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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 20-F

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ______________

For the transition period from ______________ to ______________

Commission file number: 0-30314

 

Portage Biotech Inc.
(Exact name of Registrant as specified in its charter)
 
N/A
(Translation of Registrant's name into English)
 
British Virgin Islands
(Jurisdiction of incorporation or organization)
 
Clarence Thomas Building, P.O. Box 4649, Road Town, Tortola, British Virgin Islands, VG1110.
(Address of principal executive offices)

c/o Portage Development Services Inc., Ian Walters, 203.221.7378

61 Wilton Road, Westport, Connecticut 06880
(Name, telephone, e-mail and/or facsimile number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of each exchange on which registered
Ordinary Shares, no par value PRTG Nasdaq Capital Market

 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Not applicable

(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Not applicable

(Title of Class)

 

Indicate the number of outstanding shares of each of the Issuer's classes of capital or common stock (ordinary shares) as of the close of the period covered by the annual report.  Ordinary shares without par value – 16,944,783 as at August 1, 2022

 

Indicate by check mark if the registrant is a well-known seasoned issuer, defined in Rule 405 of the Securities Act. Yes ☐ No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐        Accelerated filer ☐         Non-accelerated filer ☒        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 13(a) of the Exchange Act. ☐

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐

International Financial Reporting Standards as issued

by the International Accounting Standards Board ☒

Other ☐

 

 

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 ii 

 

TABLE OF CONTENTS

 

 

    Page No.
     
Forward Looking Statements 1
   
Foreign Private Issuer Status and Reporting Currency 2
     
Part I    
     
Item 1. Identity of Directors, Senior Management and Advisors 2
Item 2. Offer Statistics and Expected Timetable 2
Item 3. Key Information 2
Item 4. Information on the Company 15
Item 5. Operating and Financial Review and Prospects 30
Item 6. Directors and Senior Management 41
Item 7. Major Shareholders and Related Party Transactions 54
Item 8. Financial Information 59
Item 9. The Offer and Listing 59
Item 10. Additional Information 61
Item 11. Quantitative and Qualitative Disclosures about Market Risk 74
Item 12. Description of Securities Other than Equity Securities 76
     
Part II    
     
Item 13. Defaults, Dividend Arrearages and Delinquencies 76
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 76
Item 15. Controls and Procedures 76
Item 16. Audit Committee, Code of Ethics, and Principal Accountant's Fees and Services 78
     
Part III    
     
Item 17. Financial Statements 80
Item 18. Financial Statements 80
Item 19. Exhibits 80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 iii 

 

FORWARD LOOKING STATEMENTS

 

This annual report includes "forward looking statements.” All statements, other than statements of historical facts, included herein or incorporated by reference herein, including without limitation, statements regarding our business strategy, plans and objectives of management for future operations and those statements preceded by, followed by or that otherwise include the words "believe," "expects," "anticipates," "intends," "estimates" or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that such forward-looking statements will prove to be correct.

 

Each forward-looking statement reflects our current view of future events and is subject to risks, uncertainties and other factors that could cause actual results to differ materially from any results expressed or implied by our forward-looking statements.

 

Risks and uncertainties include, but are not limited to:

 

  our plans and ability to develop and commercialize product candidates and the timing of these development programs;

 

  clinical development of our product candidates, including the results of current and future clinical trials;

 

  the benefits and risks of our product candidates as compared to others;

 

  our maintenance and establishment of intellectual property rights in our product candidates;

 

  our need for financing and our estimates regarding our capital requirements and future revenues and profitability;

 

  our estimates of the size of the potential markets for our product candidates; and

 

  our selection and licensing of product candidates.

 

These statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments based on the focus of our business activities on biotechnology, as well as other factors we believe are appropriate in particular circumstances. However, whether actual results and developments will meet our expectations and predictions depends on a number of risks and uncertainties, which could cause actual results to differ materially from our expectations, including the risks set forth in "Item 3 - Key Information-Risk Factors."

 

Our business focus is that of being primarily a pharmaceutical development business subject to all of the risks of a pharmaceutical development business. We do not anticipate directly engaging in the post pharmaceutical development endeavors of manufacturing, marketing and distribution of our development products.

 

Consequently, all of the forward-looking statements made in this annual report are qualified by these cautionary statements. We cannot assure you that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected effect on us or our business or operations.

 

Unless the context indicates otherwise the terms “Portage Biotech Inc.,” “the Company,” “our Company,” “Portage,” “we,” “us” or “our” are used interchangeably in this Annual Report and mean Portage Biotech Inc. and its subsidiaries.

 

 1 

 

FOREIGN PRIVATE ISSUER STATUS AND REPORTING CURRENCY

 

Foreign Private Issuer Status

 

Portage Biotech Inc. is a British Virgin Islands (“BVI”) business company pursuant to the Certificate of Continuance issued by the Registrar of Corporate Affairs of the BVI on July 5, 2013. More than 50% of our ordinary shares were held by non-United States citizens and residents as of the last measurement date. A majority of our assets are located outside the United States. As a result, we believe that we qualify as a "foreign private issuer" for continuing to report regarding the registration of our ordinary shares using this Form 20-F annual report format.

 

Currency

 

The financial information presented in this Annual Report is expressed in United States dollars ("US $") and the financial data in this Annual Report is presented in accordance with the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee.

 

All dollar amounts set forth in this report are in U.S. dollars, except where otherwise indicated.

 

PART I

 

ITEM 1 – IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

 

Not required since this is an annual report.

 

ITEM 2 – OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not required since this is an annual report.

 

ITEM 3 – KEY INFORMATION

 

(A) SELECTED FINANCIAL DATA

 

The selected financial data set forth below should be read in conjunction with our Consolidated Financial Statements and Notes thereto appearing elsewhere in this Annual Report. The selected Operations Data for each of the three fiscal years ended March 31, 2022, 2021 and 2020, and the Balance Sheet data as of March 31, 2022 and 2021 are derived from our audited Consolidated Financial Statements appearing elsewhere in this Annual Report. The selected Operations Data for the years ended March 31, 2019 and 2018 and the Balance Sheet data as of March 31, 2020, 2019 and 2018 are derived from our audited Consolidated Financial Statements, which are not included in this Annual Report.

 

 2 

 

SUMMARY OF FINANCIAL INFORMATION IN THE COMPANY’S FINANCIAL STATEMENTS (U.S. DOLLARS)

 

Operating Data

 

Year ended March 31,  2022  2021  2020  2019  2018
   All amounts in 000'$ (except for per share amounts)
Net (loss) income before non-controlling interests   (19,169)   (17,189)   (7,249)   (3,594)   123,741 
Net (loss) income attributable to owners of the Company   (16,870)   (15,833)   (5,333)   (2,635)   123,741 
Working capital   24,049    1,738    1,226    4,757    7,489 
Total assets   194,662    174,860    173,174    173,715    10,003 
Capital stock   158,324    130,649    117,817    116,237    23,654 
Warrants   33    1,120             
Stock option reserves   16,928    7,977    58    324    267 
Equity attributable to owners of the Company   121,205    101,449    96,531    99,674    9,619 
Weighted average number of shares outstanding - Basic   13,060    11,733    10,952    4,820    2,678 
Weighted average number of shares outstanding - Diluted   13,060    11,733    10,952    4,820    2,696 
Net (loss) income per share - Basic  $(1.29)  $(1.35)  $(0.49)  $(0.55)  $46.21 
Net (loss) income per share - Diluted  $(1.29)  $(1.35)  $(0.49)  $(0.55)  $45.90 

 

1.The effect of potential share issuances pursuant to the exercise of options and warrants would be anti-dilutive and, therefore, basic and diluted loss per share are the same for the fiscal years 2022, 2021, 2020 and 2019.

 

2.The per share data has been adjusted to reflect the reverse split of the ordinary shares effective June 5, 2020.

 

On January 8, 2019, the Company completed an acquisition of SalvaRx Limited, which has been accounted for using the acquisition method as explained elsewhere in this report. Fiscal 2019 amounts include the effect of acquisition accounting.

 

The Company has not declared or paid any dividends in any of the reporting periods presented herein except for fiscal 2018, when the Company distributed a property dividend consisting of shares of common stock of our former partially owned subsidiary, Biohaven Pharmaceuticals Holding Company Ltd. (“Biohaven”).

 

Exchange Rates

 

In this Annual Report on Form 20-F, unless otherwise specified, all monetary amounts are expressed in United States dollars. The Company's subsidiaries have transactions in Canadian dollars, British pounds sterling and the European Union (“EU”) euros. Currencies other than the United States dollar have been translated into United States dollars using rates available on Bank of Canada and the Bank of England websites.

 

On June 30, 2022, the exchange rate, based on the noon buying rates, for the conversion of Canadian dollars into United States dollars (the "Noon Rate of Exchange") was approximately US$1 = CDN$1.29, for the conversion of British pounds sterling into United States dollars was approximately US$1 = £0.82 and for the conversion of EU euros into United States dollars was approximately US$1 = €0.96.

 

The following table sets out the high and low exchange rates in Canadian dollar, British pounds and EU euros for one United States dollar for each of the last six months of the fiscal year.

 

 3 

 

Fiscal year 2022  October  November  December  January  February  March
Canadian Dollar                              
High   1.27    1.28    1.29    1.28    1.28    1.28 
Low   1.23    1.24    1.26    1.25    1.27    1.25 
British Pounds                              
High   0.74    0.75    0.76    0.75    0.75    0.77 
Low   0.72    0.73    0.74    0.73    0.73    0.75 
EU Euros                              
High   0.87    0.89    0.89    0.90    0.89    0.92 
Low   0.86    0.86    0.88    0.87    0.87    0.90 

 

The following table sets out the average exchange rates in Canadian dollar, British pounds and EU euros for one United States dollar for the five most recent financial years.

 

Year ended March 31,  2022  2021  2020  2019  2018
Average for the Fiscal Year                         
Canadian Dollar   1.25    1.32    1.33    1.31    1.28 
British Pounds   0.73    0.77    0.79    0.76    0.75 
EU Euros   0.86    0.86    0.90    0.86    0.86 

 

(B) CAPITALIZATION AND INDEBTEDNESS

 

Not applicable.

 

(C) REASONS FOR THE OFFER AND USE OF PROCEEDS

 

Not applicable.

 

(D) RISK FACTORS

 

The following is a brief discussion of those distinctive or special characteristics of the Company's operations and industry that may have a material impact on, or constitute risk factors in respect of, the Company's future financial performance.

 

COVID-19, Ukraine and Inflation Risks Related to our Business

 

Government efforts to control the effect and spread of the COVID-19 virus have had and will have a disruptive effect on different aspects of our business.

 

The jurisdictions in which we conduct our business have imposed mandates and regulations or suggested measures to counter the spread of the COVID-19 virus and control the level of the pandemic within its population and the economic activities of their respective economies. These collectively have changed over the course of the pandemic and are expected to continue to evolve in response to the changing nature of the pandemic and the population and economic response to the virus and the many different measures prompted by the pandemic.  The Company has been affected in a number of ways, such as the way in which it operates its headquarters operations, it deals with its scientists and their activities, and planning for and carrying out clinical trials, all of which have experienced some short-term disruption and may suffer long-term changes in the way we will do business.  Actions such as government lock downs have slowed or, in some cases, temporarily stopped research and development activities and clinical trials. Various safety protocols for personal interactions may hamper research and development activities.  To date, since we are mostly focused on the activities related to research and development, we have not experienced the larger adverse economics of a slowed economy; however, we do expect that time lines for our research and development, clinical trials, regulatory approvals and bringing our products to market will cause our operational costs to be greater than anticipated in this current fiscal year and going forward. The financial effect will be that our development expenses will increase and we will have to obtain additional capital funding. Any required additional equity funding will be dilutive to the equity of our investors and debt financing will have restrictive covenants that could adversely affect our business plans and operational objectives.  Any further funding that we may need may not be available or even if available it may not be on terms that are acceptable to the Company.

 

 4 

 

In addition to government efforts relating to the COVID-19 pandemic, the institutions that we work with have their own limits and procedures that will influence or limit our ability to conduct research and development and the conduct of clinical trials.

 

In addition to the government mandates for controlling the many different health and economic effects of the COVID-19 virus and pandemic, individual institutions with which we work, such as hospitals, laboratories and educational institutions have taken actions that will disrupt the progress of our business plans for the Company and our individual subsidiaries. For example, as hospitals cope with the need to care for COVID-19 virus patients, they have limited access or put in abeyance access for many of their other non-emergency activities such as research and continuing or commencing clinical trials.  Most educational institutions and many laboratories curtailed or limited access to their facilities in the first half of the 2020 year and are still working out how they will operate going forward; we are expecting that going forward there will be strict limitations on access to these institutions and facilities for our researchers and research partners.  Overall, changes in the way our development activities can be conducted will result in delays in our conducting research activities, carrying out clinical trials and making regulatory submissions. As a consequence, we anticipate our costs will increase. In some instances, we may have to shelve or even terminate activities, losing the value of a potential valuable asset, not recovering our investment, breaching our licenses and research related agreements, and suffering a diminution of corporate value and investor interest.  In many respects, there is great uncertainty in the general effects resulting from the governmental and private response to the pandemic, and only the passage of time will reveal its full effects.

 

The Company expects that the COVID-19 pandemic will have general economic consequences that will have an effect on the Company.

 

The response of the governments imposing a lock down, the high unemployment, certain industries being especially hard hit and the public response as the economy opens up will undoubtedly have wide reaching effects on the economy.  It is possible that the ultimate effect could be a recession or even greater economic dislocation.  A reduced economy may result in a limitation on companies such as ours in raising capital when necessary, in the amounts of capital needed and available, and the terms that are offered that will be acceptable to the Company.  Also, there may be a decline in the overall value of the securities market that could reduce the value of the Company or limit the ability of our investors to sell their ordinary shares.  Investors should consider general economic trends and issues resulting or may result from the pandemic when they decide to transact in our securities.

 

The Company expects any impact of Ukrainian conflict to be general and not specific in terms of its operations.

 

Currently, we believe that the conflict between Ukraine and Russia does not have any direct impact on our operations, financial condition or financial reporting. We believe the conflict will have only a general impact on our operations in the same manner as it is having a general impact on all businesses that have their operations in North America and Western Europe resulting from international sanction and embargo regulations, possible shortages of goods and goods incorporating parts that may be supplied from the Ukraine or Russia, supply chain challenges, and the international and US domestic inflationary results of the conflict and government spending for and funding of our country’s response. As our operations are related only to drug development, we do not believe we will be targeted for cyber-attacks. We have no operations in the countries directly involved in the conflict or are specifically impacted by any of the sanctions and embargoes. We do not believe that the conflict will have any impact on our internal control over financial reporting or any of our other disclosure obligations. Other than general securities market trends, we do not have reason to believe that investors will evaluate the Company as having special risks or exposures related to the Ukrainian conflict.

 

The impact of changing economic conditions, including the effects of inflation, may adversely affect our business, financial condition, and results of operations.

 

The Company believes that inflation will have a general impact on the business in line with overall price increases, increases in the cost of borrowing, and operating in an inflationary economy. We expect that the government efforts to control the rate of inflation will have an impact on the Company through increased costs of operations and financing our business. A weakening of the economy in the United States, Canada, or Europe or of the global economy, including the more limited availability of credit, economic uncertainty, inflation, financial turmoil affecting the banking system or financial markets, increased unemployment rates, and other adverse economic or market conditions may adversely impact our business and operating results. We cannot predict the timing, strength, or duration of any inflationary period or economic slowdown or its ultimate impact on the Company. If the conditions in the general economy significantly deviate from present levels and continue to deteriorate, our business, financial condition, and results of operations could be adversely affected.

 

 5 

 

Risks Related to our Business

 

We have a history of operating losses and may never achieve profitability in the future.

 

Historically, we have generated only a limited amount of business income, notwithstanding a highly valued asset distribution to our shareholders of the Company share ownership of Biohaven.

