sale of Shares pursuant to that certain Standby Equity Purchase Agreement, by and between the Company and YA II PN, Ltd., dated February 10, 2025 (including the filing of a registration statement on Form S-1, or any amendments to such registration statement, with respect thereto). The Company has caused each of its executive officers and directors named in the Registration Statement to enter into agreements with the Placement Agent in the form set forth in Exhibit A.
m) U.S. listing. The Company will use its reasonable best efforts to effect and maintain the listing of the Shares on The Nasdaq Capital Market for at least one (1) year after the Closing.
n) The Company shall use its reasonable best efforts to maintain the effectiveness of the Registration Statement and a current Prospectus relating thereto, or the effectiveness of a registration statement and a prospectus relating thereto, for as long as the Warrants remain outstanding. During any period when the Company fails to have maintained an effective Registration Statement or a current Prospectus or effective registration statement relating thereto and a holder of a Warrant desires to exercise such warrant and, in the opinion of counsel to the holder, Rule 144 is not available as an exemption from registration for the resale of the Warrant Shares, the Company shall within thirty (30) days file a registration statement registering the resale of the Warrant Shares and use its reasonable best efforts to have it declared effective by the Commission as soon as practicable thereafter.
SECTION 10. GOVERNING LAW. This Agreement will be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely in such State, without regard to the conflicts of laws principles thereof. This Agreement may not be assigned by either party without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. Any right to trial by jury with respect to any dispute arising under this Agreement or any transaction or conduct in connection herewith is waived. Any dispute arising under this Agreement may be brought into the courts of the State of New York or into the federal court located in New York, New York and, by execution and delivery of this Agreement, the Company hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of aforesaid courts. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by delivering a copy thereof via overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The Company agrees that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts to the jurisdiction of which the Company is or may be subject, by suit upon such judgment. If either party shall commence an action or proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney's fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. This paragraph shall survive any termination of this Agreement, in whole or in part.
SECTION 11. ENTIRE AGREEMENT/MISC. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings, relating to the subject matter hereof. Notwithstanding anything herein to the contrary, the Engagement Agreement, dated May 10, 2024 ("Engagement Agreement"), between the Company and Maxim Group LLC shall continue to be effective and the terms therein shall continue to survive and be enforceable by the Representative in accordance with its terms, provided that, in the event of a conflict between the terms of the Engagement Agreement and this Agreement, the terms of this Agreement shall prevail. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect or any other provision of this Agreement, which will remain in full force and effect. This Agreement may not be amended or otherwise modified or waived except by an instrument in writing signed by both the Representative and the Company. The representations, warranties, agreements and covenants contained herein shall survive the closing of the Offering and delivery of the Securities. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or a .pdf format file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or .pdf signature page were an original thereof.
SECTION 12. CONFIDENTIALITY. The Placement Agents (i) will keep the Confidential Information (as such term is defined below) confidential and will not (except as required by applicable law or stock exchange requirement, regulation or legal process ("Legal Requirement"), without the Company's prior written consent, disclose to any person any Confidential Information, and (ii) will not use any Confidential Information other than in connection with the Offering. The Placement Agents further agree to disclose the Confidential Information only to its PA Representatives (as such term is defined below) who need to know the Confidential Information for the purpose of the Offering, and who are informed by the Placement Agents of the confidential nature of the Confidential Information. The term "Confidential Information" shall mean, all confidential, proprietary and non-public information (whether written, oral or electronic communications) furnished by the Company to the Placement Agents or their PA Representatives in connection with the Placement Agents' evaluation of the Offering. The term "Confidential Information" will not, however, include information which (i) is or becomes publicly available other than as a result of a disclosure by the Placement Agents or their PA Representatives in violation of this Agreement, (ii) is or becomes available to the Placement Agents or any of their PA Representatives on a non-confidential basis from a third-party, (iii) is known to the Placement Agents or any of their PA Representatives prior to disclosure by the Company or any of its representatives, or (iv) is or has been independently developed by the Placement Agents and/or the Representative without use of any Confidential Information furnished to it by the Company. The term "PA Representatives" shall mean the Placement Agents' directors, board committees, officers, employees, financial advisors, attorneys and accountants. This provision shall be in full force until the earlier of (a) the date that the Confidential Information ceases to be confidential and (b) two (2) years from the date hereof. Notwithstanding any of the foregoing, in the event that the Placement Agents or any of their PA Representatives are required by Legal Requirement to disclose any of the Confidential Information, such Placement Agents and their PA Representatives will furnish only that portion of the Confidential Information which such Placement Agents or their PA Representative, as applicable, are required to disclose by Legal Requirement as advised by counsel, and will use reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information so disclosed.
SECTION 13. NOTICES. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is sent to the email address specified on the signature pages attached hereto prior to 6:30 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is sent to the email address on the signature pages attached hereto on a day that is not a business day or later than 6:30 p.m. (New York City time) on any business day, (c) the third business day following the date of mailing, if sent by U.S. internationally recognized air courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages hereto.
SECTION 14. PRESS ANNOUNCEMENTS. The Company agrees that the Placement Agents shall, from and after any Closing, have the right to reference the Offering and the Placement Agents' role in connection therewith in the Placement Agents' marketing materials and on its website and to place advertisements in financial and other newspapers and journals, in each case at its own expense.
[The remainder of this page has been intentionally left blank.]
Please confirm that the foregoing correctly sets forth our agreement by signing and returning to Maxim the enclosed copy of this Agreement.
| Very truly yours, Accepted by the Representative, acting for itself and as Representative of the Placement Agents named on Schedule A hereto, as of the date first written above: |
||
| MAXIM GROUP LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
| Address for notice: | ||
| 300 Park Avenue, 16th Floor | ||
| New York, NY 10022 | ||
| Attention: James Siegel, General Counsel | ||
| Email: jsiegel@maximgrp.com | ||
Accepted and Agreed to as of
the date first written above:
MEDICUS PHARMA LTD.
| By: | |||
| Name: | |||
| Title: |
Address for notice:
300 Conshohocken State Road, Suite 200
Conshohocken, Pennsylvania 19428
Attention: Chief Executive Officer
Email: rbokhari@medicuspharma.com
with a copy to (which will not constitute notice):
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
Attention: Christopher J. Cummings
Email: ccummings@paulweiss.com
[Signature Page to Placement Agency Agreement]
Schedule I
1. The public offering price per Unit shall be US$[-].
2. The Company is selling [-] Units.
SCHEDULE A
| Name of Placement Agent |
| Maxim Group LLC |
| Brookline Capital Markets, a division of Arcadia Securities, LLC |
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
Lock-Up Agreement
_______________, 2025
Maxim Group LLP
300 Park Avenue
New York, NY 10022
Re: Proposed Public Offering by Medicus Pharma Ltd.
Ladies and Gentlemen:
The undersigned, an officer and/or director of Medicus Pharma Ltd., a corporation organized under the laws of Ontario, Canada (the "Company"), understands that Maxim Group LLC (the "Placement Agent") proposes to enter into a Placement Agency Agreement (the "Placement Agency Agreement") with the Company providing for the public offering (the "Public Offering") of common shares of the Company, no par value (the "Common Shares"), and certain other securities convertible into or exchangeable or exercisable for Common Shares. In recognition of the benefit that such an offering will confer upon the undersigned as an officer and/or a director of the Company and as consideration of the Placement Agent's agreement to enter into the Placement Agency Agreement and proceed with the Public Offering, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with the Placement Agent that, during the period beginning on the date hereof and ending on the date that is 30 days from the date of the Placement Agency Agreement (the "Lock-Up Period"), the undersigned will not, without the prior written consent of the Placement Agent, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any Common Shares or any securities convertible into or exchangeable or exercisable for Common Shares, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the "Lock-Up Securities"), or exercise any right with respect to the registration of any of the Lock-Up Securities, or file or cause to be filed any registration statement in connection therewith, under the Securities Act of 1933, as amended, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such swap or transaction is to be settled by delivery of Common Shares or other securities, in cash or otherwise.
Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Placement Agent, provided, in each case, that (1) for transfers made pursuant to clause (i)(a) below, the Placement Agent receives a signed lock-up agreement in substantially the form of this lock-up agreement for the balance of the Lock-Up Period from each donee, trustee, distributee, or transferee, as the case may be, and (2) other than for purposes of clauses (ii), (iii), (iv), (v) and (vii) below, any such transfer shall not involve a disposition for value:
(i) any transfers made by the undersigned (a) as a bona fide gift to any member of the immediate family of the undersigned or to a trust the beneficiaries of which are exclusively the undersigned or members of the undersigned's immediate family, (b) by will or intestate succession upon the death of the undersigned or (c) as a bona fide gift to a charity or educational institution (it being understood that (x) "immediate family" shall mean a spouse, child, grandchild or other lineal descendant (including by adoption), father, mother, brother or sister of the undersigned and (y) any references to "immediate family" in the agreement executed by such transferee shall expressly refer only to the immediate family of the undersigned and not to the immediate family of the transferee);
(ii) transactions relating to the Common Shares or other securities convertible into or exercisable or exchangeable for Common Shares acquired in open market transactions after completion of the Public Offering;
(iii) facilitating the establishment of a trading plan on behalf of the undersigned pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for the transfer of Common Shares;
(iv) any transfers made by the undersigned to the Company to satisfy tax withholding obligations pursuant to the Company's equity incentive plans or arrangements disclosed in the Prospectus (as defined in the Placement Agency Agreement) or to pay the exercise price of any options issued under any such plan or arrangement which expires during the Lock-Up Period; provided that any filing under Section 16 of the Exchange Act made in connection with such transfer shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause;
(v) any transfers in connection with a bona fide third party tender offer, merger, consolidation or other similar transaction made to all holders of Common Shares involving a change of control of the Company, provided that in the event that the tender offer, merger, consolidation or other such transaction is not completed, the undersigned's Common Shares shall remain subject to the restrictions contained herein;
(vi) any distribution or other transfer by a partnership to its partners or former partners or by a limited liability company to its members or retired members or by a corporation to its stockholders or former stockholders or to any wholly-owned subsidiary of such corporation, or in each case to a controlled affiliate of the partnership, limited liability company or corporation; and
(vii) any transfers by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement.
The undersigned also agrees and consents to the entry of stop transfer instructions with the Company's transfer agent and registrar against the transfer of the Lock-Up Securities except in compliance with the foregoing restrictions. Furthermore, no provision in this letter shall be deemed to restrict or prohibit (1) the transfer of the undersigned's Lock-Up Securities to the Company in connection with the termination of the undersigned's services to the Company, provided that, if applicable, any filing under Section 16 of the Exchange Act made in connection with such transfer shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause (1); and (2) the exercise or exchange by the undersigned of any option or warrant to acquire any Common Shares or options to purchase Common Shares, in each case for cash or on a "cashless" or "net exercise" basis, pursuant to any stock option, stock bonus or other equity incentive plan, stock plan or arrangement; provided, however, that the underlying Common Shares shall continue to be subject to the restrictions on transfer set forth in this letter and that, if applicable, any filing under Section 16 of the Exchange Act made in connection with such exercise or exchange shall clearly indicate in the footnotes thereto that (a) the filing relates to the circumstances described in this clause (2) and (b) no Common Shares were sold by the reporting person.