 

Our objective is to enable research and development so as to create early- to mid-stage, first- and best-in-class therapies for a variety of cancers, by providing funding, strategic business and clinical counsel, and shared services, with the goal of creating viable products that may be monetized through licensing, manufacturing and distribution or outright sale. Our principal activities are engaging in research and development to identify and validate new drug targets that could become marketed drugs in the future. For this, we will require significant financial resources without any income, and we expect to continue incurring operating losses for the foreseeable future.

 

Our ability to generate revenue in the future or achieve profitable operations is largely dependent upon our ability to attract and maintain experienced management and know-how to develop new drug candidates and to partner with major pharmaceutical companies to successfully commercialize any successful drug candidates. It takes many years and significant financial resources to successfully develop pre-clinical or early clinical drug candidates into marketable drugs, and we cannot assure you that we will be able to achieve these objectives. Although, we were successful in achieving significant value growth in an investment made in Biohaven, which resulted in the distribution of Biohaven shares as an asset dividend to our shareholders with a then market value of approximately $153 million in fiscal 2018, we cannot say that we will be able to achieve any similar success in our future business activities.

 

We are in the pharmaceutical development business and will be subject to all of the risks of a pharmaceutical development business.

 

Our business must be evaluated in light of the problems, delays, uncertainties and complications encountered in connection with establishing and carrying on a pharmaceutical research and development business.

 

There is a possibility that only a few or none of our drug candidates that are currently and may be under development in future will be found to be safe and effective, will be able to receive necessary regulatory approvals in order to commercialized, or will be commercially viable. Any failure to successfully develop and obtain regulatory approval for products would have a material adverse effect on our business, financial condition and results of operations.

 

Rapidly changing medical technology within the life sciences could make the product candidates that we are developing obsolete or less attractive to pursue.

 

The medical industry is characterized by rapid and significant medical technological and therapy changes, frequent new product candidates and product introductions and enhancements and evolving industry standards. Our future success will depend on our ability to continually develop and then improve the product candidates that we design and to develop and introduce new product candidates that address the evolving needs of the physicians and patients on a timely and cost-effective basis. Any new product candidates and products developed by us may not be accepted in the intended markets. Our inability to gain market acceptance of new products could harm our future operating results.

 

 6 

 

Clinical trials for our potential product candidates will be expensive and will take a considerable amount of time, and the outcome of clinical trials are by their nature uncertain.

 

Before we can obtain regulatory approval for the commercial sale of any product candidate or attract major pharmaceutical companies to collaborate with the Company, we will be required to complete extensive clinical trials to demonstrate safety and efficacy. Clinical trials are very expensive and are difficult to design and implement. The clinical trial process also takes a long time and can often be subject to unexpected delays and unexpected results.

 

The timing of the commencement, continuation and completion of clinical trials have been, and may continue to be subject to significant delays relating to various causes, including:

 

our inability to manufacture or obtain sufficient quantities of materials for use in clinical trials;

 

delays due to the measures for COVID-19 pandemic containment and conduct of business;

 

delays arising from our collaborative partnerships;

 

delays in obtaining regulatory approvals to commence a study, or government intervention to suspend or terminate a study;

 

delays, suspension, or termination of the clinical trials due to the institutional review board or independent ethics board responsible for overseeing the study to protect research subjects at a particular study site;

 

delays in identifying and reaching agreement on acceptable terms with prospective clinical trial sites;

 

slower than expected rates of patient recruitment and enrollment;

 

uncertain dosing issues;

 

inability or unwillingness of medical investigators to follow our clinical protocols;

 

variability in the number and types of subjects available for each study and resulting difficulties in identifying and enrolling subjects who meet trial eligibility criteria;

 

scheduling conflicts with participating clinicians and clinical institutions;

 

difficulty in maintaining contact with subjects after treatment, which results in incomplete data;

 

unforeseen safety issues or side effects;

 

lack of efficacy during the clinical trials;

 

our reliance on clinical research organizations to conduct clinical trials, which may not conduct those trials with good clinical or laboratory practices; or

 

other regulatory delays.

 

 7 

 

We rely on third parties to manufacture our preclinical and clinical drug supplies, and we intend to rely on third parties to produce commercial supplies of any approved product candidate.

 

We have limited personnel with experience in manufacturing, and we do not own facilities for manufacturing our products and product candidates for the potential pivotal clinical studies and/or commercial manufacturing of our products and product candidates. We will depend on our collaboration partners and other third parties to manufacture and provide analytical services with respect to our most advanced product candidates.

 

If our product candidates are approved, then in order to produce the quantities necessary to meet anticipated market demand, we and our collaboration partners will need to secure sufficient manufacturing capacity with third-party manufacturers. If we and our collaboration partners are unable to produce our product candidates in sufficient quantities to meet the requirements for the launch of the product or to meet future demand, our revenues and gross margins could be adversely affected. To be successful, our product candidates must be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. We and our collaboration partners will regularly need to secure access to facilities to manufacture some of our product candidates commercially. All of this will require additional funds and inspection and approval by the Competent Authorities of the Member States of the European Economic Area (EEA), the United States Food and Drug Administration (FDA) and other regulatory authorities. If we and our collaboration partners are unable to establish and maintain a manufacturing capacity within our planned time and cost parameters, the development and sales of our products and product candidates as well as our business, results of operations and prospects, and the value of our shares could be adversely affected.

 

We and our collaboration partners may encounter problems with aspects of manufacturing our collaboration products and product candidates, including the following:

 

production yields;
   
quality control and assurance;
   
shortages of qualified personnel;
   
compliance with FDA and EEA regulations;
   
production costs; and
   
development of advanced manufacturing techniques and process controls.

 

We evaluate our options for clinical study supplies and commercial production of our product candidates on a regular basis, which may include use of third-party manufacturers, or entering into a manufacturing joint venture relationship with a third party. We are aware of only a limited number of companies on a worldwide basis that operate manufacturing facilities in which our product candidates can be manufactured under cGMP regulations, a requirement for all pharmaceutical products. We cannot be certain that we and our collaboration partners will be able to contract with any of these companies on acceptable terms, if at all, all of which could harm our business, results of operations and prospects, and the value of our shares.

 

In addition, we and our collaboration partners, as well as any third-party manufacturer, will be required to register such manufacturing facilities with the FDA (and have a U.S. agent for the facility, if outside the United States), the Competent Authorities of the Member States of the EEA, and other regulatory authorities. The facilities will be subject to inspections confirming compliance with the FDA, the Competent Authorities of the Member States of the EEAs, or other regulatory authority cGMPs requirements. We do not control the manufacturing process of our product candidates, and, other than with respect to our collaboration product candidates, we are dependent on our contract manufacturing partners for compliance with cGMP's regulations for manufacture of both active drug substances and finished drug products. If we or our collaboration partners or any third-party manufacturer fails to maintain regulatory compliance, our business, financial condition and results of operations may be harmed, and the FDA, the Competent Authorities of the Member States of the EEA, or other regulatory authorities can impose regulatory sanctions that range from a warning letter to withdrawal of approval to seeking product seizures, injunctions and, where appropriate, criminal prosecution.

 

 8 

 

The results of pre-clinical studies and initial clinical trials may not be predictive of future results, and our potential product candidates may not have favorable results in later trials or in the commercial setting.

 

Pre-clinical tests and Phase 1 and Phase 2 clinical trials are primarily designed to test safety, to study pharmacokinetics and pharmacodynamics and to understand the side effects of product candidates and explore efficacy at various doses and schedules. Success in pre-clinical or animal studies and early clinical trials does not ensure that later large-scale efficacy trials will be successful, nor does it predict final results; favorable results in early trials may not be repeated in later trials.

 

A number of companies in the life sciences industry have suffered significant setbacks in advanced clinical trials, even after positive results in earlier trials. Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. Negative or inconclusive results or adverse medical events during a clinical trial could cause a clinical trial to be delayed, repeated or terminated. In addition, failure to construct appropriate clinical trial protocols could result in the test or control group experiencing a disproportionate number of adverse events and could cause a clinical trial to be repeated or terminated.

 

There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical and post-approval trials.

 

We may face difficulty in enrolling patients in our clinical trials.

 

We may find it difficult to enroll patients in our clinical trials. The timing of our current and future clinical trials depends on the speed at which we can recruit patients to participate in testing our therapeutic candidates. If patients are unwilling to participate in our trial(s) because of negative publicity from adverse reactions or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting trials and obtaining regulatory approval of potential products may be delayed or prevented. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether. We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve sufficient diversity in a given trial in order to complete our clinical trials in a timely manner. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business.

 

The outcome of clinical trials is uncertain and our clinical trials may fail to demonstrate adequately the safety and efficacy of a particular therapeutic candidates, which would prevent or delay regulatory approval and commercialization.

 

There is a risk in any clinical trial that side effects from our therapeutic candidates will require a hold on, or termination of, our clinical program(s) or further adjustments to our clinical program(s) in order to progress our therapeutic candidates. We will need to demonstrate that the therapeutic candidates are safe, pure and potent for use in each target indication. The therapeutic candidate must demonstrate an acceptable risk versus benefit profile in its intended patient population and for its intended use. The risk/benefit profile required for product licensure will vary depending on these factors.

 

Our success will be dependent upon our corporate collaborations with third parties in connection with services we will need for the development, marketing and commercialization of our products.

 

The success of our business will be largely dependent on our ability to enter into corporate collaborations regarding the development, clinical testing, regulatory approval and commercialization of our potential product candidates. We may not be able to find collaborative partners to support the future development, marketing and commercialization of our products, which may require us to undertake research and development and/or commercialization activities ourselves and may result in a material adverse effect on our business, financial condition, prospects and results of operations.

 

Even if we are able to find new collaborative partners, our success is highly dependent upon the performance of these new corporate collaborators. The amount and timing of resources to be devoted to activities by future corporate collaborators, if any, are not within our direct control and, as a result, we cannot assure you that any future corporate collaborators will commit sufficient resources to our research and development projects or the commercialization of our potential product candidates. Any future corporate collaborators might not perform its obligations as expected and might pursue existing or other development-stage products or alternative technologies in preference to those being developed in collaboration with us, or may terminate particular development programs, or the agreement governing such development programs.

 

 9 

 

In addition, if any future collaborators fail to comply with applicable regulatory requirements, the FDA, the European Medicines Agency ("EMA"), the Therapeutic Products Directorate of Canada ("TPD") or other authorities could take enforcement action that could jeopardize our ability to develop and commercialize our potential product candidates. Despite our best efforts to limit them, disputes may arise with respect to ownership of technology developed under any such corporate collaboration.

 

We will rely on proprietary technology, the protection of which can be unpredictable and costly.

 

Our success will depend in part upon our ability to obtain patent protection or patent licenses for our future technology and products. Obtaining patent protection or patent licenses can be costly and the outcome of any application for patent protection and patent licenses can be unpredictable. In addition, any breach of confidentiality by a third party by premature disclosure may preclude us from obtaining appropriate patent protection, thereby affecting the development and commercial value of our technology and products.

 

Some of our future products may rely on licenses of proprietary technology owned by third parties and we may not be able to maintain these licenses on favorable terms.

 

The manufacture and sale of some of the products we hope to develop may involve the use of processes, products, or information, the rights to which are owned by third parties. Such licenses frequently provide for limited periods of exclusivity that may be extended only with the consent of the licensor. If licenses or other rights related to the use of such processes, products or information are crucial for marketing purposes, and we are not able to obtain them on favorable terms, or at all, the commercial value of our products will be significantly impaired. If we experience delays in developing our products and extensions are not granted on any or all of such licenses, our ability to realize the benefits of our efforts may be limited.

 

We will have future capital needs, and there are uncertainties as to our ability to raise additional funding.

 

Our current cash resources will not cover all of our operational costs and the needs of our subsidiaries to progress towards clinical trials.  Additional capital will be needed to test product candidate in human trials, obtain regulatory approvals and ultimately to commercialize such product candidates.

 

In addition, our future cash requirements may vary materially from those now expected. For example, our future capital requirements may increase if:

 

we experience scientific progress sooner than expected in our future discovery, research and development projects, if we expand the magnitude and scope of these activities, or if we modify our focus as a result of our discoveries;

 

we experience setbacks in our progress with pre-clinical studies and clinical trials are delayed;

 

we experience delays or unexpected increased costs in connection with obtaining regulatory approvals, particularly in light of the current inflationary environment;

 

we are required to perform additional pre-clinical studies and clinical trials;

 

we experience unexpected or increased costs relating to preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; or

 

we elect to develop, acquire or license new technologies and products.

 

If sufficient capital is not available, we may be required to delay, reduce the scope of, eliminate or divest of one or more of our research or development projects, any of which could have a material adverse effect on our business, financial condition, prospects or results of operations.

 

 10 

 

One of our subsidiaries, iOx Therapeutics Ltd, which is shortly going to start clinical stage trials, has an agreement with University of Oxford under which some clinical trial costs are to be undertaken by the University of Oxford. This will reduce some of our related immediate cash requirements. iOx Therapeutics is also party to a Horizon 2020 grant consortium in which the EU partially funds the development work including human testing of a second product.  The Company will need a license and additional funding if it wishes to pursue this product further.

 

We may not be able to successfully identify, consummate or integrate acquisitions or to successfully manage the impacts of such transactions on our operations.

 

Part of our business strategy includes pursuing synergistic acquisitions. We have expanded, and plan to continue to expand, our business by making strategic acquisitions and regularly seeking suitable acquisition targets to enhance our growth. Material acquisitions, dispositions and other strategic transactions involve a number of risks, including: (i) the potential disruption of our ongoing business; (ii) the distraction of management away from the ongoing oversight of our existing business activities; (iii) finding equity funding and incurring additional indebtedness; (iv) issuing additional equity which may have a dilutive effect on the capital of the Company, (v) the anticipated benefits and cost savings of those transactions not being realized fully, or at all, or taking longer to realize than anticipated; (vi) an increase in the scope and complexity of our operations; and (vii) the loss or reduction of control over certain of our assets.

 

The pursuit of acquisitions may pose certain risks to us. We may not be able to identify acquisition candidates that fit our criteria for growth and profitability. Even if we are able to identify such candidates, we may not be able to acquire them on terms or financing satisfactory to us. We will incur expenses and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions.

 

We will be subject to risks associated with doing business globally.

 

As a pharmaceutical research and development company, our operations are likely to expand in the European Union and many other developed countries worldwide, we will be subject to political, economic, operational, legal, regulatory and other risks that are inherent in conducting business globally. These risks include foreign exchange fluctuations, exchange controls, capital controls, new laws or regulations or changes in the interpretation or enforcement of existing laws or regulations, political instability, macroeconomic changes, including recessions and inflationary or deflationary pressures, increases in prevailing interest rates by central banks or financial services companies, economic uncertainty, which may adversely affect our research and development, reduce the demand for our potential products and reduce the prices that our potential customers will be willing to pay for our products, import or export restrictions, tariff increases, price controls, nationalization and expropriation, changes in taxation, diminished or insufficient protection of intellectual property, lack of access to impartial court systems, violations of law, including the U.S. Foreign Corrupt Practices Act and the United Kingdom (“U.K.”) Bribery Act, disruption or destruction of operations or changes to the Company's business position, regardless of cause, including pandemic, war, terrorism, riot, civil insurrection, social unrest, strikes and natural or man-made disasters, including famine, flood, fire, earthquake, storm or disease. The impact of any of these developments or events, either individually or cumulatively, could have a material adverse effect on our business, financial condition and results of operations.

 

We may face exposure to adverse movements in foreign currency exchange rates while completing international clinical trials and when our products will be commercialized.

 

We intend to generate revenue and expenses internationally that are likely to be primarily denominated in U.S., Euros and U.K. pounds sterling. Our intended international business will be subject to risks typical of an international business including, but not limited to, differing tax structures, a myriad of regulations and restrictions, and general foreign exchange rate volatility. A decrease in the value of such foreign currencies relative to the United States dollar could result in losses in revenues from currency exchange rate fluctuations. Conversely, an increase in the value of such foreign currencies relative to the United States dollar could negatively impact our operating expenses. To date, we have not hedged against risks associated with foreign exchange rate exposure. We cannot be sure that any hedging techniques we may implement in the future will be successful or that our business, results of operations, financial condition and cash flows will not be materially adversely affected by exchange rate fluctuations.

 

 11 

 

The loss of key personnel could have an adverse effect on our business.

 

We are highly dependent upon the efforts of our senior management. The loss of the services of one or more members of senior management and directors could have a material adverse effect on us as a small company with a streamlined management structure, the departure of any key person could have a significant impact and would be potentially disruptive to our business until such time as a suitable replacement is hired. We do not carry any key person insurance on our senior management.

 

The U.K.’s withdrawal from the EU, commonly referred to as Brexit, may have a negative effect on global economic conditions, financial markets and our business.

 

Brexit has created significant uncertainty concerning the future relationship between the U.K. and the EU. From a regulatory perspective, there is uncertainty about which laws and regulations will apply. A significant portion of the regulatory framework in the U.K. is derived from EU laws. However, it is unclear which EU laws the U.K. will decide to replace or replicate in connection with its withdrawal from the EU. In particular, the regulatory regime applicable to our operations, including with respect to the approval of our product candidates, may change, potentially significantly, and the impact on the process for obtaining or maintaining marketing authorization for pharmaceutical products manufactured or sold in the U.K. is otherwise unknown.

 

A basic requirement related to the grant of a marketing authorization for a medicinal product in the EU is the requirement that the applicant be established in the EU. Following withdrawal of the U.K. from the EU, marketing authorizations previously granted to applicants established in the U.K. through the centralized, mutual recognition or decentralized procedures may no longer be valid. Moreover, there is a risk that the scope of a marketing authorization for a medicinal product granted by the EU pursuant to the centralized procedure, or by the competent authorities of other EU member states through the decentralized or mutual recognition procedures, would not encompass the U.K. In that circumstance, a separate authorization granted by the U.K. competent authorities would be required to place medicinal products on the U.K. market.

 

In addition, the laws and regulations that will apply after the U.K. withdrawal from the EU may have implications for manufacturing sites that hold certifications issued by the U.K. competent authorities. Our ability to rely on these manufacturing sites for products intended for the EU market will depend on the post-withdrawal terms of the authorizing bodies and, potentially, on the ability to obtain relevant exemptions under EU law to supply the EU market with products manufactured at U.K. certified sites. There is also the risk that if batch release and quality control testing sites for our products are located only in the U.K., manufacturers will need to use sites in other EU member states. All of these changes, if they occur, could increase our costs and otherwise adversely affect our business.

 

Brexit has also given rise to calls for the governments of other EU member states to consider withdrawal from the EU. These developments, or the perception that they could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, including by significantly reducing global market liquidity or restricting the ability of key market participants to operate in certain financial markets. In addition, currency exchange rates for the British pound and the Euro with respect to each other and to the U.S. dollar have already been negatively affected by Brexit. Should this foreign exchange volatility continue or be exacerbated by U.K.’s withdrawal from the EU, it could cause volatility in our quarterly financial results.

 

We have an office in Oxford, England which is focused on developing our products outside of the U.S. We do not know to what extent, or when, the U.K.’s withdrawal from the EU or any other future changes to membership in the EU will impact our business, particularly our ability to conduct international business from a base of operations in the U.K. The U.K. could lose the benefits of global trade agreements negotiated by the EU on behalf of its members, possibly resulting in increased trade barriers, which could make doing business in Europe more difficult and/or costly. Moreover, in the U.S., tariffs on certain U.S. imports have recently been imposed, and the EU and other countries have responded with retaliatory tariffs on certain U.S. exports. We cannot predict what effects these and potential additional tariffs will have on our business, including in the context of escalating global trade and political tensions. However, these tariffs and other trade restrictions, whether resulting from the U.K.’s withdrawal from the EU or otherwise, could increase our cost of doing business, reduce our gross margins or otherwise negatively impact our financial results.

 

 12 

 

Risks Related to Ownership of our Shares

 

The issuance of Ordinary Shares upon the exercise of our outstanding options will dilute the ownership interest of existing shareholders and increase the number of shares eligible for future resale.

 

As of March 31, 2022, we have 378,740 vested restricted stock units outstanding, which are subject to certain restrictions and 33,888 warrants, which expire in October 2022 if unexercised. Additionally, as of March 31, 2022, we have an aggregate of 1,151,400 options to acquire ordinary shares outstanding. Since that date, we have granted an additional 50,000 options to acquire ordinary shares and issued 2,425,999 ordinary shares in connection with the acquisition of Tarus Therapeutics and in connection with the Tarus Therapeutics acquisition we may issue additional ordinary shares. Additionally, we issued 94,508 ordinary shares to Lincoln Park Capital Fund L.L.C. in consideration for entering into the $30 million committed share purchase agreement, described more fully below, and 4,222 ordinary shares to a service provider for services rendered. On July 18, 2022, we completed the iOx Share Exchange Agreement under which we exchanged 1,070,000 ordinary shares for the remaining minority interest of 21.68% of iOx. We intend to use our capital stock to reward and encourage our employees through the use of options and similar equity grants and to pursue acquisitions. Each of these issuances will have a dilutive effect on the ownership interest of the company held by existing shareholders. The additional shares that may be or are outstanding may have an adverse effect on the share price of our ordinary shares, especially if the market perceives that the shares are issued at less than their current or anticipated fair value.

 

Our principal shareholders and senior management own a significant percentage of our shares and are able to exert significant control over matters subject to shareholder approval.

 

As of August 1, 2022, our senior management, board members, holders of 5% or more of our share capital and their respective affiliates beneficially own approximately 45.5% of our outstanding voting securities. As a result, these security holders have the ability either alone or voting together as a group to determine and/or significantly influence the outcome of matters submitted to our shareholders for approval, including the election and removal of board members, payment of dividends, amendments to our articles of association, including changes to our share capital or any mergers, demergers, liquidations and similar transactions. This may prevent or discourage unsolicited acquisition proposals or offers for our ordinary shares that our shareholders may feel are in their best interest as a shareholder. In addition, this group of shareholders generally has the ability to control our management and business affairs and direction of the Company. Such control and concentration of ownership may affect the market price of our shares and may discourage certain types of transactions, including those involving actual or potential change of control of us (whether through merger, consolidation, take-over or other business combination), which might otherwise have a positive effect on the market price of the shares.

 

We are currently a foreign private issuer, which may limit information about the Company and legal rights that you as an investor may desire and are different from those of a United States domestic reporting company.

 

We currently are a "foreign private issuer," as such term is defined in Rule 405 under the U.S. Securities Act 1933, and, therefore, we are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K with the United States Securities and Exchange Commission (“SEC”). In addition, the proxy rules and Section 16 reporting and short-swing profit recapture rules are not applicable to us. If we lose our status as a foreign private issuer by our election or otherwise and we become subject to the full reporting regime of the United States securities laws, we will be subject to additional reporting obligations and proxy solicitation obligations under the Exchange Act and our officers, directors and 10% shareholders would become subject to the short-swing profit rules. The imposition of these reporting rules would increase our costs and the obligations of those affected by the short-swing rules.

 

Complex United States taxation rules apply to holders of our ordinary shares if we have too much passive income compared to ordinary income and we are considered a PFIC.

 

Generally, if, for any taxable year, at least 75% of our gross income is passive income or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, we will be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than certain rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. We believe that we were a PFIC for our fiscal year ended March 31, 2018. In addition, we may have been a PFIC in prior years and may be a PFIC in the future. However, we do not believe we will be classified as PFIC for the fiscal year ended March 31, 2022 as a result of the acquisition of several immune-oncology related businesses as explained elsewhere in this report.

 

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If we are classified as a PFIC, our U.S. tax-resident shareholders could be liable for additional taxes and interest charges upon certain distributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of our ordinary shares (and such gain would generally be treated as ordinary income, rather than capital gain, for U.S. federal income tax purposes), whether or not we continue to be a PFIC. In addition, U.S. tax residents who own an interest in a PFIC are required to comply with certain reporting requirements.

 

A U.S. tax-resident shareholder may in certain circumstances be able to mitigate some of the adverse U.S. federal income tax consequences of us being classified as a PFIC if our ordinary shares qualify as "marketable stock" under the PFIC rules and the shareholder is eligible to make, and successfully makes, a "mark-to-market" election. A U.S. tax-resident shareholder could also mitigate some of the adverse U.S. federal income tax consequences by making a "qualified electing fund," or QEF, election, provided that we provide the information necessary for our U.S. tax-resident shareholders to make such an election, but we are not required to make this information available. However, we made the information available for the fiscal years 2018 and 2019 to those shareholders who requested it, but we have not yet determined whether we can or will do so for our fiscal years ending March 31, 2020, 2021 and 2022 or for any other fiscal year.

 

U.S. tax-resident shareholders are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to our ordinary shares if we should be classified as a PFIC.

 

U.S. shareholders may not be able to enforce civil liabilities against us.

 

We are a company incorporated under the laws of the British Virgin Islands. Many of our directors and executive officers are non-residents of the United States. Because a substantial portion of their assets and currently most of our assets are located outside the United States, it may be difficult for investors to effect service of process within the United States upon us or those persons.

 

Our corporate affairs will be governed by our Memorandum and Articles of Association, the BVI Business Companies Act (Revised Edition 2020, as amended) (the "BVI Act"), and the common law of the British Virgin Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under British Virgin Islands law are to a large extent governed by the BVI Act and common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands and from English common law, the decisions of whose courts are considered persuasive authority but are not binding on a court in the British Virgin Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law may not be as clearly established as they would be under statutes or judicial precedent in jurisdictions in the United States or Canada. In particular, the British Virgin Islands has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law. In addition, British Virgin Islands companies may or may not have standing to initiate a shareholder derivative action in a federal court of the United States.

 

The British Virgin Islands courts are also unlikely:

 

·to recognize or enforce against us judgments of U.S. courts based on certain civil liability provisions of U.S. securities laws; and

 

·to impose liabilities against us, in original actions brought in the British Virgin Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

 

There is no statutory recognition in the British Virgin Islands of judgments obtained in the United States.

 

We have been advised by counsel as to British Virgin Islands law, that (i) they are unaware of any proceedings that have been brought in the British Virgin Islands to enforce judgments of the U.S. courts or to impose liabilities based on the civil liability provisions of the U.S. federal or state securities laws; (ii) a final and conclusive judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines, penalties or similar charges, may be subject to enforcement proceedings as a debt in the courts of the British Virgin Islands under the common law doctrine of obligation; and (iii) because it is uncertain whether a British Virgin Islands court would determine that a judgment of a U.S. court based on the civil liability provisions of the U.S. federal or state securities laws is in the nature of a penalty, it is uncertain whether such a liability judgment would be enforceable in the British Virgin Islands.

 

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As a foreign private issuer and as permitted by the listing requirements of Nasdaq, we will rely on certain home country governance practices rather than the corporate governance requirements of Nasdaq.

 

We are a foreign private issuer, and in accordance with Nasdaq Listing Rule 5615(a)(3), we will comply with home country governance requirements and certain exemptions thereunder rather than complying with certain of the corporate governance requirements of Nasdaq.

 

British Virgin Islands law does not require that a majority of our board of directors consist of independent directors or that our board committees consist of entirely independent directors. Our board of directors and board committees, therefore, may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we will not be subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors must regularly have scheduled meetings at which only independent directors are present. Also, British Virgin Islands law does not require the board of directors to have a nominating committee or compensation committee, and we do not plan on having such committees.

 

We also are exempt from the Nasdaq listing rules so as to follow the quorum rules for shareholder meetings under British Virgin Islands law. We also are exempt from the Nasdaq listing rules so as to not be required to obtain shareholder approval for certain issuance of securities, shareholder approval of share option plans and change of control transactions under the Nasdaq Listing Rule 5635.

 

We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

 

We are a foreign private issuer. In order to maintain our current status as a foreign private issuer, a majority of our outstanding ordinary shares must continue to be either directly or indirectly owned of record by non-residents of the United States. If a majority of our outstanding ordinary shares are instead held by U.S. residents, then in order to continue to maintain our foreign private issuer status, (i) a majority of our executive officers or directors must not be U.S. citizens or residents, (ii) more than 50% of our assets must not be located in the United States, and (iii) our business must be administered principally outside the United States.

 

Losing our status as a foreign private issuer would require us to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We also will be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws, if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer, may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we would expect that a loss of foreign private issuer status will increase our legal and financial compliance costs and will make some activities highly time consuming and costly. We also expect that if we will be required to comply with the rules and regulations applicable to U.S. domestic issuers, it will make it more difficult and expensive for us to obtain director and officer liability insurance; we may therefore be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

 

ITEM 4 – INFORMATION ON THE COMPANY

 

(A) HISTORY AND DEVELOPMENT OF THE COMPANY

 

The Company was originally incorporated in Ontario, Canada in 1973. It was inactive until 1985. Between 1986 and 2009, it was engaged in variety of businesses including development of a new technology for the marine propulsion business, distribution and manufacture of a snack food, emerging technology-based businesses and natural resources involving diamond mining and oil & gas exploration. In 2010, the Company acquired an indirect interest in two drilling licenses in Israel, which were subsequently disposed of in June 2012. During the period 1986 to 2012, the Company went through several name changes ending with Bontan Corporation Inc. (“Bontan”).

 

In December 2012, the Company decided to change the focus of its business activities from oil and gas to biotechnology mainly due to the increasing difficulty of getting access to viable oil & gas projects and also due to the potentially more profitable business opportunities which existed in the biotechnology sector. On March 21, 2013, the Company signed a letter of intent with Portage Pharma Ltd, a biotech private limited company formed under the laws of the British Virgin Islands, to acquire Portage Pharma Ltd. through an exchange of shares. The transaction was completed on June 4, 2013.

 

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On July 5, 2013, the Company changed its name to Portage Biotech Inc. and moved its jurisdiction to the British Virgin Islands under a certificate of continuance issued by the Registrar of Corporate Affairs of BVI.

 

The Company now continues as a BVI business company incorporated under the BVI Act with its registered office located at Clarence Thomas Building, P.O. Box 4649, Road Town, Tortola, BVI. Its USA agent, Portage Development Services, is located at 61 Wilton Road, Westport, CT 06880.

 

The Company currently is a foreign private issuer under the United States Securities and Exchange Commission (“SEC”) rules. It is also a reporting issuer under the securities legislation of the provinces of Ontario and British Columbia. Its ordinary shares were listed on the Canadian Securities Exchange (“CSE”) under the symbol "PBT.U". On February 25, 2021, the ordinary shares of the Company began trading on the NASDAQ Capital Market (“NASDAQ”) under the symbol “PRTG”. As the principal market for the Company’s ordinary shares is NASDAQ, the Company voluntarily delisted from the CSE on April 23, 2021.

 

During August 2018, the Company reached a definitive agreement to acquire 100% of SalvaRx Limited in exchange for 805,070,067 common shares of the Company. The selling shareholders were SalvaRx Group plc (94.2%), James Mellon (2.9%) and Gregory Bailey (2.9%), the latter two persons being directors of the Company. The acquisition of SalvaRx is a "related party transaction" within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”). As a consequence, MI 61-101 required us to seek the approval of a majority of the disinterested shareholders to make this acquisition. On January 8, 2019, the majority of our minority shareholders approved the SalvaRx acquisition on the terms as set out in the signed definitive agreement. At the same time, the SalvaRx Group plc shareholders approved the definitive agreement, all required regulatory approvals were also obtained. The SalvaRx acquisition was completed on January 8, 2019, and the Company acquired 100% of the equity of SalvaRx Limited, which has full and partial ownership of six immune-oncology companies that are developing nine products.

 

On June 5, 2020, the Company completed a reverse-split of its ordinary shares at the rate of 100 old shares for one new share. The consolidation of shares proposal was approved by our shareholders at the annual general and special meeting of shareholders of the Company held on January 8, 2020 in which the proposal to the Board of Directors was authorized, in its sole discretion and by means of a resolution, to proceed with the proposed consolidation of the ordinary shares by a ratio of up to 120-for-1 basis, without further approval of shareholders.  The then issued and outstanding 1,098,770,697 ordinary shares were exchanged for 10,987,707 ordinary shares.