This lock-up agreement shall automatically terminate, and the undersigned shall be released from the undersigned's obligations hereunder, upon the earliest to occur, if any, of (i) the date of the filing with the United States Securities and Exchange Commission (the "SEC") of a notice of withdrawal of the Company's registration statement on Form S-1 filed with the SEC (which covers the Common Shares to be sold pursuant to the Placement Agency Agreement), (ii) prior to the execution of the Placement Agency Agreement, the Company advises the Placement Agent in writing that it has determined not to proceed with the Public Offering; (iii) the Placement Agency Agreement is executed but is terminated prior to the closing of the Public Offering (other than the provisions thereof which survive termination), or (iv) [-], 2025, in the event that the Placement Agency Agreement has not been executed by such date. The obligations of the undersigned under this lock-up agreement may be waived in writing in whole or in part by the Placement Agent.
This agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
[SIGNATURE PAGE FOLLOWS]
| Very truly yours, | ||
| Name of Security Holder (Print exact name) | ||
| By: | ||
| Signature | ||
MEDICUS PHARMA LTD.
and
Odyssey Transfer and Trust Company, as
Warrant Agent
Warrant Agency Agreement
Dated as of [ ], 2025
WARRANT AGENCY AGREEMENT
WARRANT AGENCY AGREEMENT, dated as of [ ], 2025 ("Agreement"), between Medicus Pharma Ltd., a corporation organized under the laws of Ontario, Canada (the "Company"), and Odyssey Transfer and Trust Company, as warrant agent, a corporation organized under the laws of Minnesota (the "Warrant Agent").
W I T N E S S E T H
WHEREAS, pursuant to the terms of that certain placement agency agreement (the "Underwriting Agreement"), dated as of [ ], 2025, by and between the Company and Maxim Group LLC, the Company is engaged in a public offering (the "Offering") of [2,350,000] units (the "Units"), with each Unit consisting of (i) one common share of the Company, no par value (the "Common Shares"), and (ii) one warrant (the "Warrant"), exercisable for one Common Share (the "Warrant Shares");
WHEREAS, upon the terms and subject to the conditions hereinafter set forth and pursuant to a registration statement on Form S-1, as amended (File No. [ ]) (the "Registration Statement"), and the terms and conditions of the Warrant Certificate (as defined below), the Company wishes to issue the Warrants in book entry form entitling the respective holders of such Warrants (the "Holders," which term shall include a Holder's transferees, successors and assigns and "Holder" shall include, if the Warrants are held in "street name," a Participant (as defined below) or a designee appointed by such Participant) to purchase Common Shares in accordance with the respective terms of such Warrants and Warrant Certificates;
WHEREAS, the Common Shares and each of the Warrants to be issued in connection with the Offering shall be immediately separable from each other and will be issued separately, but will be purchased together as Units in the Offering; and
WHEREAS, the Company wishes the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, registration, transfer, exchange, exercise and replacement of the Warrants and, in the Warrant Agent's capacity as the Company's transfer agent, the delivery of the Warrant Shares.
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, all capitalized terms not herein defined shall have the meanings hereby indicated:
(a) "Business Day" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York or the City of Toronto are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to "stay at home", "shelter-in-place", "non-essential employee" or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York or the City of Toronto generally are open for use by customers on such day.
(b) "Close of Business" on any given date means 5:00 p.m., New York City time, on such date; provided, however, that if such date is not a Business Day it means 5:00 p.m., New York City time, on the next succeeding Business Day.
(c) "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
(d) "Warrant Certificate" means certificates in substantially the forms attached hereto as Exhibit 1, representing such number of Warrant Shares as is indicated therein, as applicable, provided that any reference to the delivery of a Warrant Certificate in this Agreement shall include delivery of a Definitive Certificate or a Global Warrant (each as defined below).
All other capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Warrant Certificate, as applicable. All references to dollars or "$" shall refer to U.S. dollars unless otherwise indicated herein.
Section 2. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Warrant Agent hereby accepts such appointment.
Section 3. Global Warrants.
(a) The Warrants shall be registered securities and shall be evidenced by a global warrant (the "Global Warrants"), in the applicable form of Warrant Certificate, which shall be deposited with the Warrant Agent and registered in the name of Cede & Co., a nominee of The Depository Trust Company (the "Depositary"), or as otherwise directed by the Depositary. Ownership of beneficial interests in each of the Warrants shall be shown on, and the transfer of such ownership shall be effected through, records maintained by (i) the Depositary or its nominee for each Global Warrant or (ii) institutions that have accounts with the Depositary (such institution, with respect to a Warrant in its account, a "Participant").
(b) If the Depositary subsequently ceases to make its book-entry settlement system available for any of the Warrants, the Company may instruct the Warrant Agent regarding other arrangements for book-entry settlement. In the event that any of the Warrants are not eligible for, or it is no longer necessary to have any of the Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depositary to deliver to the Warrant Agent for cancellation each such Global Warrant, and the Company shall instruct the Warrant Agent to deliver to each Holder a Warrant Certificate.
(c) A Holder has the right to elect at any time or from time to time a Warrant Exchange (as defined below) pursuant to a Warrant Certificate Request Notice (as defined below). Upon written notice by a Holder to the Company and the Warrant Agent for the exchange of some or all of such Holder's Global Warrants for a separate certificate in the forms attached hereto as Exhibit 1 (a "Definitive Certificate") evidencing the same number of Warrants, which request shall be in the forms attached hereto as Exhibit 2 (a "Warrant Certificate Request Notice" and the date of delivery of such Warrant Certificate Request Notice by the Holder, the "Warrant Certificate Request Notice Date" and the surrender by the Holder to the Warrant Agent of a number of Global Warrants for the same number of Warrants evidenced by a Warrant Certificate, a "Warrant Exchange"), the Company and the Warrant Agent shall promptly effect the Warrant Exchange and the Company shall promptly issue and deliver to the Holder a Definitive Certificate for such number of Warrants in the name set forth in the Warrant Certificate Request Notice. Such Definitive Certificate shall be dated the original issue date of the Warrants, shall be manually executed by an authorized signatory of the Company, shall be in the forms attached hereto as Exhibit 1 and shall be reasonably acceptable in all respects to such Holder. In connection with a Warrant Exchange, the Company agrees to deliver the Definitive Certificate to the Holder within ten (10) Business Days of the Warrant Certificate Request Notice pursuant to the delivery instructions in the Warrant Certificate Request Notice ("Warrant Certificate Delivery Date"). If the Company fails for any reason to deliver to the Holder the Definitive Certificate subject to the Warrant Certificate Request Notice by the Warrant Certificate Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares evidenced by such Definitive Certificate (based on the VWAP (as defined in the Warrants) of the Common Shares on the Warrant Certificate Request Notice Date), $10 per Business Day for each Business Day after such Warrant Certificate Delivery Date until such Definitive Certificate is delivered or, prior to delivery of such Warrant Certificate, the Holder rescinds such Warrant Exchange. The Company covenants and agrees that, upon the date of delivery of the Warrant Certificate Request Notice, the Holder shall be deemed to be the holder of the Definitive Certificate and, notwithstanding anything to the contrary set forth herein, the Definitive Certificate shall be deemed for all purposes to contain all of the terms and conditions of the Warrants evidenced by such Warrant Certificate and the terms of this Agreement, other than Sections 3(c), 3(d) and 9 herein, shall not apply to the Warrants evidenced by the Definitive Certificate. Notwithstanding anything herein to the contrary, the Company shall act as warrant agent with respect to any Definitive Certificate requested and issued pursuant to this section. Notwithstanding anything to the contrary contained in this Agreement, in the event of inconsistency between any provision in this Agreement and any provision in a Definitive Certificate, as it may from time to time be amended, the terms of such Definitive Certificate shall control.
(d) A Holder of a Definitive Certificate (pursuant to a Warrant Exchange or otherwise) has the right to elect at any time or from time to time a Global Warrants Exchange (as defined below) pursuant to a Global Warrants Request Notice (as defined below). Upon written notice by a Holder to the Company for the exchange of some or all of such Holder's Warrants evidenced by a Definitive Certificate for a beneficial interest in Global Warrants held in book-entry form through the Depositary evidencing the same number of Warrants, which request shall be in the form attached hereto as Exhibit 3 (a "Global Warrants Request Notice" and the date of delivery of such Global Warrants Request Notice by the Holder, as applicable, the "Global Warrants Request Notice Date" and the surrender upon delivery by the Holder of the Warrants evidenced by Definitive Certificates for the same number of Warrants evidenced by a beneficial interest in Global Warrants held in book-entry form through the Depositary, a "Global Warrants Exchange"), the Company shall promptly effect the Global Warrants Exchange and shall promptly direct the Warrant Agent to issue and deliver to the Holder Global Warrants for such number of Warrants in the Global Warrants Request Notice, which beneficial interest in such Global Warrants shall be delivered by the Depositary's Deposit or Withdrawal at Custodian system to the Holder pursuant to the instructions in the Global Warrants Request Notice. In connection with a Global Warrants Exchange, the Company shall direct the Warrant Agent to deliver the beneficial interest in such Global Warrants to the Holder within ten (10) Business Days of the Global Warrants Request Notice pursuant to the delivery instructions in the Global Warrant Request Notice ("Global Warrants Delivery Date"). If the Company fails for any reason to deliver to the Holder Global Warrants subject to the Global Warrants Request Notice by the Global Warrants Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares evidenced by such Global Warrants (based on the VWAP (as defined in the Warrants) of the Common Shares on the Global Warrants Request Notice Date), $10 per Business Day for each Business Day after such Global Warrants Delivery Date until such Global Warrants are delivered or, prior to delivery of such Global Warrants, the Holder rescinds such Global Warrants Exchange. The Company covenants and agrees that, upon the date of delivery of the Global Warrants Request Notice, the Holder shall be deemed to be the beneficial holder of such Global Warrants.
Section 4. Form of Warrant Certificates. The Warrant Certificate, together with the form of election to purchase Common Shares ("Notice of Exercise") and the form of assignment to be printed on the reverse thereof, shall be in the forms attached hereto as Exhibit 1.
Section 5. Countersignature and Registration. The Global Warrant shall be executed on behalf of the Company by its Chief Executive Officer or Chief Financial Officer, by facsimile or electronic signature, and if applicable have affixed thereto the Company's seal or an electronic or facsimile thereof, which shall be attested by the Secretary or an Assistant Secretary of the Company, by facsimile signature. The Global Warrant shall be countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any Global Warrant shall cease to be such officer of the Company before countersignature by the Warrant Agent and issuance and delivery by the Company, such Global Warrant, nevertheless, may be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the person who signed such Global Warrant had not ceased to be such officer of the Company; and any Global Warrant may be signed on behalf of the Company by any person who, at the actual date of the execution of such Global Warrant, shall be a proper officer of the Company to sign such Global Warrant, although at the date of the execution of this Warrant Agreement any such person was not such an officer.
The Warrant Agent will keep or cause to be kept, at one of its offices, or at the office of one of its agents, books for registration and transfer of the Global Warrants issued hereunder. Such books shall show the names and addresses of the respective Holders of the Global Warrant, the number of warrants evidenced on the face of each of such Global Warrant and the date of each of such Global Warrant. The Warrant Agent will create a special account for the issuance of Global Warrants. The Company will keep or cause to be kept at one of its offices, books for the registration and transfer of any Definitive Certificates issued hereunder and the Warrant Agent shall not have any obligation to keep books and records with respect to any Definitive Warrants. Such Company books shall show the names and addresses of the respective Holders of the Definitive Certificates, the number of warrants evidenced on the face of each such Definitive Certificate and the date of each such Definitive Certificate.