 

On June 16, 2020, the Company closed a non-brokered private placement (the "Offering") for gross proceeds of US$6.98 million through the issuance of 698,145 ordinary shares (the "Ordinary Shares") at a price of US$10.00 per Ordinary Share. The proceeds from the offering have supported our product pipeline development/execution while enabling new opportunistic value creation.

 

Portage filed a registration statement and prospectus with the Securities and Exchange Commission (“SEC”) under which it may sell ordinary shares, debt securities, warrants and units in one or more offerings from time to time, which became effective on March 8, 2021 (“Registration Statement” or “Prospectus”). The Registration Statement includes:

 

·a base prospectus, which covers the offering, issuance and sales by us of up to $200,000,000 in the aggregate of the securities identified above from time to time in one or more offerings; and
·a sales agreement prospectus covering the offer, issuance and sale by us in an “at the market” offering of up to a maximum aggregate offering price of $50,000,000 of our ordinary shares that may be issued and sold from time to time under sales agreement, or sales agreement, with Cantor Fitzgerald & Co., or Cantor Fitzgerald, the sales agent.

 

The specific terms of any securities to be offered pursuant to the base prospectus are specified in the sales agreement prospectus. The $50,000,000 of ordinary shares that may be offered, issued and sold under the sales agreement prospectus is included in the $200,000,000 of securities that may be offered, issued and sold by us under the base prospectus. The sales under the prospectus will be deemed to be made pursuant to an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933 (the Securities Act). Upon termination of the sales agreement, any portion of the $50,000,000 included in the sales agreement prospectus that is not sold pursuant to the sales agreement will be available for sale in other offerings pursuant to the base prospectus, and if no shares are sold under the sales agreement, the full $50,000,000 of securities may be sold in other offerings pursuant to the base prospectus. The offering was declared effective by the SEC on March 8, 2021.

 

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In April 2021, the Company commenced its “at the market” offering and through June 7, 2021, it had sold 90,888 ordinary shares, generating net proceeds of approximately $2.6 million, net of 3% commissions. The Company will use any proceeds raised in the “at the market” offering to fund its research and development activities and support operations. Upon termination of the sales agreement, any portion of the $50,000,000 included in the sales agreement prospectus that is not sold pursuant to the sales agreement will be available for sale in other offerings pursuant to the base prospectus.

 

On June 24, 2021, the Company completed a firm commitment underwritten public offering of 1,150,000 ordinary shares at a price of $23.00 per share. This offering was pursuant to the shelf Registration Statement and was a portion of the total $200,000,000 of securities registered. The Company incurred offering expenses of approximately $1.8 million, including approximately $1.6 million of management, underwriting and selling expenses. The Company will use any proceeds raised to fund its research and development activities and support operations.

 

On July 6, 2022, the Company acquired Tarus Therapeutics, a private company, developing adenosine receptor antagonists, in exchange for 2,425,999 ordinary shares and the assumption of $3 million of liabilities. Additionally, payments of up to $32,000,000 in ordinary shares or cash will be triggered upon achievement of future development and sales milestones. As a result of the transaction, Portage acquired four best-in-class assets targeting different aspects of the adenosine pathway, and the Company believes it is now in a unique position to evaluate the role of adenosine in cancer and other diseases.

 

Also, on July 6, 2022, the Company entered into a committed share purchase agreement for up to $30 million with Lincoln Park Capital Fund, LLC (“LPC”), a Chicago-based institutional investor, providing financing flexibility to the Company. Under the terms of the purchase agreement, Portage will have the right at its sole discretion, but not the obligation, to sell to LPC up to $30 million worth of its ordinary shares over the 36-month term of the agreement based on the market prices prevailing at the time of each sale to LPC, subject to certain conditions. In consideration for entering into the agreement, LPC was issued 94,508 ordinary shares on July 6, 2022 valued at $0.9 million. This commitment helps support the incremental development costs for the adenosine programs, and also provides significant financial flexibility for advancement of the Company’s existing pipeline of immunotherapy treatments.

 

(B) BUSINESS OVERVIEW

 

Nature of Operations and Overview

 

Portage is a clinical stage immune-oncology company focused on overcoming immune resistance. Including the Tarus Therapeutics acquisition, it currently manages 14 immuno-oncology assets at various development stages. We source, nurture and develop the creation of early- to mid-stage, first- and best-in-class therapies for a variety of cancers, by funding, implementing viable, cost effective product development strategies, clinical counsel/trial design, shared services, financial and project management to enable efficient, turnkey execution of commercially informed development plans. Our drug development pipeline portfolio encompasses products or technologies based on biology addressing known resistance pathways/mechanisms of current check point inhibitors with established scientific rationales, including intratumoral delivery, nanoparticles, liposomes, aptamers, and virus-like particles.

 

The Portage Approach

 

Our mission is to advance and grow a portfolio of innovative, early-stage oncology assets based on the latest scientific breakthroughs focused on overcoming immune resistance. Given these foundations, we manage capital allocation and risk as much as we oversee drug development. By focusing our efforts on translational medicine and pipeline diversification, we seek to mitigate overall exposure to many of the inherent risks of drug development. Our approach is guided by the following core elements:

 

  Portfolio diversification to mitigate risk and maximize optionality;
     
  Capital allocation based on risk-adjusted potential, including staged funding to pre-specified scientific and clinical results;
     
  Virtual infrastructure and key external relationships to maintain a lean operating base;
     
  Internal development capabilities complemented by external business development;
     
  Rigorous asset selection with disciplined ongoing evaluation; and 
     
  Focus on translational medicine and therapeutic candidates with in vivo single agent activity.

 

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We believe that our corporate structure results in enhanced operational efficiency and maintains an optimal cost structure by centralizing strategic/tactical support, shared services, including all research and development operations, capital allocation/ contribution, human resources, administrative services, and business development, as well as other services to each of our immuno-oncology platforms and assets currently in various development stages.  Our execution is achieved, in part, through our internal core team and utilizing our large network of experts, contract labs, and academic partners.

 

Our Science Strategy

 

Our goal is to develop immuno-oncology therapeutics that will dramatically improve the standard-of-care for patients with cancer. The key elements of our scientific strategy are to:

 

  Build a pipeline of differentiated oncology therapeutic candidates that are diversified by mechanism, therapeutic approach, modality, stage of development, leading to a variety of deal types that can be executed with partners;
     
  Expand our pipeline through research collaborations, business development, and internally designed programs;
     
  Continue to advance and evolve our pipeline with a goal of advancing one therapeutic candidate into the clinic and one program into IND-enabling studies each year; and
     
  Evaluate strategic opportunities to accelerate development timelines and maximize the value of our portfolio.

 

Our Pipeline

 

We have built a pipeline of targeted oncology and immuno-oncology therapeutic candidates and programs that are diversified by mechanism, therapeutic approach, modality, and stage of development. On an ongoing basis, we rigorously assess each of our programs using internally defined success criteria to justify continued investment and determine proper capital allocation. When certain programs do not meet our de-risking criteria for advancement, we look to monetize or terminate those programs and preserve our capital and resources to invest in programs with greater potential. As a result, our pipeline will continue to be dynamic.

 

The charts below sets forth, only as of July 1, 2022, the current state of our immuno-oncology therapeutic candidates and programs.  The chart contains forward looking information and projections based on management’s current estimates. The chart information is based on and subject to many assumptions, as determined by management and not verified by any independent third party, which may change or may not occur as modeled. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Before you make an investment decision regarding the company, you should make your own analysis of forward-looking statements and our projections about candidate and program development and results.

 

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Our Programs and Technology – Recent Developments

 

Invariant Natural Killer T-cells (iNKT cells) Platform

 

iNKT cells play an important role in anti-tumour immune responses and are a distinct class of T lymphocyte displaying a limited diversity of T-cell receptors. They recognize lipid antigens on the surface of tumour cells and produce large amounts of cytokines within hours of stimulation without the need for clonal expansion. Furthermore, iNKT cells activate multiple immune system components, including dendritic cells, T-cells and B-cells and stimulate an antigen-specific expansion of these cells. An operating subsidiary holds an exclusive license (with the right to sub-license) from the Ludwig Institute to use, research, develop and commercialize iNKT cell agonists, for the treatment of various forms of human disease, including cancer, under the Ludwig Institute’s intellectual property and know-how.

 

PORT-2 (IMM60)

 

PORT-2 is an iNKT cell activator/agonist formulated in a liposome with a 6-member carbon head structure that has been shown to activate both human and murine iNKT cells, resulting in dendritic cell (DC) maturation and the priming of Ag-specific T and B cells. In August 2021, we dosed the first patient in the IMP-MEL PORT-2 clinical trial, a Phase ½ dose escalation and randomized expansion trial. We have completed the first dose escalating cohort and currently anticipate completing the second cohort before the end of Fiscal 2022. Initial data suggests PORT-2 demonstrates strong safety when administered as a monotherapy and the Company is moving toward enrollment in the combination safety evaluation with Keytruda. The Company received regulatory approval from the Medicines and Healthcare products Regulatory Agency in the United Kingdom and Research Ethics Board at Oxford University in December 2020. The PORT-2 study has 6 arms and is expected to enroll up to 100 patients with melanoma or non-small cell lung carcinoma (NSCLC) in order to evaluate safety and efficacy.

 

In animal models, PORT-2 enhanced the frequency of tumour specific immune responses (Jukes 2016). iNKT cells are unique lymphocytes defined by their co-expression of surface markers associated with NK cells along with a T-cell antigen receptor (Schmieg 2005). They recognise amphipathic ligands such as glycolipids or phospholipids presented in the context of the non-polymorphic, MHC class I-like molecule CD1d. Activated iNKT cells rapidly produce IFN-gamma and IL-4 and induce dendritic cell (DC) maturation and IL-12 production (Cerundolo 2009, Salio 2009, Speak 2008, Fujii 2013).

 

Preliminary Phase 1 data received to date suggests PORT-2 was well tolerated when administered as a monotherapy, with no severe or serious related adverse events. All possibly related adverse events were mild to moderate and did not limit dosing. This has enabled a plan to accelerate opening of the combination safety cohort with Keytruda, in parallel with the ongoing high dose monotherapy cohort. Biomarker data presented at the ASCO meeting in 2022 confirmed the mechanism of action, i.e., both activation of the innate and adaptive arms of the immune system. One of the 2 patients treated at the 3mg/m2 dose had a mixed response with several tumors showing >50% reduction in diameter indicating single agent activity. Detailed data will be submitted to congresses later this year.

 

With the enhanced management team, efficient organization, and financial resources obtained in 2021, Portage has decided to expand the PORT-2 study beyond the U.K. to accelerate clinical studies while addressing COVID-19 headwinds. The Company has hired a global clinical research organization (CRO-Parexel) and is preparing for regulatory submissions in other countries. By expanding the regions and sites contributing to the study, Portage will be enabled to accelerate enrollment in the planned Phase 2 portions of this trial.

 

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PORT-3 (IMM65)

 

PORT-3 is a PLGA-nanoparticle formulation of IMM60 combined with a NY-ESO-1 peptide vaccine. The first patient was dosed in 2021 and is continuing to enroll patients in the PRECIOUS Phase 1 study of PORT-3 in patients with solid tumors. The Phase 1 portion of the trial is expected to enroll 15 patients while the randomized Phase 2 portion is expected to enroll an additional 42 patients. The trial was having difficulty identifying tumors that expressed NY-ESO-1, so it was amended to include all solid tumors regardless of expressing to facilitate assessment of safety. The Horizon 2020 grant support ended in April 2022. This platform is designed to demonstrate proof of concept. The combination product has the ability to prime and boost an anti-tumor immune response. Our patent position extends to other known tumor antigens, and we are prepared to rapidly launch other assets into the clinic if we see strong activity of this formulation. Notably, Portage received additional grant support from the Horizon 2020 program to explore next generation targeted nanoparticles. Preliminary safety data for repeat dosing of PORT-3, a nanoparticle co-formulation of PORT-2 and NY-ESO-1 immunogenic peptides developed for the treatment of NY-ESO-1 positive solid tumors, is also favorable.

 

Biodegradable PLGA-nanoparticles function as a delivery platform for immunomodulators and tumor antigens to induce a specific anti-tumor immune response. PLGA has minimal (systemic) toxicity and is used in various drug-carrying platforms as an encapsulating agent. Furthermore, co-formulating an iNKT inhibitor with a peptide vaccine in a particle has shown to be approximately 5 times more potent in killing cancer cells and generating an antigen specific CD8 T-cell response than giving the 2 agents individually (ref Dolen et al Oncoimmunology paper).

 

NY-ESO-1 is a cancer-testis antigen expressed during embryogenesis and in the testis, an immune privileged site. Furthermore, NY-ESO-1 expression is observed in several advanced cancers: lung (2-32%), melanoma (40%), bladder (32-35%), prostate (38%), ovarian (30%), esophageal (24-33%), and gastric cancers (8-12%). Clinical trials have shown the safety and tolerability of Good Manufacturing Practices (GMP)-grade NY-ESO-1 peptides in patients with cancer.

 

There is substantial opportunity for potential expansion in the PD-1 market with PORT-2 and PORT-3. 70-80% of patients do not respond or have a limited response to existing monotherapies, such as PD-1 checkpoint inhibitors. Combinations can improve this but often come at the cost of significant additional toxicity. The market is saturated with 14 approved PD-1 antibodies, and every major pharma company competes in this space. With iNKT agonists upregulating expression of PD-L1, patient populations who are typically not good candidates for PD-1 antibodies due to their lack of or low expression of PD-L1 may be able to utilize PORT 2 or PORT-3 to sensitize tumors to PD-1 agents. Extending the use of PD-1 antibodies represents a significant upside for one of these companies competing for market share, should they choose to partner with Portage.

 

Adenosine Receptor Antagonist Platform

 

A critical mechanism of cancer immune evasion is the generation of high levels of immunosuppressive adenosine within the tumor microenvironment (TME). Research suggests that the TME has significantly elevated concentrations (100-500 fold) of extracellular adenosine. Engagement with adenosine receptors A2A and A2B triggers a dampening effect on the immune response, suppressing effector cell function and stabilizing immunosuppressive regulatory cells. Over-expression of the A2A and A2B receptors leads to poor prognosis in multiple cancers, including prostate cancer, colorectal cancer and lung adenocarcinoma, driven by a reduced ability to generate an immune response against the tumor.

 

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These findings have made A2A and A2B high-priority targets for immunotherapeutic intervention. Portage is advancing four first-in-class adenosine inhibitors, which together represent a broad suite of adenosine-targeting approaches and will enable a comprehensive exploration of how targeting the adenosine pathway could improve response in multiple cancer and non-cancer indications:

 

PORT-6 (TT-10)

 

Adenosine receptor type 2A (A2A) inhibitor to treat A2A expressing solid tumors; PORT-6 is more potent, more durable and more selective than other clinical stage A2A agents.

 

PORT-7 (TT-4)

 

Adenosine receptor type 2B (A2B) inhibitor to treat solid tumors; PORT-7 has a very selective profile that focuses on A2B.

 

PORT-8 (TT-53)

 

Dual inhibitor of adenosine receptors 2A and 2B (A2A/A2B) to treat solid tumors; Portage has the ability to combine these 2 individually to titrate the levels of A2A and A2B or has the ability to give the dual inhibitor (PORT-08).

 

PORT-9 (TT-3)

 

An A2B inhibitor to treat colorectal and gastrointestinal cancers.

 

In preparation for entering clinical trials for the adenosine programs, Portage will conduct an examination of which solid tumor types have a high expression of receptors A2A and A2B and enrich for patients that have high expression and therefore have potential to benefit most from treatment. Portage has designed the TOAST-01 trial to evaluate the activity and safety of PORT-6 and PORT-7 alone and in combination. This trial will adapt over time and also include safety cohorts for these two agents with other immune activating agents including others from the Portage internal pipeline. Depending on the data, it can be expanded to evaluate either agent as monotherapy or a randomized comparison of either agent plus standard of care versus standard of care alone.