Section 6. Transfer, Split Up, Combination and Exchange of Warrant Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates. With respect to the Global Warrant, subject to the provisions of the Warrant Certificate and the last sentence of this first paragraph of Section 6 and subject to applicable law, rules or regulations, or any "stop transfer" instructions that the Company may give to the Warrant Agent, at any time after the closing date of the Offering, and at or prior to the Close of Business on the Termination Date (as such term is defined in the Warrant Certificate), any Global Warrant or Global Warrants may be transferred, split up, combined or exchanged for another Global Warrant or Global Warrants, entitling the Holder to purchase a like number of Common Shares as the Global Warrant or Global Warrants surrendered then entitled such Holder to purchase. Any Holder desiring to transfer, split up, combine or exchange any Global Warrant shall make such request in writing delivered to the Warrant Agent, and shall surrender the Global Warrant to be transferred, split up, combined or exchanged at the principal office of the Warrant Agent. Any requested transfer of Warrants, whether in book-entry form or certificate form, shall be accompanied by reasonable evidence of authority of the party making such request that may be required by the Warrant Agent. Thereupon the Warrant Agent shall, subject to the last sentence of this first paragraph of Section 6, countersign and deliver to the Person entitled thereto a Global Warrant or Global Warrants, as the case may be, as so requested. The Company and the Warrant Agent may require payment from the Holder of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Global Warrants. The Company shall compensate the Warrant Agent per the fee schedule mutually agreed upon by the parties hereto and provided separately on the date hereof.
Upon receipt by the Warrant Agent of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of a Warrant Certificate, which evidence shall include an affidavit of loss, or in the case of mutilated certificates, the certificate or portion thereof remaining, and, in case of loss, theft or destruction, of indemnity or security in customary form and amount (but, with respect to any Definitive Certificates, shall not include the posting of any bond by the Holder), and satisfaction of any other reasonable requirements established by Section 8-405 of the Uniform Commercial Code as in effect in the State of New York, and reimbursement to the Company and the Warrant Agent of all reasonable expenses incidental thereto, and upon surrender to the Warrant Agent and cancellation of the Warrant Certificate if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor to the Warrant Agent for delivery to the Holder in lieu of the Warrant Certificate so lost, stolen, destroyed or mutilated. The Warrant Agent may charge the Holder an administrative fee for processing the replacement of lost Warrant Certificates, which shall be charged only once in instances where a single surety bond obtained covers multiple certificates. The Warrant Agent may receive compensation from the surety companies or surety agents for administrative services provided to them.
Section 7. Exercise of Warrants; Exercise Price; Termination Date.
(a) The Warrants shall be exercisable commencing on the Initial Exercise Date. The Warrants shall cease to be exercisable and shall terminate and become void as set forth in the Warrant Certificate. Subject to the foregoing and to Section 7(b) below, the Holder of a Warrant may exercise the Warrant in whole or in part upon surrender of the Warrant Certificate, if required, with the executed Notice of Exercise and payment of the Exercise Price, which may be made, at the option of the Holder, by wire transfer or by certified or official bank check in United States dollars, to the Warrant Agent at the principal office of the Warrant Agent or to the office of one of its agents as may be designated by the Warrant Agent from time to time. In the case of the Holder of a Global Warrant, the Holder shall deliver the executed Notice of Exercise and the payment of the Exercise Price as described herein. Notwithstanding any other provision in this Agreement, a holder whose interest in a Global Warrant is a beneficial interest in a Global Warrant held in book-entry form through the Depositary (or another established clearing corporation performing similar functions), shall effect exercises by delivering to the Depositary (or such other clearing corporation, as applicable) the appropriate instruction form for exercise and complying with the procedures to effect exercise that are required by the Depositary (or such other clearing corporation, as applicable). The Company acknowledges that the bank account maintained by the Warrant Agent in connection with the services provided under this Agreement will be in the Warrant Agent's name and that the Warrant Agent may receive investment earnings in connection with the investment at Warrant Agent risk and for its benefit of funds held in those accounts from time to time. Neither the Company nor the Holders will receive interest on any deposits or Exercise Price. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. The Company hereby acknowledges and agrees that, with respect to a holder whose interest in a Global Warrant is a beneficial interest in a Global Warrant held in book-entry form through the Depositary (or another established clearing corporation performing similar functions), upon delivery of irrevocable instructions to such holder's Participant to exercise such Warrants, that solely for purposes of Regulation SHO that such holder shall be deemed to have exercised such Warrants.
(b) Upon receipt of a Notice of Exercise for a Cashless Exercise at a time when Cashless Exercise is available under the Warrants, the Company will promptly calculate and transmit to the Warrant Agent the number of Warrant Shares issuable in connection with such Cashless Exercise and deliver a copy of the Notice of Exercise to the Warrant Agent, which shall issue such number of Warrant Shares in connection with such Cashless Exercise.
(c) Upon the exercise of the Warrant Certificate pursuant to the terms of Section 2 of the applicable Warrant Certificate, the Warrant Agent shall cause the applicable Warrant Shares underlying such Warrant Certificate or Global Warrant to be delivered to or upon the order of the Holder of such Warrant Certificate or Global Warrant, registered in such name or names as may be designated by such Holder, no later than the Warrant Share Delivery Date (as such term is defined in such Warrant Certificate). If the Company is then a participant in the DWAC system of the Depositary and either (A) there is an effective registration statement permitting the issuance of such Warrant Shares to or resale of the Warrant Shares by Holder or (B) the Warrant is being exercised via Cashless Exercise, then the certificates for such Warrant Shares shall be transmitted by the Warrant Agent to the Holder by crediting the account of the Holder's broker with the Depositary through its DWAC system. For the avoidance of doubt, if the Company becomes obligated to pay any amounts to any Holders pursuant to Section 2.4.1 or 2.4.4 of the Warrant Certificate for the Warrant, such obligation shall be solely that of the Company and not that of the Warrant Agent. Notwithstanding anything else to the contrary in this Agreement, except in the case of a Cashless Exercise, if any Holder fails to duly deliver payment to the Warrant Agent of an amount equal to the aggregate Exercise Price of the Warrant Shares to be purchased upon exercise of such Holder's Warrant as set forth in Section 7(a) hereof by the Warrant Share Delivery Date, the Warrant Agent will not obligated to deliver such Warrant Shares (via DWAC or otherwise) until following receipt of such payment, and the applicable Warrant Share Delivery Date shall be deemed extended by one day for each day (or part thereof) until such payment is delivered to the Warrant Agent.
(d) The Warrant Agent shall deposit all funds received by it in payment of the Exercise Price for all Warrants in the account of the Company maintained with the Warrant Agent for such purpose (or to such other account as directed by the Company in writing) and shall advise the Company via email at the end of each week on which Notices of Exercise are received or funds for the exercise of any Warrant are received of the amount so deposited to its account.
Section 8. Cancellation of Warrant Certificates. All Warrant Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Warrant Agent for cancellation or in canceled form, or, if surrendered to the Warrant Agent, shall be canceled by it, and no Warrant Certificate shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Warrant Agent for cancellation and retirement, and the Warrant Agent shall so cancel and retire, any other Warrant Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Warrant Agent shall deliver all canceled Warrant Certificates to the Company, at the request of the Company, and in such case shall deliver a certificate of cancellation thereof to the Company, subject to any applicable law, rule or regulation requiring the Warrant Agent to retain such canceled certificates.
Section 9. Certain Representations; Reservation and Availability of Common Shares or Cash.
(a) This Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the Warrant Agent, constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, and each of the Warrants has been duly authorized, executed and issued by the Company and, assuming due authentication thereof by the Warrant Agent pursuant hereto and payment therefor by the Holders as provided in the Registration Statement and in accordance with the terms of each of the Warrants, constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits hereof; in each case except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally or by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(b) As of the date hereof, the authorized capital stock of the Company consists of an unlimited number of Common Shares, of which [ ] Common Shares are issued and outstanding (prior to the consummation of the Offering) and [ ] Common Shares are reserved for issuance upon exercise of the Warrants. Except as disclosed in the Registration Statement, there are no other outstanding obligations, warrants, options or other rights to subscribe for or purchase from the Company any class of capital stock of the Company.
(c) The Company covenants and agrees that, if applicable, it will cause to be reserved and kept available out of its authorized and unissued Common Shares or its authorized and issued Common Shares held in its treasury, free from preemptive rights, the number of Common Shares that will be sufficient to permit the exercise in full of all outstanding Warrants.
(d) [Reserved].
(e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the original issuance or delivery of the Warrant Certificates or certificates evidencing Common Shares upon exercise of the Warrants. The Company shall not, however, be required to pay any tax or governmental charge which may be payable in respect of any transfer involved in the transfer or delivery of Warrant Certificates or the issuance or delivery of certificates for Common Shares in a name other than that of the Holder of the Warrant Certificate evidencing Warrants surrendered for exercise or to issue or deliver any certificate for Common Shares upon the exercise of any Warrants until any such tax or governmental charge shall have been paid (any such tax or governmental charge being payable by the Holder of such Warrant Certificate at the time of surrender) or until it has been established to the Company's reasonable satisfaction that no such tax or governmental charge is due.
Section 10. Common Share Record Date. Each Person in whose name any certificate for Common Shares is issued (or to whose broker's account is credited Common Shares through the DWAC system) upon the exercise of Warrants shall for all purposes be deemed to have become the holder of record for the Common Shares represented thereby on, and such certificate shall be dated, the date on which submission of the Notice of Exercise was made, provided that the Warrant Certificate evidencing such Warrant is duly surrendered (but only if required herein) and payment of the Exercise Price (and any applicable transfer taxes) is received on or prior to the Warrant Share Delivery Date; provided, however, that if the date of submission of the Notice of Exercise is a date upon which the Common Share transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding day on which the Common Share transfer books of the Company are open.
Section 11. Adjustment of Exercise Price, Number of Common Shares or Number of the Company Warrants. The Exercise Price, the number of shares covered by each Warrant and the number of Warrants outstanding are subject to adjustment from time to time as provided in Section 3 of each Warrant Certificate. In the event that at any time, as a result of an adjustment made pursuant to Section 3 of any Warrant Certificate, the Holder of any Warrant thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than the Common Shares, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to such number of adjusted shares pursuant to Section 3 of the Warrant Certificate and the provisions of Sections 7, 11 and 12 of this Agreement with respect to the Common Shares shall apply on like terms to any such other shares. All Warrants originally issued by the Company subsequent to any adjustment made to the Exercise Price pursuant to such Warrant Certificate shall evidence the right to purchase, at the adjusted Exercise Price, the number of Common Shares purchasable from time to time hereunder upon exercise of the Warrants, all subject to further adjustment as provided herein.
Section 12. Certification of Adjusted Exercise Price or Number of Common Shares. Whenever the Exercise Price or the number of Common Shares issuable upon the exercise of each Warrant is adjusted as provided in Section 11 or 13, the Company shall (a) promptly prepare an officer's certificate setting forth the Exercise Price of each Warrant as so adjusted, and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Warrant Agent and with each transfer agent for the Common Shares a copy of such officer's certificate and (c) instruct the Warrant Agent to send a brief summary thereof to each Holder of a Warrant Certificate.
Section 13. Fractional Common Shares.
(a) The Company shall not issue fractions of Warrants or distribute Warrant Certificates which evidence fractional Warrants. Whenever any fractional Warrant would otherwise be required to be issued or distributed, the actual issuance or distribution shall reflect a rounding of such fraction to the nearest whole Warrant (rounded down) with no compensation in lieu thereof.
(b) The Company shall not issue fractions of Common Shares upon exercise of Warrants or distribute share certificates which evidence fractional shares. Whenever any fraction of a Common Share would otherwise be required to be issued or distributed, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
Section 14. Conditions of the Warrant Agent's Obligations. The Warrant Agent accepts its obligations herein set forth upon the terms and conditions hereof, including the following to all of which the Company agrees and to all of which the rights hereunder of the Holders from time to time of the Warrant Certificates shall be subject:
(a) Compensation and Indemnification. The Company agrees promptly to pay the Warrant Agent the compensation detailed on Exhibit 4 hereto for all services rendered by the Warrant Agent and to reimburse the Warrant Agent for reasonable out-of-pocket expenses (including reasonable counsel fees) incurred without gross negligence or willful misconduct finally adjudicated to have been directly caused by the Warrant Agent in connection with the services rendered hereunder by the Warrant Agent. The Company also agrees to indemnify and defend the Warrant Agent for, and to hold it harmless against, any loss, liability or expense incurred without gross negligence, or willful misconduct on the part of the Warrant Agent, finally adjudicated to have been directly caused by Warrant Agent hereunder, including the reasonable costs, attorney fees of counsel for the Warrant Agent selected by the Warrant Agent and expenses of defending against any claim of such liability. The Warrant Agent shall be under no obligation to institute or defend any action, suit, or legal proceeding in connection herewith or to take any other action likely to involve the Warrant Agent in expense, unless first indemnified to the Warrant Agent's satisfaction. The indemnities provided by this paragraph shall survive the resignation or discharge of the Warrant Agent or the termination of this Agreement. Anything in this Agreement to the contrary notwithstanding, in no event shall the Warrant Agent be liable under or in connection with the Agreement for indirect, special, incidental, punitive or consequential losses or damages of any kind whatsoever, including but not limited to lost profits, whether or not foreseeable, even if the Warrant Agent has been advised of the possibility thereof and regardless of the form of action in which such damages are sought, and the Warrant Agent's aggregate liability to the Company, or any of the Company's representatives or agents, under this Section 14(a) or under any other term or provision of this Agreement, whether in contract, tort, or otherwise, is expressly limited to, and shall not exceed in any circumstances, one (1) year's fees received by the Warrant Agent as fees and charges under this Agreement, but not including reimbursable expenses previously reimbursed to the Warrant Agent by the Company hereunder.
(b) Agent for the Company. In acting under this Warrant Agreement and in connection with the Warrant Certificates, the Warrant Agent is acting solely as agent of the Company and does not assume any obligations or relationship of agency or trust for or with any of the Holders of Warrant Certificates or beneficial owners of Warrants.
(c) Counsel. The Warrant Agent may consult with counsel satisfactory to it, which may include counsel for the Company, and the written advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice of such counsel.
(d) Documents. The Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or omitted by it in reliance upon any Warrant Certificate, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties.
(e) Certain Transactions. The Warrant Agent, and its officers, directors and employees, may become the owner of, or acquire any interest in, Warrants, with the same rights that it or they would have if it were not the Warrant Agent hereunder, and, to the extent permitted by applicable law, it or they may engage or be interested in any financial or other transaction with the Company and may act on, or as depositary, trustee or agent for, any committee or body of Holders of Warrant Securities or other obligations of the Company as freely as if it were not the Warrant Agent hereunder. Nothing in this Warrant Agreement shall be deemed to prevent the Warrant Agent from acting as trustee under any indenture to which the Company is a party.
(f) No Liability for Interest. Unless otherwise agreed with the Company, the Warrant Agent shall have no liability for interest on any monies at any time received by it pursuant to any of the provisions of this Agreement or of the Warrant Certificates.
(g) No Liability for Invalidity. The Warrant Agent shall have no liability with respect to any invalidity of this Agreement or the Warrant Certificates (except as to the Warrant Agent's countersignature thereon).
(h) No Responsibility for Representations. The Warrant Agent shall not be responsible for any of the recitals or representations herein or in the Warrant Certificate (except as to the Warrant Agent's countersignature thereon), all of which are made solely by the Company.
(i) No Implied Obligations. The Warrant Agent shall be obligated to perform only such duties as are herein and in the Warrant Certificates specifically set forth and no implied duties or obligations shall be read into this Agreement or any of the Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability, the payment of which within a reasonable time is not, in its reasonable opinion, assured to it. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by the Company of any of the Warrant Certificates authenticated by the Warrant Agent and delivered by it to the Company pursuant to this Agreement or for the application by the Company of the proceeds of any Warrant Certificate. The Warrant Agent shall have no duty or responsibility in case of any default by the Company in the performance of its covenants or agreements contained herein or in any of the Warrant Certificates or in the case of the receipt of any written demand from a Holder of a Warrant Certificate with respect to such default, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law.
Section 15. Purchase or Consolidation or Change of Name of Warrant Agent. Any corporation or other legal entity into which the Warrant Agent or any successor Warrant Agent may be merged or with which it may be consolidated, or any corporation or other entity resulting from any merger or consolidation to which the Warrant Agent or any successor Warrant Agent shall be party, or any corporation or other entity succeeding to the corporate trust business of the Warrant Agent or any successor Warrant Agent, shall be the successor to the Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation or other entity would be eligible for appointment as a successor Warrant Agent under the provisions of Section 17. In case at the time such successor Warrant Agent shall succeed to the agency created by this Agreement any of the Warrant Certificates shall have been countersigned but not delivered, any such successor Warrant Agent may adopt the countersignature of the predecessor Warrant Agent and deliver such Warrant Certificates so countersigned; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver such Warrant Certificates so countersigned; and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Agreement.
Section 16. Duties of Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company, by its acceptance hereof, shall be bound:
(a) The Warrant Agent may consult with legal counsel reasonably acceptable to the Company (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chief Executive Officer or Chief Financial Officer of the Company; and such certificate shall be full authentication to the Warrant Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) Subject to the limitation set forth in Section 14, the Warrant Agent shall be liable hereunder only for its own gross negligence or willful misconduct, or for a breach by it of this Agreement.
(d) The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Warrant Certificate (except its countersignature thereof) by the Company or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Warrant Agent) or in respect of the validity or execution of any Warrant Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant Certificate; nor shall it be responsible for the adjustment of the Exercise Price or the making of any change in the number of Common Shares required under the provisions of Section 11 or 13 or responsible for the manner, method or amount of any such change or the ascertaining of the existence of facts that would require any such adjustment or change (except with respect to the exercise of Warrants evidenced by the Warrant Certificates after actual notice of any adjustment of the Exercise Price); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Common Shares to be issued pursuant to this Agreement or any Warrant Certificate or as to whether any Common Shares will, when issued, be duly authorized, validly issued, fully paid and nonassessable.
(f) Each party hereto agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the other party hereto for the carrying out or performing by any party of the provisions of this Agreement.
(g) The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties hereunder from the Chief Executive Officer or Chief Financial Officer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable and shall be indemnified and held harmless for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer, provided Warrant Agent carries out such instructions without gross negligence or willful misconduct.
(h) Subject to all applicable laws and regulations, the Warrant Agent and any shareholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.
(i) The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorney or agents, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorney or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof and so long as the Warrant Agent has not acted with gross negligence or willful misconduct and a material breach of the Agreement has not occurred.
Section 17. Change of Warrant Agent. The Warrant Agent may resign and be discharged from its duties under this Agreement upon 10 days' prior notice in writing sent to the Company. The Company may remove the Warrant Agent or any successor Warrant Agent upon 10 days' prior notice in writing, sent to the Warrant Agent or successor Warrant Agent, as the case may be, and to each transfer agent of the Common Shares, and upon such removal, such notice shall be provided to the Holders of the Warrant Certificates. If the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Warrant Agent. If the Company shall fail to make such appointment within a period of 10 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or by the Holder of a Warrant Certificate (who shall, with such notice, submit such Holder's Warrant Certificate for inspection by the Company), then the Holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent, provided that, for purposes of this Agreement, the Company shall be deemed to be the Warrant Agent until a new warrant agent is appointed. Any successor Warrant Agent, whether appointed by the Company or by such a court, shall be a corporation or other entity organized and doing business under the laws of the United States or of a state thereof, in good standing, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority. After appointment, the successor Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the predecessor Warrant Agent, upon payment of its outstanding remuneration and expenses, shall deliver and transfer to the successor Warrant Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Warrant Agent and each transfer agent of the Common Shares, and mail a notice thereof in writing to the Holders of the Warrant Certificates. However, failure to give any notice provided for in this Section 17, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Warrant Agent or the appointment of the successor Warrant Agent, as the case may be.
Section 18. Issuance of New Warrant Certificates. Notwithstanding any of the provisions of this Agreement or of each of the Warrants to the contrary, the Company may, at its option, issue new Warrant Certificates evidencing Warrants in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price per share and the number or kind or class of shares of stock or other securities or property purchasable under the several Warrant Certificates made in accordance with the provisions of this Agreement.
Section 19. Notices. Notices or demands authorized by this Agreement to be given or made (i) by the Warrant Agent or by the Holder of any Warrant Certificate to or on the Company, (ii) subject to the provisions of Section 17, by the Company or by the Holder of any Warrant Certificate to or on the Warrant Agent or (iii) by the Company or the Warrant Agent to the Holder of any Warrant Certificate shall be deemed given (a) on the date delivered, if delivered personally, (b) on the first Business Day following the deposit thereof with Federal Express or another recognized overnight courier, if sent by Federal Express or another recognized overnight courier, (c) on the fourth Business Day following the mailing thereof with postage prepaid, if mailed by registered or certified mail (return receipt requested), and (d) the date of transmission, if such notice or communication is delivered via facsimile or email attachment at or prior to 5:30 p.m. (New York City time) on a Business Day and (e) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile or email attachment on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, in each case to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
(a) If to the Company, to:
Medicus Pharma Ltd.
300 Conshohocken State Road, Suite 200
Conshohocken, PA 19428
Attention : James Quinlan
Email:
with a copy (which will not constitute notice) to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
Attention: Christopher J. Cummings
Email:
with a copy (which will not constitute notice) to:
Bennett Jones LLP
3400 One First Canadian Place
Toronto, ON M5X 1A4
Attention: Aaron Sonshine
Email:
(b) If to the Warrant Agent, to:
Odyssey Transfer and Trust Company
ATTN: Operations
2155 Woodlane Drive Suite 100
Woodbury, MN 55125
Email:
For any notice delivered by email to be deemed given or made, such notice must be followed by notice sent by overnight courier service to be delivered on the next business day following such email, unless the recipient of such email has acknowledged via return email receipt of such email.
(c) If to the Holder of any Warrant Certificate: to the address of such Holder as shown on the registry books of the Company. Any notice required to be delivered by the Company to the Holder of any Warrant may be given by the Warrant Agent on behalf of the Company. Notwithstanding any other provision of this Agreement, where this Agreement provides for notice of any event to a Holder of any Warrant, such notice shall be sufficiently given if given to the Depositary (or its designee) pursuant to the procedures of the Depositary or its designee.
Section 20. Supplements and Amendments.
(a) The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any Holders of Global Warrants in order to add to the covenants and agreements of the Company for the benefit of the Holders of the Global Warrants or to surrender any rights or power reserved to or conferred upon the Company in this Agreement, provided that such addition or surrender shall not adversely affect the interests of the Holders of the Global Warrants or Warrant Certificates in any material respect.