 

Other Programs in Development

 

Amphiphilic platform

 

DfuseRx SM, identifies combinations of anti cancer agents with amphiphilic diffuse enhancers that can passively enter into cancer cells.  These novel formulations with unique IP can be directly injected into any solid tumours, and the payloads will diffuse across the membrane and disperse throughout the tumor, while sparing healthy cells. Once inside the cells, the technology is diluted away and the payloads are stuck inside the cell. The payloads are able to disperse to areas of the tumor that do not have blood supply and hence oral or IV drugs will not reach.

 

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PORT-1 (INT230-6)

 

Intensity is developing INT230-6 (we refer to as PORT-1) as a fixed dose formulation of cisplatin, vinblastine and a penetration enhancer being developed by our affiliate, Intensity Therapeutics, Inc.  In animal models, the drug is able to cure the majority of the animals, by a combination of direct killing of the cancer, and also a CD4 and CD8 T-cell response (Bloom et al).  Newly released interim safety and survival data from the Phase ½ IT-01 study presented at ASCO 2021 demonstrated that both INT230-6 (PORT-1) monotherapy and combination therapy with immune checkpoint drugs are well-tolerated. The proven mechanism of action includes direct tumor-killing effects, as well as responses generated in non-injected tumors (abscopal responses) resulting from antigen presentation and immune activation. PORT-1 is the first of Portage’s assets that entered the clinic and has demonstrated proof-of-concept in humans. The specific rapid local killing in the normal 3-dimensional environment inside the body we believe is critical for robust antigen presentation and immune activation.  Animal studies also showed synergy when combined with checkpoint inhibition (Bender et al, Bloom et al). The product has been dosed into 80 subjects in a Phase 1 and Phase 2 trial. This has shown proof of concept that the vast majority of the drug stays in the tumor, and a dose equivalent to 3x the approved dose of the cytotoxic agent was very well tolerated without the typical chemo side effects.  The most common adverse event related to the treatment was pain at the injection site.  As a result, PORT-1 has launched 9 phase 2 studies including 7 clinical collaborations with the two largest immuno-oncology drug manufacturers, BMS and Merck in combination with their respective checkpoints in high unmet need medical types (pancreatic, gall bladder, sarcoma, non-microsatellite unstable colorectal, etc.).  Intensity has also launched a randomized Phase 2 study of INT230-6 vs no treatment in early stage breast cancer (the INVINCIBLE Trial) and has expanded its collaboration efforts with the INVINCIBLE study, conducted by the Ottawa Hospital and the Ontario Institute for Cancer Research. Intensity made three presentations on INT230-6 at the American Society of Clinical Oncology Annual Meeting (ASCO) in June 2022 with clinical data suggesting INT230-6 has potential to prolong survival when compared to historical results.  An innovative window of opportunity trial in pre-surgical early stage breast cancer confirmed that one treatment with PORT-1, can result in near complete necrosis of breast tumors with an influx of key immune cells to process the dying tumor. It was remarkably safe and well tolerated. As a result of exciting preliminary data, Intensity has secured fast track regulatory status from the FDA for triple negative breast cancer.

 

PORT-4, Nanolipogel (NLG) co-formulation Platform

 

Scientists are interested in novel ways to deliver multiple signals to the immune system in order to better activate an anti-tumor response.  We have been impressed with a platform from Yale University that allows different types of agents to be packaged together and will concentrate them in tumors.  We have licensed the platform for delivery of DNA aptamers and certain aptamer-small molecule-based combination products. In order to have multiple proprietary agents with known mechanisms of action, we have licensed rights to create DNA aptamers for immune-oncology targets and the first one developed is a proprietary PD1 aptamer, which has been placed in the NLG formulation.  Early testing has shown the formulation properly modulates PD1 signaling in vitro similar to a PD1 antibody I.  In non-clinical, in vivo experiments, the NLG-PD1 performed favorably compared to a mouse PD1 antibody.  The current level of funding is expected to support exploration of multiple PD1 based co-formulations with small molecules and other DNA aptamers. The Company has conducted further research with the technology licensed from Yale University to co-deliver a PD1 blocking signal with a small molecule vascular endothelial growth factor inhibitor. We are looking to accelerate preclinical development of our PORT-4 platform, which may potentially increase the potency and improve the safety of numerous anti-cancer drugs through co-delivery of combination treatments to the tumor.

 

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PORT-5, STING Agonist Platform

 

Proprietary immune priming and boosting technology (using a STING agonist delivered in a virus-like particle) have shown proof of concept in animal models and are beginning to progress the lead asset towards the clinic.  This platform offers multiple ways to target immune stimulation towards the cancer, as well as to co-deliver multiple signals in a single product.  Our researchers have developed a way to administer the product systemically and does not require direct tumor injections.  PORT-5 STING platform provides distinct advantages over chemical intratumoral approaches by offering a potent immune priming and boosting pathway within a virus-like particle (VLP) to enable convenient systemic administration and traffic to the correct targets. This technology preferentially targets dendritic cells, which is differentiated from other chemical STING approaches.  The Company is progressing this project towards clinical trials as well as developing next generation compounds.  Given that this is a simple way to boost the immune response to any target, we are also pursuing a project to boost immune response to COVID and other pathogens. To that end, the team has received grant funding to study this technology with any COVID-19 vaccine to evaluate if it is possible to boost the immune response for immunocompromised or elderly patients. During April 2022, AACR show-cased PORT-5 preclinical data at a late-breaking session that shows that one or more targeted immunotherapy agents could be packaged within a virus-like particle to increase potency, while enabling a selective immune activation. Given the progress to date, the Company is preparing the product to be able to file an IND.

 

Other Early-Stage R&D

 

We continue to evaluate and test new antibody targets.  Our interest here lies in the suppressive tumor micro-environment, and how we can down regulate or remove MDSC, TAMs, Tregs and other signals that impede the immune response from clearing cancer cells.  One new effort that we have initiated is collaborations with two leading artificial intelligence/machine learning companies in order to screen for agents with specific attributes in this area.  This may allow us a fast track an asset to the clinic with a re-purposed product.

 

·Portage is also initiating a collaboration with Dr. Robert Negrin and his team at Stanford University to evaluate the use of PORT-2 with iNKT cell therapies in animals. This work will evaluate if an agonist co-administered with expanded or transformed iNKT cells can further activate the transplanted and endogenous cells inside the patient. The Stanford collaboration will also study the impact iNKT agonists have on driving an adaptive immune response and correcting the suppressive tumor microenvironment.

 

·Portage entered into a Cooperative Research and Development Agreement (“CRADA”) with the U.S. National Cancer Institute (“NCI”). Collaboration will advance preclinical and potential clinical development of STING agonists and anti-RAGE agents for cancer vaccines. The Company and NCI will develop agents to enhance the efficacy of proprietary cancer vaccines and mouse model cancer vaccines developed by the NCI. After the Tarus acquisition, the company has amended the CRADA to include exploration of the different adenosine compounds.

 

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Our Business Model

 

Portage is a development organization that is structured to facilitate flexibility in financing and ease of partnering, licensing, and merger/acquisition of individual assets and or technology platforms. The structure consists of a holding company, Portage Biotech Inc. (Portage) and an operating company, Portage Development Services Inc. (“PDS”), which provide human resources and other services to each operating entity via shared services agreements. We believe that by centralizing these shared services, including all research and development operations, administrative services, and business development, and allocating employees and resources to each operating entity, we can (i) enhance operational efficiency, (ii) maintain an optimal cost structure, (iii) attract leading collaborators, and (iv) promote asset flexibility, as further described below.

 

  Enhance operational efficiency: We centralize all employees and services at our hub and allocate resources to spokes as needed.  We empower managers to access these resources and make program-level decisions in order to increase productivity and speed.  We believe this model enables a flexible organizational structure that can achieve scale through the addition of programs without increasing burdensome bureaucracy or redundant infrastructure.
     
  Maintain an optimal cost structure: We have a relatively small number of employees and have built a network of trusted external service providers, choosing to leverage their infrastructure and expertise as needed instead of embarking on capital-intensive lab, manufacturing, and equipment expenditures.  By reducing overhead costs, we believe we can increase the likelihood that we can generate a return on invested capital.
     
  Attract leading collaborators and licensors: Each of our subsidiaries has its own capitalization and governance, enabling us to keep licensors economically incentivized at the program level.  We believe that the experienced leadership team and shared services at our hub differentiate us from other potential licensees.
     
  Promote asset flexibility: Each operating subsidiary is a separate legal entity that holds the relevant intellectual property of its therapeutic candidates or programs and has none of its own employees, fixed assets, or overhead costs.  This allows us to efficiently pursue various subsidiary-level transactions, such as stock or asset sales, licensing transactions, strategic partnerships, co-development arrangements, or spin-outs.  It also provides us with the flexibility to terminate programs with minimal costs if results do not meet our de-risking criteria for advancement.

 

We incubate internal programs in our hub, leveraging PDS’s internal resources and network of service providers as needed to support our discovery, lead optimization, and IND-enabling efforts. When we decide to license from or collaborate with external parties, we establish distinct operating entities, to hold and advance those programs. This structure enables us to keep licensors economically incentivized at the program level through our ability to offer equity and access to potential cash milestones and royalty payments.

 

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Competition

 

Like all companies operating in the pharmaceutical or biotherapeutic development sector, we face competition from well-established large pharmaceutical companies as well as innovative new entrants.  Due to the prevalence of cancer there are many companies that operate in this space.  There are many companies that are focusing their efforts in this space. Some of the smaller entrants in this space with which we may compete with over time include Cullinan Oncology, LLC, which develops high value therapeutics geared towards dramatically improving the standard of care for those living with cancer, and PureTech Health, which develops medicines for diseases including intractable cancers, lymphatic and GI diseases, and immunotherapy companies such as Black Diamond Therapeutics, Repare Therapeutics, Nuvation Bio, Shattuck Labs, Jounce Therapeutics Company, Syndax Pharmaceuticals Inc. and Iteos Therapeutics S.A., among others.

 

Nevertheless, we believe our strategic intent is sufficiently differentiated in that we are focusing on multiple aspects of resistance to current immunotherapies based on our experience at BMS developing Opdivo and Yervoy. The way we target certain pathways is first in class or best in class.  We believe one of our strengths beyond the experience of our officers and directors is our keen ability to understand what good looks like from the eyes of a pharma partner.  We have a broad understanding of the landscape that will come to market by the time our products are commercialized, what the needs are of our potential acquirers, how to package up our programs, who to speak to and when in respect to licensing.  We pair that with a gated and focus execution plans that is laser focused on value added experiments, the nature of which are pre-vetted with our potential partners. We also believe that our extensive collaborations within the research facilities of leading, world class universities and institutes, such as the Department of Investigative Medicine at University of Oxford, Stanford University, The National Cancer Institute, the Institut Curie, the Institut National de la Santé et de la Recherche Médicale, Yale University, Radboud University, and the Ludwig Institute for Cancer Research, Inc., among others, gives us an advantage in our research capabilities, as well as enable us to access and develop innovative technologies.  On top of that our relationships in academia, the private sector and network of talent is what makes this engine turn.

 

(C) ORGANIZATIONAL STRUCTURE

 

We currently have six diverse oncology technology platforms, the products of which have established scientific rationales, including intra-tumoral, nanoparticles, liposomes, aptamers, cell penetrating peptides, and virus-like particles.

 

At March 31, 2022, we had six members on the Board of Directors – Dr. Gregory Bailey, Mr. Steven Mintz, Dr. Ian Walters, Mr. James Mellon, Ms. Linda Kozick and Mr. Mark Simon. In connection with the acquisition of Tarus Therapeutics, Dr. Robert Glassman joined our Board of Directors on July 1, 2022. Dr. Bailey is our Chairman of the Board of Directors, Dr. Walters is Chief Executive Officer (CEO), and Mr. Allan Shaw is Chief Financial Officer (CFO).

 

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A brief biodata of the key people in our organization is provided below.

 

Ian B. Walters, MD, MBA – Director and CEO

 

Ian B. Walters, M.D., M.B.A., is the Chief Executive Officer of Portage Biotech Inc. Over his 24-year career, he has demonstrated both leadership and expertise in drug development, including the advancement of multiple cancer compounds from research stages through approval.

 

Ian specializes in the evaluation, prioritization, and the innovative development of new therapies for the treatment of severe diseases. He has worked at PDL Biopharma, Inc., Millenium Pharmaceuticals, Inc., and Sorrento Therapeutics, Inc., leading corporate development, translational medicine, clinical development and medical affairs.

 

Ian spent seven years at Bristol-Myers Squibb, where he managed physicians overseeing the international development of more than eight oncology compounds (including Nivolimab (anti-PD-1), Ipilimumab (anti-CTLA-4), brivanib (anti VEGF/FGF), anti-IGF/IR, VEGFR2 biologic, Elotuzimab (antiCS1), as well as biomarker and companion diagnostic work. He was a core member of Bristol- Myers Squibb’s Strategic Transactions Group evaluating and executing licensing agreements, mergers and acquisitions, clinical collaborations, and the company’s immuno-oncology strategy.

 

Before entering the private sector, Ian was a lead investigator at the Rockefeller University and initiated advanced immunology research to understand the mechanism of action of several compounds. Ian received his MD from the Albert Einstein College of Medicine and an MBA from the Wharton School of The University of Pennsylvania. Ian is also a member of the board of directors of Enzo Biochem, Inc., a NASDAQ listed company, and BoKo Therapeutics. Ian is also the part-time CMO of Intensity Therapeutics, Inc.

 

Gregory Bailey MD – Chairman of the Board of Directors

 

Mr. Bailey is the Chair of the Company. Gregory Bailey is a co-founder and managing partner of MediqVentures. Previously he was a managing partner of Palantir Group, Inc., a merchant bank involved in a number of biotech company startups and financings. Palantir was also involved in acquiring intellectual property assets and founding companies around the IP.

 

Greg was the co-founder of Ascent Healthcare Solutions, VirnetX Inc. (VHC: AMEX), Portage Biotech Inc. (PTGEF: OTCBB) and DuraMedic Inc. He was the initial financier and an independent director of Medivation, Inc. (MDVN: NASDAQ), from 2005 to December 2012. Dr. Bailey served as the Managing Director and co-Head of Life Sciences at MDB Capital Group LLC from May 2004 to December 2006. Greg has served on the board of directors of multiple public companies. Current board positions include Biohaven, Agex, Manx Financial, and Portage.  He is also the CEO of Juvanescence. Mr. Bailey is also a Member of the Compensation Committee.

 

Greg practiced emergency medicine for 10 years before entering finance. He received his medical degree from the University of Western Ontario.

 

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Steven Mintz – Director

 

Steven Mintz C.A. graduated from University of Toronto in 1989 and went into public accounting, working at a large accounting firm from 1989 until 1992. He obtained his C.A. designation in June of 1992. In June 1992 he became employed by a boutique bankruptcy and insolvency firm where he was employed until January 1997. He obtained his Trustee in Bankruptcy license in 1995.

 

Since January 1997, he has been a self-employed financial consultant serving both private individuals and companies, as well as public companies in a variety of industries including mining, oil and gas, real estate and investment strategies. He is currently President of St. Germain Capital Corp., a private consulting and investment firm. He is also a principal and CFO of the Minkids Group, a family investment, and development company. Steven is currently a director of Pool Safe, Inc. (since December 2009), Everton Resources, Inc. (since May 2023) IM Cannabis (since April 2018, formerly Navasota Resources). Mr. Mintz is the Chair of the Audit Committee and a Member of the Compensation Committee.

 

Mr. James Mellon – Director

 

Jim Mellon is an author, entrepreneur and investor. He was one of the founders of Portage Biotech and is the co-author of five books, all written with a view toward identifying emerging thematic trends leading to investment opportunities. He is a founder and Executive Director of Agronomics Limited (LSE:ANIC), an investment vehicle for cellular agriculture and cultivated meat. He has a particular interest in longevity research and is currently the co-founder and chairman of anti-aging biopharma company Juvenescence. He is also a non-executive director of Condor Gold plc, the Executive Chairman of the Board of Manx Financial Group plc, Co-founder and Non-Executive Director of Bradda Head Lithium (LSE:BHL.L). He is also Co-founder and Chairman of Endurance RP. Mr. Mellon is a Member of the Audit and Nominating Committees.

 

Jim studied Philosophy, Politics & Economics at Oxford University.