(b) In addition to the foregoing, with the consent of Holders of Warrants entitled, upon exercise thereof, to receive not less than a majority of the Common Shares issuable thereunder, the Company and the Warrant Agent may modify this Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Warrant Agreement or modifying in any manner the rights of the Holders of the Global Warrants; provided, however, that no modification of the terms (including but not limited to the adjustments described in Section 11) upon which the Warrants are exercisable or the rights of holders of Warrants to receive liquidated damages or other payments in cash from the Company or reducing the percentage required for consent to modification of this Agreement may be made without the consent of the Holder of each outstanding Warrant Certificate affected thereby; provided further, however, that no amendment hereunder shall affect any terms of any Warrant Certificate issued in a Warrant Exchange. As a condition precedent to the Warrant Agent's execution of any amendment, the Company shall deliver to the Warrant Agent a certificate from a duly authorized officer of the Company that states that the proposed amendment complies with the terms of this Section 20.
Section 21. Successors. All covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 22. Benefits of this Agreement. Nothing in this Agreement shall be construed to give any Person other than the Company, the Holders of Warrant Certificates and the Warrant Agent any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the Holders of the Warrant Certificates.
Section 23. Governing Law. This Agreement and each Warrant Certificate and Global Warrant issued hereunder shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflicts of law principles thereof.
Section 24. Counterparts. This Agreement may be executed in any number of counterparts, including electronic counterparts, and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Section 25. Captions. The captions of the sections of this Agreement have been inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
Section 26. Information. The Company agrees to promptly provide to the Holders of the Warrants any material information it provides to the holders of the Common Shares, except to the extent any such information is publicly available on the EDGAR system (or any successor thereof) of the U.S. Securities and Exchange Commission or on the SEDAR+ system (or any successor thereof) of the Canadian Securities Administrators.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
| MEDICUS PHARMA LTD. | ||
| By: | ||
| Name: Dr. Raza Bokhari | ||
| Title: Executive Chairman and Chief Executive Officer |
||
| ODYSSEY TRANSFER AND TRUST COMPANY | ||
| By: | ||
| Name: | ||
| Title: | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 1
Form of Warrant Certificate
Exhibit 2
Form of Warrant Certificate Request Notice
WARRANT CERTIFICATE REQUEST NOTICE
To: Odyssey Transfer and Trust Company, as Warrant Agent for Medicus Pharma Ltd. (the "Company")
The undersigned Holder of Warrants to Purchase Common Shares ("Warrants") in the form of Global Warrants issued by the Company hereby irrevocably elects to receive a Warrant Certificate evidencing the Warrants held by the Holder as specified below:
| 1. | Name of Holder of Warrants in form of Global Warrants: _____________________________ |
| 2. | Name of Holder in Warrant Certificate (if different from name of Holder of Warrants in form of Global Warrants): ________________________________ |
| 3. | Number of Warrants in name of Holder in form of Global Warrants: ___________________ |
| 4. | Number of Warrants for which Warrant Certificate shall be issued: __________________ |
| 5. | Number of Warrants in name of Holder in form of Global Warrants after issuance of Warrant Certificate, if any: ________________ |
| 6. | Warrant Certificate shall be delivered to the following address: |
______________________________
______________________________
______________________________
______________________________
The undersigned hereby acknowledges and agrees that, in connection with this Warrant Exchange and the issuance of the Warrant Certificate, the Holder is deemed to have surrendered the number of Warrants in form of Global Warrants in the name of the Holder equal to the number of Warrants evidenced by the Warrant Certificate.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ____________________________________________________
Signature of Authorized Signatory of Investing Entity: ______________________________
Name of Authorized Signatory: ________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: _____________________________________________________________________
Name of Investing Individual: _________________________________________________
Signature of Investing Individual: ______________________________________________
Date: _____________________________________________________________________
Exhibit 3
Form of Global Warrant Request Notice
GLOBAL WARRANT REQUEST NOTICE
To: Odyssey Transfer and Trust Company, as Warrant Agent for Medicus Pharma Ltd. (the "Company")
The undersigned Holder of Common Share Purchase Warrants ("Warrants") in the form of Warrants Certificates issued by the Company hereby irrevocably elects to receive a Global Warrant evidencing the Warrants held by the Holder as specified below:
| 1. | Name of Holder of Warrants in form of Warrant Certificates: _____________________________ |
| 2. | Name of Holder in Global Warrant (if different from name of Holder of Warrants in form of Warrant Certificates): ________________________________ |
| 3. | Number of Warrants in name of Holder in form of Warrant Certificates: ___________________ |
| 4. | Number of Warrants for which Global Warrant shall be issued: __________________ |
| 5. | Number of Warrants in name of Holder in form of Warrant Certificates after issuance of Global Warrant, if any: ___________ |
| 6. | Global Warrant shall be delivered to the following address: |
______________________________
______________________________
______________________________
______________________________
The undersigned hereby acknowledges and agrees that, in connection with this Global Warrant Exchange and the issuance of the Global Warrant, the Holder is deemed to have surrendered the number of Warrants in form of Warrant Certificates in the name of the Holder equal to the number of Warrants evidenced by the Global Warrant.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ____________________________________________________
Signature of Authorized Signatory of Investing Entity: ______________________________
Name of Authorized Signatory: ________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: _____________________________________________________________________
Name of Investing Individual: _________________________________________________
Signature of Investing Individual: ______________________________________________
Date: ____________________________________________________________________
Exhibit 4
Warrant Agent Fee Schedule
COMMON SHARE PURCHASE WARRANT
MEDICUS PHARMA LTD.
| Warrant Shares: ________ | Initial Exercise Date: _______, 202_ |
THIS COMMON SHARE PURCHASE WARRANT (the "Warrant") certifies that, for value received, _____________ or its assigns (the "Holder") is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the "Initial Exercise Date") and on or prior to 5:00 p.m. (New York City time) on _____1 (the "Termination Date") but not thereafter, to subscribe for and purchase from Medicus Pharma Ltd., a corporation organized under the laws of Ontario, Canada (the "Company"), up to ______ common shares (as subject to adjustment hereunder, the "Warrant Shares") of the Company. The purchase price of one Common Share under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b). This Warrant shall initially be issued and maintained in the form of a security held in book-entry form and the Depository Trust Company or its nominee ("DTC") shall initially be the sole registered holder of this Warrant, subject to a Holder's right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement, in which case this sentence shall not apply.
Section 1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
"Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
"Bid Price" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed or quoted on a Trading Market, the bid price of the Common Shares for the time in question (or the nearest preceding date) on the Trading Market on which the Common Shares are then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Shares are not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Shares are then reported in the Pink Open Market operated by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per common share so reported, or (d) in all other cases, the fair market value of a common share as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
"Business Day" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York or the City of Toronto are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to "stay at home", "shelter-in-place", "non-essential employee" or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York or the City of Toronto generally are open for use by customers on such day.
"Commission" means the United States Securities and Exchange Commission.
"Common Shares" means the common shares of the Company, no par value, and any other class of securities into which such securities may hereafter be reclassified or changed.
1 Insert the date that is the five year anniversary of the Initial Exercise Date; provided, however, that, if such date is not a Trading Day, insert the immediately following Trading Day.
"Common Share Equivalents" means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Shares, including, without limitation, any debt, preferred share, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
"Placement Agency Agreement" means the placement agency agreement, dated as of _____, 2025, between the Company and Maxim Group LLC, as amended, modified or supplemented from time to time in accordance with its terms.
"Registration Statement" means the Company's registration statement on Form S-1 (File No. 333-[-]).
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Subsidiary" means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
"Trading Day" means a day on which the Common Shares are traded on a Trading Market.
"Trading Market" means any of the following markets or exchanges on which the Common Shares are listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTCQB, OTCQX, OTC Pink Open Market, the Toronto Stock Exchange or the TSX Venture Exchange (or any successors to any of the foregoing).
"Transfer Agent" means Odyssey Trust Company, the current transfer agent of the Company, with a mailing address of 702-67 Yonge Street, Toronto, Ontario M5E 1J8, and any successor transfer agent of the Company.
"VWAP" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Shares for such date (or the nearest preceding date) on the Trading Market on which the Common Shares are then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Shares are then quoted on the OTCQB or OTCQX and there is not another Trading Market, the volume weighted average price of the Common Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Shares are not then listed or quoted for trading on OTCQB or OTCQX or another Trading Market and if prices for the Common Shares are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Shares so reported, or (d) in all other cases, the fair market value of a Common Share as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
"Warrant Agency Agreement" means that certain warrant agency agreement, dated _____, 2025 by and between the Company and Odyssey Transfer and Trust Company (the "Warrant Agent Agreement"). To the extent any provision of this Warrant conflicts with the express provisions of the Warrant Agent Agreement, the provisions of this Warrant shall govern and be controlling.
"Warrant Agent" means Odyssey Transfer and Trust Company and any successor warrant agent of the Company.
"Warrants" means this Warrant and other Common Share purchase warrants issued by the Company pursuant to the Registration Statement.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the "Notice of Exercise"). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or by certified or official bank check unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. The holder of any Warrants may exercise his or her right to acquire Common Shares in part and may thereby acquire a number of Common Shares less than the aggregate number which he or she is entitled to acquire pursuant to the Warrant Certificate(s) surrendered in connection therewith. In the event of any acquisition of a number of Shares less than the number which the holder is entitled to acquire, he or she shall, upon exercise thereof, be entitled to receive, without charge therefor, a new Warrant Certificate(s) representing the balance of the Common Shares which he or she was entitled to acquire pursuant to the surrendered Warrant Certificate(s) and which were not then acquired
Notwithstanding the foregoing in this Section 2(a), a holder whose interest in this Warrant is a beneficial interest in certificate(s) representing this Warrant held in book-entry form through DTC (or another established clearing corporation performing similar functions), shall effect exercises made pursuant to this Section 2(a) by delivering to DTC (or such other clearing corporation, as applicable) the appropriate instruction form for exercise, complying with the procedures to effect exercise that are required by DTC (or such other clearing corporation, as applicable), subject to a Holder's right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement, in which case this sentence shall not apply.
b) Exercise Price. The exercise price per Common Share under this Warrant shall be US$_____, subject to adjustment hereunder (the "Exercise Price").
c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a "cashless exercise" in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of "regular trading hours" (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Shares on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder's execution of the applicable Notice of Exercise if such Notice of Exercise is executed during "regular trading hours" on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of "regular trading hours" on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of "regular trading hours" on such Trading Day;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
Notwithstanding anything herein to the contrary, if on the Termination Date there is effective registration statement, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c) if the VWAP as of such date is greater than the Exercise Price.
Notwithstanding anything herein to the contrary, no cashless exercise shall be permitted unless the Fair Market Value of the Common Shares is equal to or higher than the Exercise Price. Solely for purposes of this Section 2(c), the "Fair Market Value" shall mean the average reported last sale price of the Common Shares for the five (5) Trading Days ending on the Trading Day prior to the date of exercise.