 

Ms. Linda Kozick – Director

 

Linda M. Kozick has more than 25 years of experience in the biopharmaceutical industry, including 15 years of strategic commercial leadership in oncology with a focus in immuno-oncology. Prior to retiring she held leadership positions at Bristol Myers Squibb and was instrumental to Obdivo and Yervoy product management and portfolio strategy. In addition to Portage, she currently serves on the Board of Directors for RAPT Therapeutics, Inc. and Artiva Biotherapeutics. Ms. Kozick is the Chair of the Compensation Committee and a Member of the Nominating Committee.

 

Linda received her B.S. in Medical Technology and M.S. in Molecular Immunology from SUNY Upstate Medical Center, and her MBA from Chapman University.

 

Mr. Mark Simon – Director

 

Mark Simon has over 30 years advising experience for biotech and pharma companies as an investment banker and research analyst. He is the Co-founder and an advisor of Torreya Capital, LLC, a global investment bank serving companies in the life sciences industry. Before co-founding Torreya Capital, LLC, he was a Managing Director and the head of life sciences investment banking at Citigroup, where he covered global biopharmaceutical companies, and also served as a Managing Director and Senior Biotechnology Research Analyst at Robertson Stephens. Mark serves on the boards of Cabaletta Bio and several disease advocacy and philanthropic foundations. Mr. Simon is the Chair of the Nominating Committee and a Member of the Audit Committee.

 

Mark holds a B.A. in History from Columbia College and an MBA from Harvard Business School.

 

Robert Glassman, MD, PhD – Director

 

Dr. Robert Glassman brings more than 25 years of healthcare banking, venture investing and advisory experience, including as vice chair of Credit Suisse, Global Healthcare Banking and Venture Partner of Public Equity at OrbiMed. He previously served as clinical assistant professor at Weill Cornell Medicine and has also held academic positions at the Hospital University of Pennsylvania, Cornell and Rockefeller University. Robert holds an M.D. from Harvard Medical School and is a Board-certified hematologist-oncologist.

 

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Allan L. Shaw – CFO

 

Allan brings more than two decades of public company financial, operational, and strategic global business leadership. Allan Shaw serves as our Chief Financial Officer and is a five-time public company Chief Financial Officer with proven skills across multiple finance disciplines: corporate finance, capital markets and strategic transactions as well as a broad base of expertise in corporate governance and risk management. He structured, directed, negotiated and closed over $4 billion in public and private financings for several companies. Mr. Shaw has served on five public boards including chairing two audit committees, two compensation committees, and is currently involved with a portfolio of healthcare activities. Mr. Shaw is the founder and since 2005, has served as senior managing director, of Shaw Strategic Capital LLC, an international financial advisory firm focused on providing strategic financial counsel on a wide variety of issues such as general corporate finance, mergers and acquisitions, capital structuring, licensing and capital markets, and serving as financial consultant to private and public companies. Mr. Shaw was the Chief Financial Officer and Treasurer of Syndax Pharmaceuticals, Inc. from January 2016 to February 2017 and from December 2011 to September 2015 was Managing Director of Alvarez & Marsal LLC, a global professional services firm, where he led their biopharmaceutical consulting practice. Additional prior experience includes serving as the Chief Financial Officer of Serono S.A. from November 2002 to May 2004, NewLead Holdings Ltd from October 2009 to July 2011 and Viatel, Inc. from November 1994 to June 2002. He currently serves on the board of directors of Edith & Carl Marks JCH of Bensonhurst, a non-profit organization, and chairs their finance committee. Mr. Shaw is a certified public accountant in the State of New York as well as a Chartered Global Management Accountant (CGMA). Mr. Shaw received a B.S. from the State University of New York at Oswego College.

 

Robert Kramer, PhDChief Scientific Officer

 

Robert has 24 years of experience in the pharmaceutical industry and is the former Head of Oncology Discovery Research at both Bristol Myers Squibb and Janssen Pharmaceuticals, part of the Johnson & Johnson group of companies. He has been responsible for enabling the transition of 35 drugs from initial discovery into the clinic. Robert championed immunotherapy at Bristol Myers Squibb, which led, in 2009 to the acquisition of Medarex, Inc. and its portfolio of immune therapeutics that included Ipilimumab and Nivolumab. He received his PhD in pharmacology from the University of Vermont and undertook his post doctorate studies at the U.S. National Cancer Institute. Robert has also held an Assistant Professorship at the Harvard Medical School.

 

Steven InnaimoVice President of Project Management & Operations

 

Steven Innaimo is a seasoned research and development expert who brings more than 25 years of experience in drug development from the large pharma, biotech and contract research organization sectors. Prior to joining Portage in 2018, Steve spent two years at Covance as Executive Director and Head of the Global Project Management Office for Covance Clinical Development Services. He previously spent 23 years at Bristol Myers Squibb including as Senior Director of Oncology Project Management and Clinical Operations. During his time at Bristol Myers Squibb, Steve directly managed or provided development oversight for a number of immune-oncology assets, including Yervoy and Opdivo. He has driven multiple therapies to initial and post-marketing registrations globally. Steve began his research and development career as a molecular biologist for Targetech Inc. Steve holds a B.S. in Molecular Biology, an M.S. in Endocrinology from the University of Connecticut and a Project Management Certificate from Boston University.

 

Brian WileyChief Business Officer

 

Brian Wiley has nearly 30 years of experience in the biopharmaceutical industry, with over 25 years dedicated to oncology. His experience includes licensing deals, collaborations, M&A, both public and private financings and multiple product launches in oncology. He founded Boston BioConsulting, LLC, a consulting firm that specializes in corporate strategy, business development and pre-commercial planning for the biopharmaceutical industry. Additionally, he served as Chief Commercial Officer and Head of Business Development at NewLink Genetics and also served in various leadership and management roles at Celgene, Gloucester Pharmaceuticals, Millennium and Aventis.

 

Brian has a B.A. in Marketing from Pennsylvania State University.

 

(D) PROPERTY, PLANT AND EQUIPMENT

 

The company currently does not have any lease commitments.

 

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ITEM 4A – UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 5 – OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

(B)OPERATING RESULTS (All Amounts in 000’$)

 

The following discussion should be read in conjunction with the Audited Financial Statements of the Company and notes thereto for the year ended March 31, 2022, contained elsewhere in this report.

 

Results of Operations

 

Year ended March 31,  2022  2021  2020
   in 000’$  in 000’$  in 000’$
Operating expenses  $(15,588)  $(12,440)  $(5,978)
Change in fair value of warrant liability   852    (790)   24 
Share of (loss) income in associate accounted for using equity method   (62)   (490)   18 
(Loss) on equity issued at a discount       (1,256)    
(Loss) on extinguishment of notes payable       (223)   (33)
Gain on sale of marketable equity securities       72     
Gain on disposition of subsidiaries       412     
Foreign exchange transaction gain   24        6 
Interest (expense), net   (43)   (177)   (546)
Loss before provision for income taxes   (14,817)   (14,892)   (6,509)
Income tax expense   (4,352   (2,297)   (740)
Net loss   (19,169)   (17,189)   (7,249)
Other comprehensive income (loss)               
Net unrealized gain on investments           876 
Total comprehensive loss for year  $(19,169)  $(17,189)  $(6,373)
                
Comprehensive loss attributable to:               
Owners of the Company  $(16,870)  $(15,833)  $(4,457)
Non-controlling interest   (2,299)   (1,356)   (1,916)
Total comprehensive loss for year  $(19,169)  $(17,189)  $(6,373)

 

Overview

 

Portage is a clinical stage immune-oncology company focused on overcoming immune resistance. Including the Tarus Therapeutics acquisition, it currently manages 14 immuno-oncology assets at various development stages. We source, nurture and develop the creation of early- to mid-stage, first- and best-in-class therapies for a variety of cancers, by funding, implementing viable, cost effective product development strategies, clinical counsel/trial design, shared services, financial and project management to enable efficient, turnkey execution of commercially informed development plans. Our drug development pipeline portfolio encompasses products or technologies based on biology addressing known resistance pathways/mechanisms of current check point inhibitors with established scientific rationales, including intratumoral delivery, nanoparticles, liposomes, aptamers, and virus-like particles.

 

The Portage Approach

 

Our mission is to advance and grow a portfolio of innovative, early-stage oncology assets based on the latest scientific breakthroughs focused on overcoming immune resistance. Given these foundations, we manage capital allocation and risk as much as we oversee drug development. By focusing our efforts on translational medicine and pipeline diversification, we seek to mitigate overall exposure to many of the inherent risks of drug development.

 

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Our approach is guided by the following core elements:

 

  Portfolio diversification to mitigate risk and maximize optionality;
     
  Capital allocation based on risk-adjusted potential, including staged funding to pre-specified scientific and clinical results;
     
  Virtual infrastructure and key external relationships to maintain a lean operating base;
     
  Internal development capabilities complemented by external business development;
     
  Rigorous asset selection with disciplined ongoing evaluation; and 
     
  Focus on translational medicine and therapeutic candidates with in vivo single agent activity.

 

We believe that our corporate structure results in enhanced operational efficiency and maintains an optimal cost structure by centralizing strategic/tactical support, shared services, including all research and development operations, capital allocation/ contribution, human resources, administrative services, and business development, as well as other services to each of our immuno-oncology platforms and assets currently in various development stages.  Our execution is achieved, in part, through our internal core team and utilizing our large network of experts, contract labs, and academic partners.

 

The Company generally operates through wholly owned, partially owned and controlled subsidiary and affiliated companies, and believes it is not subject to the regulation of the Investment Company Act of 1940, as amended (“40 Act”), based on the definition of investment companies. Notwithstanding that, as the Company primarily operates within the biomedical industry as a research and development business, the Company believes that it is also able to take advantage of the non-exclusive safe harbor of Rule 3a-8 promulgated under the 40 Act so as not to be characterized as an investment company. The Company has adopted a capital preservation policy referenced in that rule.

 

Results of Operations for Fiscal 2022 Compared to Fiscal 2021

 

The Company generated a net loss and comprehensive loss of approximately $19.2 million during the year ended March 31, 2022 (“Fiscal 2022”), compared to a net loss and comprehensive loss of approximately $17.2 million during the year ended March 31, 2021 (“Fiscal 2021”), an increase in loss of $2.0 million year over year. Operating expenses, which include research and development and general and administrative expenses, were $15.6 million in Fiscal 2022, compared to $12.4 million in Fiscal 2021, an increase of $3.2 million, which is discussed more fully below. Operating expenses included $9.1 million of non-cash share-based compensation expense in Fiscal 2022, compared to $8.8 million in Fiscal 2021.

 

The Company’s other items of income and expense were substantially non-cash in nature and were approximately $0.8 million net income in Fiscal 2022, compared to approximately $2.5 million net loss in Fiscal 2021, a change in other items of income and expense of approximately $3.3 million, year over year. The primary reasons for the year over year difference in other items of income and expense was:

·the change in the fair value of outstanding warrants of $1.6 million, from a loss of $0.8 million in Fiscal 2021 to income of $0.8 million in Fiscal 2022, as calculated under the Black-Scholes model;
·the change in the Company’s share of an associate accounted for under the equity method of $0.4 million, from a loss of $0.5 million in Fiscal 2021 to a loss of $0.1 million in Fiscal 2022;
·the loss on equity issued at a discount with respect to the settlement of the SalvaRx notes of $1.3 million representing the difference between the fair value of the shares in Fiscal 2021 and the warrant exercise price;
·the loss on the extinguishment of the SalvaRx notes of $0.2 million in Fiscal 2021;
·a non-cash gain relating to the settlement of related liabilities on the disposition of Portage Pharmaceuticals Ltd. (“PPL”) of $0.4 million, of which $0.2 million was recorded in operations in Fiscal 2021; and
·the decrease in interest expense of $0.2 million due to the settlement of the SalvaRx Notes in the prior year period, which were not outstanding in the current year period.

 

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Additionally, the Company reflected a net deferred income tax expense of $4.4 million in Fiscal 2022, compared to a net deferred income tax expense of $2.3 million in Fiscal 2021. The principal reason for the change was a $5.5 million increase attributable to an increase in the U.K. income tax rate, net of the recognition of deferred tax assets previously unrecognized. This was further offset by a $1.1 million benefit due to the foreign currency effect on deferred tax liability balance settleable in Great British pounds. The Fiscal 2021 net deferred income tax expense was attributable to the foreign currency effect on the deferred tax liability balance settleable in Great British pounds, which was partially offset by recoverable research and development tax credits.

 

Other comprehensive loss was $17.7 million in Fiscal 2022, compared to $17.2 million in Fiscal 2021.

 

Results of Operations for Fiscal 2021 Compared to Fiscal 2020

 

The Company generated a net loss and comprehensive loss of $17.2 million in Fiscal 2021, compared to a net loss of $7.2 million and comprehensive loss of $6.4 million during the year ended March 31, 2020 (“Fiscal 2020”), an increase in loss of $10.0 million and $10.8 million, respectively, year over year. Operating expenses, which include research and development and general and administrative expenses, were $12.4 million in Fiscal 2021, compared to $6.0 million in Fiscal 2020, an increase of $6.4 million, which is discussed more fully below. Operating expenses included $8.8 million of non-cash share-based compensation expense in Fiscal 2021, compared to $2.1 million in Fiscal 2020.

 

The Company’s other items of income and expense were substantially non-operating in nature, and were $2.5 million net expense in Fiscal 2021, compared to $0.5 million net expense in Fiscal 2020. $2.0 million of the net expense in Fiscal 2021 was non-cash. Other items of income and expense included:

·a loss on equity issued at a discount of $1.3 million in Fiscal 2021, representing the difference between the market price and the contractual exercise price, relating to the settlement of the SalvaRx Notes and warrants;
·a loss from an associate accounted for under the equity method of $0.5 million, compared to a small gain in Fiscal 2020;
·a loss of $0.8 million representing the change in the fair value of the warrants issued with respect to the SalvaRx settlement;
·a non-cash gain relating to the settlement of related liabilities on the disposition of Portage Pharmaceuticals Ltd. (“PPL”) of $0.4 million, of which $0.2 million was recorded in operations in Fiscal 2021; and
·interest expense of $0.2 million is Fiscal 2021, compared to $0.6 million in Fiscal 2020 due to the settlement of the SalvaRx Notes. The Company also recorded a loss of $0.2 million on the early extinguishment of the SalvaRx Notes in Fiscal 2021.

 

Additionally, the Company reflected a net income tax provision of $2.3 million in Fiscal 2021, primarily due to the foreign currency effect on deferred tax liability, which was partially offset by recoverable research and development tax credits, compared to a net income tax provision of $0.7 million in Fiscal 2020, primarily attributable to a change in corporation tax rates in the U.K., which was partially offset by the foreign currency effect on deferred tax liability and recoverable research and development tax credits.

 

Other comprehensive loss was $17.2 million in Fiscal 2021, compared to $6.4 million in Fiscal 2020. Fiscal 2020 was positively impacted by net unrealized gain on investments of $0.8 million.

 

Operating Expenses

 

The overall analysis of the operating expenses (in 000’$) is as follows:

 

Years ended March 31,  2022  2021  2020
          
Research and development  $6,769   $7,312   $4,108 
General and administrative expenses   8,819    5,128    1,870 
Total operating expenses  $15,588   $12,440   $5,978 

 

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Research and Development Costs

 

Fiscal 2022

 

Research & development (“R&D”) costs decreased by approximately $0.5 million, or approximately 7%, from approximately $7.3 million in Fiscal 2021, to approximately $6.8 million in Fiscal 2022. Fiscal 2021 R&D costs were reduced by the receipt of a $0.6 million legal settlement in respect of some product development costs; accordingly, normalized expenses decreased $1.1 million year over year. The decrease was primarily attributable to non-cash share-based compensation expense associated with grants made under the Amended and Restated 2021 Equity Incentive Plan of $0.7 million and a decrease in iOx related share-based compensation expense of $0.5 million, a decrease of $0.5 million in other R&D costs relating to outside services and a decrease of $0.4 million in other R&D costs relating to services and storage, partially offset by a year over year increase in compensation of $1.0 million for employees / consultants involved in research and development activities.

 

Fiscal 2021

 

R&D costs increased by $3.2 million, or approximately 78%, from $4.1 million in Fiscal 2020, to $7.3 million in Fiscal 2021. The increase was attributable to non-cash share-based compensation expense associated with grants made under the 2021 Equity Incentive Plan of $5.1 million, partially offset by a decrease in iOx related share-based compensation expense of $0.8 million. Additionally, Fiscal 2021 was impacted by the receipt of a $0.6 million cash settlement for a legal dispute the Company had with a vendor while developing one of its products, as well as a general slow down in expenditures resulting from the pandemic.

 

Fiscal 2020

 

R&D costs more than doubled relative to Fiscal 2019, increasing by approximately $2.2 million to $4.1 million from Fiscal 2019 to Fiscal 2020. This increase is primarily attributable to iOx developmental activities associated with completing its IND enabling studies and regulatory preparations with the objective of IMM60 and IMM65 entering the clinic before the end of the calendar year, despite COVID-19 interruptions. Additional resources were also spent on achieving initial proof of concept with its NLG platform for delivering DNA aptamers and certain aptamer-based combination products by leveraging the Saugatuck/Oncommer technology platforms.

 

General and Administrative Expenses

 

Fiscal 2022

 

General and administrative (“G&A”) expenses increased by approximately $3.7 million, or approximately 73%, from approximately $5.1 million in Fiscal 2021, to approximately $8.8 million in Fiscal 2022. The principal reason for the increase was the $1.6 million of non-cash share-based compensation expense associated with the Company’s Amended and Restated 2021 Equity Incentive Plan, of which $2.4 million is associated with Directors’ compensation and $0.8 million is associated with the new grants issued in January and February 2022, which was partially offset by a decrease of $1.6 million associated with management compensation; and a decrease in iOx related share-based compensation expense of $0.1 million. Additionally, the Company incurred an increase of $1.0 million in professional fees relating to initiatives associated with a corporate restructuring and public relations / business development. Finally, D&O insurance premiums increased $1.4 million in the current year period due to market rate increases in the cost of coverage, partially offset by a decrease in office and general expenses of $0.2 million, attributable to investor related expense.

 

Fiscal 2021

 

General and administrative (“G&A”) expenses increased by $3.2 million, from $1.9 million in Fiscal 2020, to $5.1 million in Fiscal 2021. The principal reason for the increase was the $2.8 million of non-cash share-based compensation expense associated with the Company’s 2021 Equity Incentive Plan in Fiscal 2021. No share-based compensation expense under the 2021 Equity Incentive Plan was incurred in Fiscal 2020. Additionally, the Company incurred approximately $0.2 million relating to initiatives associated with a corporate restructuring and public relations / business development.

 

 33 

 

Fiscal 2020

 

G&A expenses increased by approximately $1.0 million to $1.87 million in Fiscal 2020 relative to $857,000 in Fiscal 2019.  The increase is attributable to the audit expenses as well as incurring a full year of operating costs related to the SalvaRx acquisition.

 

(B) LIQUIDITY AND CAPITAL RESOURCES

 

Capital Resources

 

Portage filed a shelf registration statement and prospectus with the Securities and Exchange Commission (“SEC”) under which it may sell ordinary shares, debt securities, warrants and units in one or more offerings from time to time, which became effective on March 8, 2021 (“Registration Statement” or “Prospectus”). The specific terms of any securities to be offered pursuant to the base prospectus are specified in the sales agreement prospectus. The Registration Statement currently includes:

 

·a base prospectus, which covers the offering, issuance and sales by us of up to $200,000,000 in the aggregate of the securities identified above from time to time in one or more offerings;
·a sales agreement supplemental prospectus covering the offer, issuance and sale by us in an “at the market” offering of up to a maximum aggregate offering price of $50,000,000 of our ordinary shares that may be issued and sold from time to time under sales agreement, or sales agreement, with Cantor Fitzgerald & Co., or Cantor Fitzgerald, the sales agent; and
·a prospectus supplement dated June 24, 2021, for the offer, issuance and sale by us of 1,150,000 ordinary shares for gross proceeds of approximately $26.5 million in a firm commitment underwriting with Cantor Fitzgerald.

 

The sales agreement with Cantor Fitzgerald permits the Company to sell in an at the market offering up to $50,000,000 of ordinary shares from time to time, the amount of which is included in the $200,000,000 of securities that may be offered, issued and sold by us under the base prospectus. The sales under the prospectus will be deemed to be made pursuant to an “at the market” offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933 (the Securities Act). Upon termination of the sales agreement, any portion of the $50,000,000 included in the sales agreement prospectus that is not sold pursuant to the sales agreement will be available for sale in other offerings pursuant to the base prospectus, and if no shares are sold under the sales agreement, the full $50,000,000 of securities may be sold in other offerings pursuant to the base prospectus.

 

During the quarter ended June 30, 2021, the Company commenced an “at the market” offering, under which it sold 90,888 shares generating gross proceeds of approximately $2.6 million ($2.5 million, net of commissions).

 

On June 24, 2021, the Company completed the sale of 1,150,000 ordinary shares, including the underwriters’ overallotment, at a price of $23.00 per share, which generated gross proceeds of approximately $26.5 million and net proceeds of approximately $25.0 million, and was settled June 28, 2021. Management believes the funds generated, along with existing cash and cash equivalents, will be sufficient to fund the Company’s research and development activities, as well as the expansion of its operating infrastructure and achievement of numerous developmental milestones.

 

On July 6, 2022 (the “Signing Date”), the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln”), pursuant to which the Company may require Lincoln to purchase ordinary shares having an aggregate value of up to $30 million over a period of 36 months. Pursuant to the Purchase Agreement, Lincoln will be obligated to purchase ordinary shares in three different scenarios as described below.

 

 34 

 

·Regular Purchase – At any time after the Closing Date (as defined below) and provided that the closing sale price of the ordinary shares is not less than $0.25 per share, from time to time on any business day selected by the Company (the “Purchase Date”), the Company shall have the right, but not the obligation, to require Lincoln to purchase up to 30,000 ordinary shares (the “Regular Purchase Amount”) at the Purchase Price (as defined below) per purchase notice (each such purchase, a “Regular Purchase”). Lincoln’s committed obligation under each Regular Purchase shall not exceed $1,500,000; provided, that the parties may mutually agree at any time to increase the dollar amount of any Regular Purchase on any Purchase Date above and beyond the forgoing amounts that Lincoln is committed to purchase. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to the lesser of: (i) the lowest sale price of the ordinary shares during the Purchase Date, and (ii) the average of the three (3) lowest closing sale prices of the ordinary shares during the ten (10) business days prior to the Purchase Date. The Company shall have the right to submit a Regular Purchase notice to Lincoln as often as every business day. “Closing Date” shall mean the date that customary conditions to closing have been satisfied, including that the Company’s shelf registration statement for the ordinary shares to be issued pursuant to the Purchase Agreement is effective and available for use and any listing application and/or exchange approvals, to the extent applicable, have been approved.

 

·Accelerated Purchase – In addition to Regular Purchases and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion may require Lincoln on each Purchase Date to purchase on the following business day (“Accelerated Purchase Date”) up to the lesser of (i) three (3) times the number of shares purchased pursuant to such Regular Purchase, and (ii) 25% of the trading volume on the Accelerated Purchase Date at a purchase price equal to the lesser of 97% of (i) the closing sale price on the Accelerated Purchase Date, and (ii) the Accelerated Purchase Date’s volume weighted average price (the “Accelerate Purchase Price”). The parties may mutually agree to increase the number of ordinary shares sold to Lincoln on any Accelerated Purchase Date at the Accelerated Purchase Price. The Company shall have the right in its sole discretion to set a minimum price threshold for each Accelerated Purchase in the notice provided with respect to such Accelerated Purchase and the Company may direct multiple Accelerated Purchases in a day; provided, that delivery of ordinary shares has been completed with respect to any prior Regular and Accelerated Purchases Lincoln has purchased.

 

·Tranche Purchase – In addition to Regular Purchases and Accelerated Purchases and provided that the closing price of the ordinary shares is not below $0.25, at any time beginning five (5) business days from the Closing Date, the Company shall have the option to require Lincoln to purchase up to $3,000,000 in separate purchases of up to $1,000,000 for each purchase (the “Tranche Purchases”, and with Regular Purchases and Accelerated Purchases, the “Committed Purchases”). The purchase price for each Tranche Purchase shall be equal to 90% of the Purchase Price. The Company may deliver notice to Lincoln for a Tranche Purchase so long as at least twenty (20) business days have passed since any Tranche Purchase was completed.

 

Upon execution of the Purchase Agreement, The Company issued to Lincoln 94,508 ordinary shares, representing a 3% commitment fee. The Company has the right to terminate the Purchase Agreement for any reason, effective upon one (1) business day prior written notice to Lincoln. Lincoln has no right to terminate the Purchase Agreement.

 

Committed Purchases shall be suspended if any of the following occur: (i) the shelf registration statement is not available for the sale of all of the ordinary shares issued pursuant to the Purchase Agreement for ten (10) consecutive trading days or for a total of thirty (30) trading days out of the preceding 365 days; (ii) the ordinary shares cease to be DTC authorized and participating in the D.W.A.C./F.A.S.T. systems; (iii) suspension of the ordinary shares from trading for one (1) trading day; (iv) any breach of the representations and warranties or covenants contained in any related agreements with Lincoln which has or which could have a material adverse effect on the Company, Lincoln or the value of the ordinary shares, subject to reasonable cure periods to be agreed upon for curable breaches of covenants; (v) if the Company is listed on a national exchange or market (excluding the OTC Markets, OTC Bulletin Board or comparable market), at any time prior to shareholder approval of the Purchase Agreement more than 19.99% of the Company’s aggregate ordinary shares, determined as of the Signing Date, would be issuable to Lincoln in violation of the principal securities exchange or market rules; (vi) if the Ordinary shares cease to be eligible for trading on the NASDAQ Capital Market, the Company’s principal market, and is not immediately thereafter trading on the NASDAQ Global Select Market, the NASDAQ Global Market, the NYSE, the NYSE American, or the OTC Markets; or (vii) the Company’s insolvency or the Company’s participation or threatened participation in insolvency or bankruptcy proceedings by or against the Company. The Committed Purchases may resume following the resolution of any of these events.

 

 35 

 

The Purchase Agreement does not impose any financial or business covenants on the Company and there are no limitations on the use of proceeds received by the Company from Lincoln. The Company may raise capital from other sources in its sole discretion; provided, however, that the Company shall not enter into any similar agreement for the issuance of variable priced equity-like securities until the three (3) year anniversary of the Signing Date, excluding, however, an At-The-Market (ATM) transaction with a registered broker-dealer.

 

In connection with the Purchase Agreement, the Company and Lincoln entered into a Registration Rights Agreement (the “Registration Rights Agreement”), dated July 6, 2022. Pursuant to the Registration Rights Agreement, the Company agreed, that within the time required under Rule 424(b) under the Securities Act, it will file with the SEC the Initial Prospectus Supplement to the Company’s shelf registration statement pursuant to Rule 424(b) for the purpose of registering for resale the ordinary shares to be issued to Lincoln under the Purchase Agreement. All reasonable expenses of the Company incurred through the registration of the ordinary shares under the Purchase Agreement shall be paid by the Company.

 

Liquidity

 

The accompanying consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern and that contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Accordingly, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might result from the outcome of this uncertainty.

 

As of March 31, 2022, the Company had cash and cash equivalents of approximately $23.4 million and total current liabilities of approximately $0.8 million (inclusive of approximately $0.03 million warrant liability settleable on a non-cash basis). For the year ended March 31, 2022, the Company is reporting a net loss of approximately $19.2 million and cash used in operating activities of approximately $6.8 million. As of June 30, 2022, the Company had approximately $21.0 million of cash and cash equivalents on hand.

 

During the quarter ended June 30, 2021, the Company made an “at the market” offering, under which it sold 90,888 shares generating gross proceeds of approximately $2.6 million ($2.5 million, net of commissions). On June 24, 2021, the Company completed a firm commitment underwritten public offering of 1,150,000 ordinary shares at a public offering price of $23.00 per share for gross proceeds of approximately $26.5 million and was settled June 28, 2021. The Company incurred aggregate offering expenses for the public offering of approximately $1.8 million, including approximately $1.6 million of management, underwriting and selling expenses. The Company believes it has working capital funds sufficient to fund operations through at least August 2023.

 

The Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. The losses result primarily from its conduct of research and development activities.

 

The Company historically has funded its operations principally from proceeds from issuances of equity and debt securities and would expect to enter the capital markets when additional funding is required.

 

Operating Cash Flow

 

During Fiscal 2022, the Company used cash of approximately $6.8 million to fund operating activities, which was provided by the Company’s existing cash and the “at the market” offering and public offering, described above.

 

During Fiscal 2021, the Company used cash of approximately $4.3 million to fund operating activities, which was funded by the Company’s existing cash and net proceeds from a private placement that closed in June 2020 of approximately $6.7 million.

 

During Fiscal 2020, the Company used cash of approximately $3.7 million to fund operating activities, which was met from the Company’s existing cash.

 

 36 

 

The Company’s continuing operations are dependent upon any one of:

 

1.    the development and identification of economically recoverable medical solutions;

2.    the ability of the Company to obtain the necessary financing to complete the research; or

3.    future profitable production from or proceeds from the disposition of intellectual property.

 

The Company has incurred substantial operating losses since inception due to significant research and development spending and corporate overhead and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2022, the Company had cash of approximately $23.4 million, working capital of approximately $24.0 million (approximately $24.1 million adjusted for the warrant liability settleable on a non-cash basis) and an accumulated deficit of approximately $55.0 million.  The Company has funded its operations from proceeds from the sale of equity and debt securities. The Company will require significant additional capital to make the investments it needs to execute its longer-term business plan. The Company’s ability to successfully raise sufficient funds through the sale of debt or equity securities when needed is subject to many risks and uncertainties and, even if it were successful, future equity issuances would result in dilution to its existing stockholders and any future debt securities may contain covenants that limit the Company’s operations or ability to enter into certain transactions.

 

On July 1, 2022, the Company, its wholly-owned subsidiary, Tarus Acquisition Inc., and Tarus Therapeutics, Inc., a Delaware Corporation advancing adenosine receptor agonists for the treatment of solid tumors, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). Under the structure of the Merger Agreement, Tarus Therapeutics, Inc. was ultimately merged into a wholly-owned subsidiary of the Company with the surviving entity renamed Tarus Therapeutics, LLC.

 

As consideration for Tarus, the Company issued to Tarus shareholders an aggregate of 2,425,999 ordinary shares of Portage, calculated on the basis of $18M divided by the 60-day Volume Weighted Average Price per share. The shares are unregistered and subject to lock-ups for terms ranging from six to twelve months. Additionally, payments of up to $32 million in cash or Portage ordinary shares would be triggered upon achievement of future development and sales milestones. As a result of the transaction:

 

·The Company also assumed $2M short-term debt held by Tarus and deferred license milestones obligations ($1M plus interest), for an aggregate of $3M in liabilities.

 

·Upon enrolling the first patient in a Phase 2 clinical trial, Portage will pay an additional one-time payment of $15M. Payment will be in the form of cash or PRTG stock (at the discretion of Portage).

 

 

 

 

 

 

 

 

 

 

 37 

 

On July 13, 2022, the Company entered into a commitment with Stimunity to provide €600,000 under a Convertible Note with a maturity date of September 1, 2023 (the “Maturity Date”). The Convertible Note provides for interest at 7% per annum. The Convertible Note is automatically converted upon Stimunity commencing a Series A subscription round for €20 million. If such Subscription round is completed prior to the Maturity Date, the Company will be entitled to convert the Convertible Note at the subscription share price less 15%. Additionally, if subscribers create a new category of shares with additional rights of less than €5 million (the “Minimum Raise”), the Company will have the right to convert the Convertible Note and historical shares owned into the new category of shares. In the event that Stimunity does not close a subscription prior to the Maturity Date or raises less than the Minimum Raise, the Company will have the right to convert at €363.00 per share or the raise price less 15%, whichever is lower. The Convertible Note is expected to be funded by September 1, 2022.