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder's or its designee's balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system ("DWAC") if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company's share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, provided that the Holder has then delivered the aggregate Exercise Price to the Company, if applicable, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise provided that the Holder has then delivered the aggregate Exercise Price to the Company, if applicable (such date, the "Warrant Share Delivery Date"). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Shares on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, "Standard Settlement Period" means the standard settlement period, expressed in a number of Trading Days, on the Company's primary Trading Market with respect to the Common Shares as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise upon written notice to the Company.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder's brokerage firm otherwise purchases, Common Shares to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a "Buy-In"), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of Common Shares that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Common Shares with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder's right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver Common Shares upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder's Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder's Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder's Affiliates (such Persons, "Attribution Parties")), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of Common Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Common Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Common Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Share Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder's determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of this Warrant that are not in compliance with the Beneficial Ownership Limitation (other than to the extent that information on the number of outstanding Common Shares of the Company is provided by the Company and relied upon by the Holder). In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding Common Shares, a Holder may rely on the number of outstanding Common Shares as reflected in (A) the Company's most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of Common Shares outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of Common Shares then outstanding. In any case, the number of outstanding Common Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding Common Shares was reported. The "Beneficial Ownership Limitation" shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
a) Share Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a share dividend or otherwise makes a distribution or distributions on its Common Shares or any other equity or equity equivalent securities payable in Common Shares (which, for avoidance of doubt, shall not include any Common Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Common Shares into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding Common Shares into a smaller number of shares, or (iv) issues by reclassification of the Common Shares any shares of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Common Shares (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Common Shares outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Share Equivalents or rights to purchase shares, warrants, securities or other property pro rata to the record holders of any class of Common Shares (the "Purchase Rights"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Common Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder's right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Common Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Shares, by way of return of capital or otherwise (excluding cash and including, without limitation, any distribution of shares or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) other than dividends or distributions subject to Section 3(a) (a "Distribution"), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of Common Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Shares are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Common Shares as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Shares, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Shares or any compulsory share exchange pursuant to which the Common Shares are effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger, or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding Common Shares (not including any Common Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a "Fundamental Transaction"), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of Common Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the "Alternate Consideration") receivable as a result of such Fundamental Transaction by a holder of the number of Common Shares for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one Common Share in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the "Successor Entity") to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of common shares of such Successor Entity (or its parent entity) equivalent to the Common Shares acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares (but taking into account the relative value of the Common Shares pursuant to such Fundamental Transaction and the value of such shares, such number of shares and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the "Company" shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.
e) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of Common Shares deemed to be issued and outstanding as of a given date shall be the sum of the number of Common Shares (excluding treasury shares, if any) issued and outstanding.
f) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Shares, (C) the Company shall authorize the granting to all holders of the Common Shares rights or warrants to subscribe for or purchase any shares of any class or of any rights, (D) the approval of any shareholders of the Company shall be required in connection with any reclassification of the Common Shares, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Shares are converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Shares of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Shares of record shall be entitled to exchange their Common Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall promptly furnish such notice with the Commission pursuant to a Current Report on Form 8-K or Form 6-K, as applicable. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
g) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.
Section 4. Transfer of Warrant.
a) Transferability. This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall be required to physically surrender this Warrant to the Company or its designated agent, together with a duly executed assignment form of this warrant substantially in the form attached hereto, where the Company will forthwith issue and deliver upon the order of the Holder a new Warrant, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
b) New Warrants. If this Warrant is not held in global form through DTC (or any successor depositary), this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Warrant Agent shall register this Warrant, upon records to be maintained by the Warrant Agent for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company and the Warrant Agent may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
a) No Rights as Shareholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a "cashless exercise" pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company and the warrant agent of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any share certificate relating to the Warrant Shares (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of such Warrant or share certificate, if mutilated, the Company will make and deliver a new Warrant or share certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or share certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will, if applicable, reserve from its authorized and unissued Common Shares a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Shares may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder's rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at 300 Conshohocken State Road, Suite 200, Conshohocken, PA 19428, Attention: Chief Executive Officer, email address: [ ], or such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K or Form 6-K, as applicable.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Shares or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company, on the one hand, and the Holder or the beneficial owner of this Warrant, on the other hand.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
o) Warrant Agency Agreement. If this Warrant is held in global form through DTC (or any successor depositary), this Warrant is issued subject to the Warrant Agency Agreement. To the extent any provision of this Warrant conflicts with the express provisions of the Warrant Agency Agreement, the provisions of this Warrant shall govern and be controlling.
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(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| MEDICUS PHARMA LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
Countersigned and Registered by:
ODYSSEY TRANSFER AND TRUST COMPANY, as Warrant Agent
| By: | ||
| Authorized Signatory |
NOTICE OF EXERCISE
TO: MEDICUS PHARMA LTD.
AND ODYSSEY TRUST AND TRANSFER COMPANY
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE OF HOLDER]
Name of Investing Entity:
_______________________________________________________________________
Signature of Authorized Signatory of Investing Entity:
_______________________________________________________________________
Name of Authorized Signatory:
_______________________________________________________________________
Title of Authorized Signatory:
_______________________________________________________________________
Date: __________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: | ______________________________________ |
| (Please Print) | |
| Address: | ______________________________________ |
| (Please Print) | |
| Phone Number: | |
| Email Address: | ______________________________________ |
| Dated: _______________ __, ______ | |
| Holder's Signature: | ______________________________________ |
| Holder's Address: |
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
NOTICE TO INVESTORS
PROSPECTIVE INVESTORS MAY NOT TREAT THE CONTENTS OF THIS SUBSCRIPTION AGREEMENT, THE REGISTRATION STATEMENT OR ANY OF THE OTHER MATERIALS PROVIDED BY THE COMPANY (COLLECTIVELY, THE "OFFERING MATERIALS"), OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE COMPANY OR ANY OF ITS OFFICERS, EMPLOYEES OR AGENTS (INCLUDING "TESTING THE WATERS" MATERIALS), AS INVESTMENT, LEGAL OR TAX ADVICE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATIONS OF THE COMPANY AND THE TERMS OF THE OFFERING TO WHICH THIS SUBSCRIPTION AGREEMENT RELATES, INCLUDING THE MERITS AND THE RISKS INVOLVED. EACH PROSPECTIVE INVESTOR SHOULD CONSULT SUCH INVESTOR'S OWN COUNSEL, ACCOUNTANTS AND OTHER PROFESSIONAL ADVISORS AS TO INVESTMENT, LEGAL, TAX AND OTHER RELATED MATTERS CONCERNING SUCH INVESTOR'S PROPOSED INVESTMENT IN THE COMPANY.
THE SECURITIES OFFERED HEREBY ARE NOT BEING OFFERED TO RESIDENTS OF CANADA.
THE OFFERING MATERIALS MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN, ITS OPERATING STRATEGY AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO, THE COMPANY'S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS "ESTIMATE," "PROJECT," "BELIEVE," "ANTICIPATE," "INTEND," "EXPECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
SUBSCRIPTION AGREEMENT
This subscription agreement (the "Subscription Agreement" or the "Agreement") is entered into by and between Medicus Pharma Ltd., a corporation organized under the laws of Ontario, Canada (the "Company"), and the undersigned investor (the "Investor"), as of the date set forth on the signature page hereto. Any term used but not defined herein shall have the meaning set forth in the registration statement filed on Form S-1, as filed with the Securities and Exchange Commission (the "SEC"), and as may be amended from time to time (the "Registration Statement").
RECITALS
WHEREAS, the Company is offering for sale a maximum of [ ] units (the "Units" or the "Offered Securities"), with each Unit consisting of one of the Company's common shares, no par value (the "Shares"), and one warrant to purchase one Share (the "Warrant"), on Form S-1 under the Securities Act of 1933 (the "Securities Act") (the "Offering") at a fixed price of $[ ] per Unit (the "Purchase Price"), on a best-efforts basis. The Shares issuable upon the exercise of the Warrants are hereinafter called the "Warrant Shares." The Offered Securities and all Shares underlying the securities therein (including the Shares and Warrant Shares) are herein collectively called the "Securities."
WHEREAS, Investor desires to acquire that number of Offered Securities as set forth on the signature page hereto at the Purchase Price.
WHEREAS, the Offering will terminate at the earliest of: (a) the date on which the maximum offering has been sold or (b) the date on which this Offering is earlier terminated by the Company, in its sole discretion (in each case, the "Termination Date").
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto do hereby agree as follows:
1. Subscription.
(a) Investor hereby irrevocably subscribes for, and agrees to purchase, the Offered Securities set forth on the signature page hereto at the Purchase Price, upon the terms and conditions set forth herein. The aggregate Purchase Price for the Offered Securities subscribed by Investor is payable to the Company in the manner provided in Section 2.
(b) Investor understands that the Offered Securities are being offered pursuant to the prospectus set forth in the Registration Statement (the "Prospectus"). By subscribing for the Offered Securities, Investor acknowledges that Investor has received and reviewed a copy of the Prospectus and any other information required by Investor to make an investment decision with respect to the Offered Securities.
(c) This Subscription Agreement may be accepted or rejected in whole or in part, for any reason or for no reason, at any time prior to the Termination Date, by the Company in its sole and absolute discretion. The Company will notify Investor whether this Subscription Agreement is accepted or rejected. If rejected, Investor's payment shall be returned to Investor without interest and all of Investor's obligations hereunder shall terminate, except for Section 5 hereof, which shall remain in force and effect.
(d) The terms of this Subscription Agreement shall be binding upon Investor and Investor's permitted transferees, heirs, successors and assigns (collectively, the "Transferees"); provided, however, that for any such transfer to be deemed effective, the proposed Transferee shall have executed and delivered to the Company, in advance, an instrument in form acceptable to the Company in its sole discretion, pursuant to which the proposed Transferee shall acknowledge and agree to be bound by the representations and warranties of Investor and the terms of this Subscription Agreement. No transfer of this Agreement may be made without the consent of the Company, which consent may be withheld by the Company in its sole and absolute discretion.
2. Payment and Purchase Procedure. The Purchase Price shall be paid simultaneously with Investor's delivery of this Subscription Agreement. Investor shall deliver payment of the Purchase Price of the Offered Securities in the manner set forth in Section 8 hereof. Investor acknowledges that, in order to subscribe for Offered Securities, Investor must comply fully with the purchase procedure requirements set forth in Section 8 hereof.
3. Representations and Warranties of the Company. The Company represents and warrants to Investor that each of the following is true and complete in all material respects as of the date of this Subscription Agreement:
(a) The Company is a corporation duly formed, validly existing and in good standing under the laws of Ontario, Canada. The Company has all requisite power and authority to own and operate its properties and assets, to execute and deliver this Subscription Agreement, the Offered Securities and any other agreements or instruments required hereunder. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business.
(b) The issuance, sale and delivery of the Offered Securities in accordance with this Subscription Agreement have been duly authorized by all necessary corporate action on the part of the Company. The Offered Securities, when issued, sold and delivered against payment therefor in accordance with the provisions of this Subscription Agreement, will be duly and validly issued, fully paid and non-assessable. The Shares issuable upon exercise of any Warrants purchased by Investor, upon exercise of such Warrant and payment by the holder thereof of the exercise price, will be duly and validly issued, fully paid and non-assessable.
(c) The acceptance by the Company of this Subscription Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. Upon the Company's acceptance of this Subscription Agreement, this Subscription Agreement shall constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights and (ii) as limited by general principles of equity that restrict the availability of equitable remedies.
(d) Assuming the accuracy of Investor's representations and warranties set forth in Section 4 hereof, no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required by or with respect to the Company in connection with the execution, delivery and performance by the Company of this Subscription Agreement except (i) for such filings as may be required under any applicable federal or state securities laws, (ii) for such other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have a material adverse effect on the ability of the Company to perform its obligations hereunder.
(e) The authorized and outstanding securities of the Company immediately prior to the initial investment in the Offered Securities is as set forth in the Registration Statement. Except as set forth in the Registration Statement, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), or agreements of any kind (oral or written) for the purchase or acquisition from the Company of any of its securities.
(f) Complete copies of the Company's financial statements meeting the requirements of Form S-1 under the Securities Act (the "Financial Statements") have been made available to Investor and appear in the Registration Statement. The Financial Statements are based on the books and records of the Company and fairly present in all material respects the financial condition of the Company as of the respective dates they were prepared and the results of the operations and cash flows of the Company for the periods indicated. The auditing firm which has audited the Financial Statements is an independent accounting firm within the rules and regulations adopted by the SEC.
(g) Except as set forth in the Registration Statement, there is no pending action, suit, proceeding, arbitration, mediation, complaint, claim, charge or investigation before any court, arbitrator, mediator or governmental body, or to the Company's knowledge, currently threatened in writing (a) against the Company or (b) against any consultant, officer, manager, director or key employee of the Company arising out of his or her consulting, employment or board relationship with the Company or that could otherwise materially impact the Company.
4. Representations and Warranties of Investor. Investor represents and warrants to the Company that each of the following is true and complete in all material respects as of the date of this Subscription Agreement:
(a) Requisite Power and Authority. Investor has all necessary power and authority under all applicable provisions of law to execute and deliver this Subscription Agreement and to carry out the provisions hereof. Upon due delivery hereof, this Subscription Agreement will be a valid and binding obligation of Investor, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights and (ii) as limited by general principles of equity that restrict the availability of equitable remedies.
(b) Company Registration Statement; Company Information. Investor acknowledges the public availability of the Registration Statement which can be viewed on the SEC Edgar Database at www.sec.gov, and that Investor has reviewed the Registration Statement. Investor acknowledges that the Registration Statement makes clear the terms and conditions of the Offering and that the risks associated therewith are described. Investor has had an opportunity to discuss the Company's business, management and financial affairs with management of the Company and has had the opportunity to review the Company's operations and facilities. Investor has also had the opportunity to ask questions of, and receive answers from, the Company and its management regarding the terms and conditions of the Offering. Investor acknowledges that, except as set forth herein, no representations or warranties have been made to Investor, or to any advisor or representative of Investor, by the Company with respect to the business or prospects of the Company or its financial condition.
(c) Valuation; Arbitrary Determination of Purchase Price by the Company. Investor acknowledges that the Purchase Price of the Offered Securities in the Offering was set by the Company as set forth in the Registration Statement and no warranties are made as to the actual value of the Offered Securities. Investor further acknowledges that future offerings of securities of the Company may be made at lower valuations, with the result that Investor's investment will bear a lower valuation and will experience dilution.
(d) Domicile. Investor maintains Investor's domicile (and is not a transient or temporary resident) at the address provided herein.
(e) Foreign Investors. If Investor is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Investor hereby represents that Investor is in full compliance with the laws of Investor's jurisdiction in connection with any invitation to subscribe for the Offered Securities or any use of this Subscription Agreement, including, without limitation, (1) the legal requirements within Investor's jurisdiction for the purchase of the Offered Securities, (2) any foreign exchange restrictions applicable to such purchase, (3) any governmental or other consents that may need to be obtained, and (4) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Offered Securities. Investor's subscription and payment for and continued beneficial ownership of the Offered Securities will not violate any applicable securities or other laws of Investor's jurisdiction.
(f) Fiduciary Capacity. If Investor is purchasing the Offered Securities in a fiduciary capacity for another person or entity, including, without limitation, a corporation, partnership, trust or any other juridical entity, Investor has been duly authorized and empowered to execute this Subscription Agreement and all other related documents. Upon request of the Company, Investor will provide true, complete and current copies of all relevant documents creating Investor, authorizing Investor's investment in the Company and/or evidencing the satisfaction of the foregoing.
5. Indemnity. The representations, warranties and covenants made by Investor herein shall survive the consummation of this Subscription Agreement. Investor agrees to indemnify and hold harmless the Company and its officers, directors and agents, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all reasonable attorneys' fees, including attorneys' fees on appeal) and expenses reasonably incurred in investigating, preparing or defending against any false representation or warranty or breach of failure by Investor to comply with any covenant or agreement made by Investor herein or in any other document furnished by Investor to any of the foregoing in connection with the transaction contemplated hereby.
6. Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, applicable to agreements made in and wholly to be performed in that jurisdiction with regards to the choice of law rules of such state, except for matters arising under the Securities Act or the Securities Exchange Act of 1934, as amended, which matters shall be construed and interpreted in accordance with such laws.
7. Notices. Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise specified, shall be mailed, hand delivered or telecopied (a) if to the Company, at the office of the Company, 300 Conshohocken State Road, Suite 200, Conshohocken, Pennsylvania 19428, telephone number: [ ], Attention: Chief Executive Officer, with copies to (which will not constitute notice) Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019, Attention: Christopher J. Cummings, telephone number: [ ] and to Bennett Jones LLP, 3400 One First Canadian Place, Toronto, ON M5X 1A4, attention: Aaron Sonshine, telephone number: [ ], or (b) if to Investor, at Investor's address supplied in connection herewith, or to such other address as may be specified by written notice from time to time by the party entitled to receive such notice. Any such notice shall be effective only upon receipt.
8. Purchase Procedure. Investor acknowledges that, in order to subscribe for the Offered Securities, Investor must, and Investor does hereby, deliver (in a manner described below) to the Company: (a) a single executed counterpart of the Subscription Agreement, which shall be delivered to the Company either by (1) physical delivery to: 300 Conshohocken State Road, Suite 200, Conshohocken, Pennsylvania 19428; (2) e-mail to: [ ]; and (b) payment of the Purchase Price, which shall be delivered in the manner set forth in Annex I attached hereto and made a part hereof.
9. Miscellaneous. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons or entity or entities may require. Other than as set forth herein, this Subscription Agreement is not transferable or assignable by Investor. The representations, warranties and agreements contained herein shall be deemed to be made by, and be binding upon, Investor and Investor's heirs, executors, administrators and successors and shall inure to the benefit of the Company and its successors and assigns. None of the provisions of this Subscription Agreement may be waived, changed or terminated orally or otherwise, except as specifically set forth herein or except by a writing signed by the Company and Investor. In the event any part of this Subscription Agreement is found to be void or unenforceable, the remaining provisions are intended to be separable and binding with the same effect as if the void or unenforceable part were never in this Subscription Agreement. This Subscription Agreement supersedes all prior discussions and agreements between the Company and Investor, if any, with respect to the subject matter hereof and contains the sole and entire agreement between the Company and Investor with respect to the subject matter hereof. The terms and provisions of this Subscription Agreement are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person. The headings used in this Subscription Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. In the event that either party hereto shall commence any suit, action or other proceeding to interpret this Subscription Agreement, or determine to enforce any right or obligation created hereby, then such party, if it prevails in such action, shall recover its reasonable costs and expenses incurred in connection therewith, including, but not limited to, reasonable attorneys' fees and expenses and costs of appeal, if any. All notices and communications to be given or otherwise made to Investor shall be deemed to be sufficient if sent by e-mail to such address provided by Investor herein. Unless otherwise specified in this Subscription Agreement, Investor shall send all notices or other communications required to be given hereunder to the Company via e-mail at [ ]. Any such notice or communication shall be deemed to have been delivered and received on the first business day following that on which the e-mail has been sent (assuming that there is no error in delivery). As used in this Section 9, the term "business day" shall mean any day other than a day on which banking institutions in the State of New York are legally closed for business. This Subscription Agreement may be executed in one or more counterparts. No failure or delay by any party in exercising any right, power or privilege under this Subscription Agreement shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
10. Consent to Electronic Delivery of Notices, Disclosures and Forms. Investor understands that, to the fullest extent permitted by law, any notices, disclosures, forms, privacy statements, reports or other communications (collectively, "Communications") regarding the Company, Investor's investment in the Company and the Offered Securities (including annual and other updates and tax documents) may be delivered by electronic means, such as by e-mail. Investor hereby consents to electronic delivery as described in the preceding sentence. In so consenting, Investor acknowledges that e-mail messages are not secure and may contain computer viruses or other defects, may not be accurately replicated on other systems or may be intercepted, deleted or interfered with, with or without the knowledge of the sender or the intended recipient. Investor also acknowledges that an e-mail from the Company may be accessed by recipients other than Investor and may be interfered with, may contain computer viruses or other defects and may not be successfully replicated on other systems. Neither the Company, nor any of its respective officers, directors and affiliates, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act (collectively, the "Company Parties"), gives any warranties in relation to these matters. Investor further understands and agrees to each of the following: (a) other than with respect to tax documents in the case of an election to receive paper versions, none of the Company Parties will be under any obligation to provide Investor with paper versions of any Communications; (b) electronic Communications may be provided to Investor via e-mail or a website of a Company Party upon written notice of such website's internet address to such Investor. In order to view and retain the Communications, Investor's computer hardware and software must, at a minimum, be capable of accessing the Internet, with connectivity to an internet service provider or any other capable communications medium, and with software capable of viewing and printing a portable document format ("PDF") file created by Adobe Acrobat. Further, Investor must have a personal e-mail address capable of sending and receiving e-mail messages to and from the Company Parties. To print the documents, Investor will need access to a printer compatible with his or her hardware and the required software; (c) if these software or hardware requirements change in the future, a Company Party will notify the Investor through written notification. To facilitate these services, Investor must provide the Company with his or her current e-mail address and update that information as necessary. Unless otherwise required by law, Investor will be deemed to have received any electronic Communications that are sent to the most current e-mail address that the Investor has provided to the Company in writing; (d) none of the Company Parties will assume liability for non-receipt of notification of the availability of electronic Communications in the event Investor's e-mail address on file is invalid; Investor's e-mail or Internet service provider filters the notification as "spam" or "junk mail"; there is a malfunction in Investor's computer, browser, internet service or software; or for other reasons beyond the control of the Company Parties; and (e) solely with respect to the provision of tax documents by a Company Party, Investor agrees to each of the following: (1) if Investor does not consent to receive tax documents electronically, a paper copy will be provided, and (2) Investor's consent to receive tax documents electronically continues for every tax year of the Company until Investor withdraws its consent by notifying the Company in writing.
Investor certifies that Investor has read this entire Subscription Agreement and that every statement made by Investor herein is true and complete.
The Company may not be offering the Offered Securities in every state. The Offering Materials do not constitute an offer or solicitation in any state or jurisdiction in which the Offered Securities are not being offered. The information presented in the Offering Materials was prepared by the Company solely for the use by prospective investors in connection with the Offering. Nothing contained in the Offering Materials is or should be relied upon as a promise or representation as to the future performance of the Company.
The Company reserves the right, in its sole discretion and for any reason whatsoever, to modify, amend and/or withdraw all or a portion of the Offering and/or accept or reject, in whole or in part, for any reason or for no reason, any prospective investment in the Offered Securities. Except as otherwise indicated, the Offering Materials speak as of their date. Neither the delivery nor the purchase of the Offered Securities shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since that date.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on the date set forth below.
Dated: _____________________.
| INDIVIDUAL INVESTOR | ||
| (Signature) | (Subscription Amount) | |
| (Printed Name) | (Number of Units Subscribed) | |
| CORPORATION/LLC/TRUST INVESTOR | ||
| (Name of Corporation/LLC/Trust) | (Subscription Amount) | |
| (Signature) | ||
| (Number of Units Subscribed) | ||
| (Printed Name) | ||
| (Title) | ||
| PARTNERSHIP INVESTOR | ||
| $ | ||
| (Name of Partnership) | (Subscription Amount) | |
| (Signature) | (Number of Units Subscribed) | |
| (Printed Name) | ||
| (Title) | ||
| INVESTOR INFORMATION | |||
| Name of Investor |
SSN or EIN | ||
| Street Address |
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| City |
State |
Zip Code |
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| Phone |
E-mail |
State/Nation of Residency |
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| Name and Title of Authorized Representative, if investor is an entity or custodial account |
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| Type of Entity or Custodial Account (IRA, Keogh, corporation, partnership, trust, limited liability company, etc.) |
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| Jurisdiction of Organization |
Date of Organization |
Account Number | |
| CHECK ONE: | _______Individual Investor | _______Custodian Entity | _______Tenants-in-Common* | |||
| _______Community Property* | _______Corporation | _______Joint Tenants* | ||||
| _______LLC | _______Partnership | _______Trust | ||||
| * | If the Offered Securities are intended to be held as Community Property, as Tenants-In-Common or as Joint Tenancy, then each party (owner) must execute this Subscription Agreement. | |||||
The foregoing subscription for ___________ Offered Securities, a Subscription Amount of $__________, is hereby accepted on behalf of Medicus Pharma Ltd., this ___ day of _______, 2025.
| MEDICUS PHARMA LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
ANNEX I
WIRE INSTRUCTIONS - MEDICUS PHARMA LTD.
Exhibit 5.1
May 27, 2025
Medicus Pharma Ltd.
300 Conshohocken State Rd., Suite 200
W. Conshohocken, PA 19428
Dear Mesdames/Sirs:
Re: Medicus Pharma Ltd. - Registration Statement on Form S-1
We have acted as special Canadian legal counsel to Medicus Pharma Ltd., an Ontario corporation (the "Company"), in connection with the Company's registration statement on Form S-1 filed on May 27, 2025 (as amended and supplemented from time to time, the "Registration Statement") with the U.S. Securities and Exchange Commission (the "SEC"), including a related prospectus filed with the Registration Statement (the "Prospectus"), covering the registration and proposed "best efforts" public offering (the "Offering") of units (each, a "Unit").
Each Unit will consist of one common share without par value (each, a "Unit Share"), and one common share purchase warrant (each, a "Warrant") entitling the holder thereof to purchase one common share of the Company (each, a "Warrant Share") for a period of five years from the date of issuance of the Warrant at an exercise price equal to 100% of the final public offering price of the Units. The Unit Shares, the Warrants and the Warrant Shares issuable upon exercise of the Warrants are collectively referred to herein as the "Offered Securities".
We understand that the Offered Securities are to be sold by the Company to investors on a "best efforts" basis as described in the Registration Statement and the Prospectus and pursuant to a placement agency agreement to be entered into by and among the Company and the placement agents (together with all schedules, exhibits and ancillary documents and agreements thereto, the "Placement Agency Agreement") and subscription agreements to be entered into by and between the Company and each of the investors (together with all schedules, exhibits and ancillary documents and agreements thereto, the "Subscription Agreement"), each substantially in the form to be filed as an exhibit to the Registration Statement. The Offered Securities are being registered by the Company in connection with the Offering. The offering price of the Units is to be determined by the Company and the placement agents.
In connection with this opinion, we have reviewed and relied upon originals, photocopies or copies, certified or otherwise identified to our satisfaction, of the Registration Statement and the Prospectus, the Company's Articles of Incorporation, the Company's Articles of Amendment, the Company's Bylaws, records of the Company's corporate proceedings in connection with the Offering, and such other documents, records, certificates, memoranda and other instruments as we deem necessary as a basis for this opinion. With respect to the foregoing documents, we have assumed, without independent investigation: (i) the authenticity of all records, documents, and instruments submitted to us as originals; (ii) the genuineness of all signatures on all agreements, instruments and other documents submitted to us; (iii) the legal capacity and authority of all persons or entities (other than the Company) executing all agreements, instruments or other documents submitted to us; (iv) the authenticity and the conformity to the originals of all records, documents, and instruments submitted to us as copies; (v) that the statements contained in the certificates and comparable documents of public officials, officers and representatives of the Company and other persons on which we have relied for purposes of this opinion are true and correct; (vi) the due authorization, execution and delivery of all agreements, instruments and other documents by all parties thereto (other than the due authorization, execution and delivery of each such agreement, instrument and document by the Company); and (vii) that the Registration Statement has been declared effective pursuant to the U.S. Securities Act of 1933, as amended (the "Securities Act"). We have also obtained from officers of the Company certificates as to certain factual matters and, insofar as this opinion is based on matters of fact, we have relied on such certificates without independent investigation. With respect to the Placement Agency Agreement, the Subscription Agreement and the Warrants, which are governed by and construed in accordance with the laws of the State of New York, we have assumed that these agreements comply with and do not violate the laws of the State of New York.
Our opinion is limited to laws of the Province of Ontario. We have not considered, and have not expressed any opinion with regard to, or as to the effect of, any other law, rule, or regulation, state or federal, applicable to the Company. In particular, we express no opinion as to United States federal securities laws.
Based upon the foregoing and in reliance thereon, and subject to the qualifications and limitations set forth herein, we are of the opinion that:
1. the Units have been duly authorized and validly issued and, upon receipt of the consideration therefor, will be fully paid and non-assessable units of the Company;
2. the Unit Shares have been duly authorized and validly issued and, upon receipt of the consideration therefor, will be outstanding as fully paid and non-assessable common shares of the Company; and
3. the Warrants have been duly authorized and validly issued by the Company and the Warrant Shares issuable upon exercise of the Warrants have been reserved and duly and validly authorized and allotted for issuance by the Company to the holders of the Warrants, and upon due exercise of the Warrants, in accordance with their terms (including payment in full of the exercise price for the Warrant Shares issuable upon exercise of the Warrants), the Warrant Shares issuable upon exercise of the Warrants will be issued as fully paid and non-assessable common shares of the Company.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our firm's name in the sections of the Registration Statement and the Prospectus included therein entitled "Experts and Legal Matters". In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations of the SEC.
This opinion is furnished in accordance with the requirements of Item 16(a) of Form S-1 and Item 601(b)(5)(i) of Regulation S-K in connection with the filing of the Registration Statement and the Prospectus, and is not to be used, circulated, quoted or otherwise relied upon for any other purpose. This opinion is limited to the specific issues addressed herein, and no opinion may be inferred or implied beyond that expressly stated herein. We disclaim any obligation to advise you of facts, circumstances, events or developments that hereafter may be brought to our attention and that may alter, affect or modify the opinion expressed herein after the effective date of the Registration Statement.
Yours truly,
/s/ Bennett Jones LLP
2
Exhibit 5.2
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
212-373-3000
212-757-3990
May 27, 2025
Medicus Pharma Ltd.
300 Conshohocken State Rd., Suite 200
W. Conshohocken, PA 19428
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as special counsel to Medicus Pharma Ltd., an Ontario corporation (the "Company"), in connection with the Registration Statement on Form S-1 (the "Registration Statement") of the Company, filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder (the "Rules"). You have asked us to furnish our opinion as to the legality of certain of the securities being registered under the Registration Statement. The Registration Statement relates to the registration under the Act of (i) units (the "Units") of the Company that may be offered by the Company, each such unit consisting of one common share of the Company, no par value per share (the "Common Shares"), and one warrant of the Company (the "Warrants") to purchase a Common Share and (ii) all Common Shares and all Warrants issued as part of the Units as specified in the Registration Statement.
In connection with the furnishing of this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents:
1. the Registration Statement;
2. the form of the Placement Agency Agreement (the "Placement Agency Agreement") proposed to be entered into between the Company and the placement agent named in the Registration Statement, included as Exhibit 1.1 to the Registration Statement;
3. the form of the Warrant Agency Agreement proposed to be entered into by and between Odyssey Transfer and Trust Company (the "Warrant Agent") and the Company, included as Exhibit 4.6 to the Registration Statement (the "Warrant Agreement"); and
4. the Form of Warrant, included as Exhibit 4.7 to the Registration Statement (the "Form of Warrant").
In our examination of the documents referred to above, we have assumed, without independent investigation, the genuineness of all signatures, the legal capacity of all individuals who have executed any of the documents reviewed by us, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as certified, photostatic, reproduced or conformed copies of valid existing agreements or other documents, the authenticity of all the latter documents and that the statements regarding matters of fact in the certificates, records, agreements, instruments and documents that we have examined are accurate and complete. We have also assumed, without independent investigation, (i) that the Company is validly existing and in good standing under the laws of its jurisdiction of organization, (ii) that the Company has all necessary corporate power to execute, deliver and perform its obligations under the Warrants and the Warrant Agreement, (iii) that the execution, delivery and performance of the Warrants and the Warrant Agreement have been duly authorized by all necessary corporate action and do not violate the Company's organizational documents or the laws of its jurisdiction of organization and (iv) the due execution and delivery of the Warrants and the Warrant Agreement by the Company, under the laws of its jurisdiction of organization. We have further assumed that the Warrants and the Warrant Agreement constitute the legal, valid and binding obligations of the Warrant Agent.
Based upon the above, and subject to the stated assumptions, exceptions and qualifications, we are of the opinion that the Warrants included in the Units, when the Units are duly issued, delivered and paid for as contemplated in the Registration Statement and in accordance with the terms of the Underwriting Agreement and the Warrant Agreement, and assuming the due authorization, execution and delivery of the Warrants by the Warrant Agent, will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and the terms of the Warrant Agreement, except that (i) the enforceability of the Warrants may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors' rights generally and possible judicial action giving effect to governmental actions relating to persons or transactions or foreign laws affecting creditors' rights and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law), (ii) we express no opinion as to the validity, legally binding effect or enforceability of Section 3(d) of the Form of Warrant or any related provision in the Warrants that requires or relates to adjustments to the conversion rate in an amount that a court would determine in the circumstances under applicable law to be commercially unreasonable or a penalty or forfeiture and (iii) we express no opinion as to the validity, legally binding effect or enforceability of any provision in the Warrant Agreement or the Warrants that imposes penalties or liquidated damages under certain circumstances.
The opinion expressed above is limited to the laws of the State of New York. Our opinion is rendered only with respect to the laws, and the rules, regulations and orders under those laws, that are currently in effect.
We hereby consent to use of this opinion as an exhibit to the Registration Statement and to the use of our name under the heading "Experts and Legal Matters" contained in the prospectus included in the Registration Statement. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required by the Act or the Rules.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison LLP
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
2
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the inclusion in this Registration Statement of Medicus Pharma Ltd. on Form S-1 to be filed on or about May 27, 2025 of our report dated March 28, 2025, on our audit of the financial statements as of December 31, 2024 and for the year then ended. Our report includes an explanatory paragraph about the existence of substantial doubt concerning the Company's ability to continue as a going concern. We also consent to the reference to our firm under the caption “Experts and Legal Matters” in this Registration Statement.
/s/ EisnerAmper LLP
EISNERAMPER LLP
Philadelphia, Pennsylvania
May 27, 2025
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use of our auditor's report dated March 28, 2025 with respect to the consolidated financial statements of Medicus Pharma Ltd. (formerly Interactive Capital Partners Corp.) as at December 31, 2023 and for the year then ended, included in the Registration Statement on Form S-1 of Medicus Pharma Ltd., as filed with the United States Securities and Exchange Commission.
We also consent to the reference to our firm under the heading "Experts and Legal Matters" in the Form S-1.
/s/ MNP LLP
Chartered Professional Accountants
Licensed Public Accountants
Mississauga, Canada
May 27, 2025