 

It is anticipated that such Convertible Note will be funded by existing cash and cash provided under the ELOC.

 

Investing Cash Flows

 

Fiscal 2022

 

During Fiscal 2022, the Company did not use any cash for investing activities.

 

Fiscal 2021

 

During Fiscal 2021, the Company used ($0.9 million) in investing activities. The Company invested $1.0 million in Stimunity, based upon the achievement of certain agreed milestones, which increased the Company’s interest in Stimunity to 44%, which was partially offset by $0.1 million proceeds from the sales of its remaining interest in Biohaven.

 

Fiscal 2020

 

During Fiscal 2020, there were no investing cash flow activities. Non-cash investing activities included Portage paid $1.3 million consideration through the issuance of 129,806 common shares to acquire 288,458 shares of the private company, Intensity. This transaction increased Portage’s ownership to 1,288,458 shares of Intensity (approximately 10.0% of the then outstanding shares of Intensity).

 

Financing Cash Flows

 

Fiscal 2022

 

During Fiscal 2022, the Company generated net cash from financing activities of $27.3 million, compared to $4.8 million during Fiscal 2021.

 

During the quarter ended June 30, 2021, the Company commenced an “at the market” offering, under which it sold 90,888 shares generating gross proceeds of approximately $2.6 million ($2.5 million, net of commissions). Further, the Company initiated an offering pursuant to the Prospectus. On June 24, 2021, the Company completed a firm commitment underwritten public offering of 1,150,000 ordinary shares at a public offering price of $23.00 per share for gross proceeds of approximately $26.5 million and was settled June 28, 2021. The Company incurred aggregate offering expenses for the public offering of approximately $1.8 million, including approximately $1.6 million of management, underwriting and selling expenses.

 

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On June 16, 2020, the Company completed a private placement offering of 698,145 restricted ordinary shares at a price of $10 per share for gross proceeds of $6.98 million to accredited investors. Directors of the Company subscribed for 215,000 shares for $2,150,000. The Company incurred offering costs of $248,000 in connection with the private placement.

 

Fiscal 2021

 

During Fiscal 2021, the Company generated cash from financing activities of $4.8 million. The Company raised net proceeds from a private placement of stock of $6.7 million, which was offset by the repayment of a $1.0 million advance from a related party and $1.0 million for the cash portion of the settlement of the SalvaRx notes.

 

Fiscal 2020

 

During Fiscal 2020, Portage redeemed $0.3 million of the SalvaRx notes and received a short-term advance of $1.0 million from its Chairman (see Item 7 (B), “Related Party Transactions”).

 

(C) RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

 

From May 23, 2012 to date, the Company through its operating subsidiaries is engaged in general research and development and clinical and pre-clinical studies as detailed under Item 4 (B) Business Overview of this report. Research and development expenses analysis and details are provided under Item 5 (A) of this report. All research and development expenses are expensed as they are incurred.

 

PPL's CPP platform is protected by two suits of intellectual property: (a) an exclusive license for all patents on Antennapedia -based cell permeable peptides for non-oncology use; and (b) international patents for proprietary human-derived cell penetrating peptide structures.

 

(D) TREND INFORMATION

 

There are no other trends, commitments, events or uncertainties presently known to management that are reasonably expected to have a material effect on the Company's business, financial condition or results of operation other than as disclosed elsewhere in this report (refer to the heading entitled "Risk Factors").

 

(E) OFF-BALANCE SHEET ARRANGEMENTS

 

At March 31, 2022 and 2021, the Company did not have any off-balance sheet arrangements, including any relationships with unconsolidated entities or financial partnership to enhance perceived liquidity.

 

(F) CONTRACTUAL OBLIGATIONS

 

None.

 

(G) SAFE HARBOUR

 

Not applicable.

 

 

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(H) HOME COUNTRY PRACTICE LETTER DISCLOSURE

 

We are incorporated under the BVI Act. Our ordinary shares are registered with the SEC and are listed on the Nasdaq Capital Market. As a result, our corporate governance framework is subject to laws of the British Virgin Islands, or BVI, the securities laws and regulations of the United States and the listing requirements of the Nasdaq Marketplace Rules.

 

Under Rule 5615 of the Nasdaq Marketplace Rules, a foreign private issuer may follow its home country practice in lieu of the requirements of the Nasdaq Marketplace Rules. We follow the exemptions provide under the Nasdaq Marketplace Rules as described below.

 

British Virgin Islands law does not require that a majority of our board of directors consist of independent directors or that our board committees consist of entirely independent directors. Our board of directors and board committees, therefore, may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we will not be subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors must regularly have scheduled meetings at which only independent directors are present. Also, British Virgin Islands law does not require the board of directors to have a nominating committee or compensation committee, but we do plan on having such committees.

 

We also are exempt from the Nasdaq listing rules so as to follow the quorum rules for shareholder meetings under British Virgin Islands law. We also are exempt from the Nasdaq listing rules so as to not be required to obtain shareholder approval for certain issuance of securities, shareholder approval of share option plans and change of control transactions under the Nasdaq Listing Rule 5635.

 

As a foreign private issuer, the Company is exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Securities Exchange Act of 1934. The Company solicits proxies in accordance with applicable rules and regulations in British Virgin Islands.

 

 

 

 

 

 

 

 

 

 

 

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ITEM 6 – DIRECTORS AND SENIOR MANAGEMENT

 

(A) DIRECTORS AND SENIOR MANAGEMENT

 

The following sets forth the names and province or state and country of residence of our directors and executive officers, the offices held by them in the Company, as of the date of this report, and the month and year in which they became directors or officers. The term of each director expires on the date of our next annual meeting.

 

Name, Province/State and Country of Residence and Present Position with Portage (1) Date became Director/Officer Principal Occupation Last five years

Dr. Gregory Bailey (2)

London, U.K.

Chairman of the Board of Directors

June 4, 2013 See section 4 (C) of this report

Mr. Steven Mintz (3)

Ontario, Canada

Director

April 6, 2016 See section 4 (C) of this report

Mr. James Mellon (4)

Isle of Man

Director

February 15, 2022 See section 4 (C) of this report

Ms. Linda M. Kozick (6)

Florida, USA

Director

February 15, 2022 See section 4 (C) of this report

Mr. Mark Simon (5)

New Jersey, USA

Director

February 15, 2022 See section 4 (C) of this report

Dr. Declan Doogan (7)

Florida, USA

Former Director

Chief Executive Officer until April 30, 2019

June 4, 2013 See section 4 (C) of this report

Mr. Kam Shah (7)

Ontario, Canada

Former Director

Chief Financial Officer until March 31, 2020

January 3, 1999 See section 4 (C) of this report

Dr. Ian Walters

Connecticut, USA

Chief Executive Officer effective May 1, 2019 and Director

August 1, 2016 See section 4 (C) of this report

Mr. Allan Shaw

New York, USA

Chief Financial Officer

May 12, 2020 See section 4 (C) of this report

Mr. Robert Kramer (8)

Utah, USA

Chief Scientific Officer

January 8, 2019 See section 4 (C) of this report

Mr. Steven Innaimo (8)

Connecticut, USA

Vice President of Project Management & Operations

January 8, 2019 See section 4 (C) of this report

Mr. Brian Wiley

Massachusetts, USA

Chief Business Officer

February 15, 2022 See section 4 (C) of this report

Dr. Robert Glassman (9)

New Jersey, USA

Director

July 1, 2022 See section 4 (C) of this report

 

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(1)Neither age nor date of birth of directors or executive officers is required to be reported in our home country nor otherwise publicly disclosed.
(2)Chair of the Company and Member of the Compensation Committee.
(3)Chair of the Audit Committee and Member of the Compensation Committee.
(4)Member of the Audit and Nominating Committees.
(5)Chair of the Nominating Committee and Member of the Audit Committee.
(6)Chair of the Compensation Committee and Member of the Nominating Committee.
(7)Dr. Doogan and Mr. Shah resigned from the Board effective February 15, 2022.
(8)Reflects the date of the SalvaRx acquisition by the Company. Prior to that, this individual was contracted by SalvaRx Limited.
(9)Dr. Glassman joined the Board of Directors on July 1, 2022 in connection with the Tarus Therapeutics transaction.

 

Family Relationships

 

There are no family relationships between or among the directors and executive officers.

 

Other Relationships

 

There are no arrangements or understandings between or among any major shareholder, customer, supplier or others, pursuant to which any of the above-named persons were selected as directors or as members of senior management.

 

Board Diversity Matrix of Portage Biotech Inc.

 

The below chart is intended to disclose, to the extent legally permitted, the board of director diversity of Portage Biotech Inc., pursuant to Rule 5606(f) of the NASDAQ listing rules.

 

Board Diversity Matrix (As of August 1, 2022)
Country of Principal Executive Offices: British Virgin Islands
Foreign Private Issuer Yes
Disclosure Prohibited under Home Country Law Yes
Total Number of Directors 6
  Female Male Non-Binary Did Not Disclose Gender
Part I: Gender Identity  
   Directors 1 5
Part II: Demographic Background  
   Under-represented person in Home Country
   LGBTQ+
   Did not Disclose Demographic Background

 

(B) COMPENSATION DISCUSSION AND ANALYIS

 

The compensation payable to directors and officers of the Company and its subsidiary is summarized below:

 

1.General

 

During Fiscal 2022, the Company engaged a third-party compensation consultant to review the Company’s compensation structure and provide recommendations to make the Company competitive for the purpose of recruiting and retaining board members, key management and staff. The review included benchmarking and other analytical tools.

 

As a result of the study and resulting recommendations, in November 2021, the Board approved cash fees and options to purchase common shares of stock be provided to independent board members for both participation as a member, as well as membership of board committees. Board remuneration commenced as of January 1, 2022.

 

The Company does not have any pension plans.

 

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2.Statement of Director and Executive Compensation

 

Additionally, as part of the third-party review, the Company adopted a compensation regime based upon targeted goals and other metrics.

 

The following table and accompanying notes set forth all compensation paid by the Company to its directors, senior management and key consultants for the fiscal years ended March 31, 2022, 2021 and 2020:

 

Name & Principal Position   Year   Fee and Salary (3)   Bonus   Other  

Securities Under Options / SARs

Granted (1)

  Shares or Units Subject to Resale Restrictions  

LTIP

Payout (2)

  Other (11)   Total Compensation  
        $   $   $   $   $   $   $   $  
Declan Doogan - Former Independent Director and Audit Committee Member (CEO up to April 30, 2019) (12)  
    2022                  
    2021         1,416,100 (8)       1,416,100  
    2020                  
                                       
Kam Shah - Former Director and Former CFO (12)  
    2022                  
    2021   45,000       1,582,700 (8)       1,627,700  
    2020   180,000               180,000  
                                       
Gregory Bailey - Chairman of the Board of Directors and Compensation Committee Member  
    2022   21,667       57,063 (4)       78,730  
    2021   --       1,416,100 (8)       1,416,100  
    2020                  
                                       
James Mellon - Independent Director and Audit Committee Member and Nominating Committee Member  
    2022   5,208       99,360 (5)       104,568  
                                       
Steven Mintz - Independent Director and Chairman of the Audit Committee and Compensation Committee Member  
    2022   18,750       57,063 (4)       75,813  
`   2021         1,416,100 (8)       1,416,100  
    2020                  
                                       
Linda Kozick - Independent Director and Chairperson of the Compensation Committee and Nominating Committee Member  
    2022   5,000       99,360 (5)       104,360  
                                       
Mark Simon - Independent Director and Chairman of the Nominating Committee and Audit Committee Member  
    2022   5,208       99,360 (5)       104,568  
                                       
Ian Walters - CEO effective May 1, 2019 and Director  
    2022   459,195   375,000     1,101,132 (6) 879,942 (7)   13,952   2,829,221  
    2021   368,503   200,000     2,583,610 (9) 2,698,000 (10)     5,850,113  
    2020   350,000               350,000  
                                       
Allan Shaw - CFO  
    2022   256,000   161,000     294,336 (6) 235,469 (7)   13,952   960,757  
    2021   186,290       2,241,410 (9)       2,427,700  
    2020                  
                                       
Robert Kramer - Chief Scientific Officer  
    2022   195,501   83,000     219,876 (6) 175,784 (7)     674,161  
    2021   147,500       1,043,710 (9) 1,615,250 (10)     2,806,460  
    2020   135,000               135,000  
                                       
Steven Innaimo - Vice President of Project Management & Operations  
    2022   310,000   93,000     120,888 (6) 96,068 (7)   13,952   633,908  
    2021   298,000       2,994,250 (9)       3,292,250  
    2020   294,000               294,000  
                                       
Brian Wiley – Chief Business Officer effective December 1, 2021  
    2022   84,057       525,600 (6)       609,657  

 

 43 

 

Notes:

 

(1)"SAR" means stock appreciation rights. The Company never issued any SARs.
(2)"LTIP" means long term incentive plan. The Company does not have any such plan.
(3)Represents fees for services and salaries, as applicable, earned and paid in Fiscal 2022.
(4)Represents aggregate fair value of options to purchase common stock granted January 19, 2022, which vest on the first anniversary of the date of grant.
(5)Represents aggregate fair value of options to purchase common stock granted February 15, 2022, which vest monthly over the first three years following the date of grant.
(6)Represents aggregate fair value of options to purchase common stock granted January 19, 2022, which vest ratably on each of the first four anniversaries of the date of grant.
(7)Represents the aggregate fair value (market value) of restricted stock units granted January 19, 2022, which were vested on grant date and are subject to certain restrictions.
(8)Represents the aggregate grant date fair value of options to purchase common stock granted January 13, 2021, which vest 1/3 on January 13, 2021, and 1/3 each on the first and second anniversaries of the grant date.
(9)Represents aggregate the grant date fair value of options to purchase common stock granted January 13, 2021, which vest ratably on the first, second and third anniversaries of the grant date.
(10)Represents the aggregate fair value (market value) of restricted stock units granted January 13, 2021, which were vested at grant date and are subject to certain restrictions.
(11)Represents employee benefits paid by the Company.
(12)Dr. Declan Doogan and Kam Shah resigned from the Board effective February 15, 2022.

 

Long Term Incentive Plan (LTIP) Awards

 

On January 19, 2022, the Board of Directors unanimously approved the Amended and Restated 2021 Equity Incentive Plan. The Amended and Restated 2021 Equity Incentive Plan provides for:

(1)An increase of aggregate number of shares available for awards to 2,001,812, which is equal to 15% of the issued and outstanding common shares in the capital of the Company as of January 19, 2022 subject to discretionary annual increases (on a cumulative basis) as may be approved by the Board in future years by a number of shares not to exceed an additional five percent (5%) of the aggregate number of shares then outstanding;
(2)The authorization of incentive stock options (should shareholder approval be sought and obtained) under the Amended and Restated 2021 Equity Incentive Plan; and
(3)The provision of dividend equivalent rights to be issued when authorized.

 

In addition, one of our companies, iOx Therapeutics Ltd., also has an option plan for acquiring equity in the subsidiaries for their management.

 

The objective of the Company's and our subsidiaries equity-based incentive plans is to provide for and encourage ownership of our ordinary shares by our directors, officers, consultants and employees, if any and those of any subsidiary companies so that such persons may increase their stake in our company and benefit from increases in the value of the ordinary shares. The Plans are designed to be competitive with the benefit programs of other companies in the Biotechnology sector and enable the Company and its subsidiaries to attract and retain directors, officers and employees of the Company and its subsidiaries and to consultants and management company employees of exceptional skill. It is the view of management that the plans are a significant incentive for the directors, officers, consultants and employees to continue and to increase their efforts in promoting our operations to the mutual benefit of both our company and such individuals and also allows us to avail of the services of experienced persons with minimum cash outlay.

  

 44 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table and related notes provides information regarding all outstanding equity awards for our named executive officers (“NEOs”) as of March 31, 2022:

 

    Option Awards (1)   Stock Awards (4) (5) (6) (7) 
Name   Number of Securities
Underlying Unexercised
Options
(#)
Exercisable (1)
    Number of Securities
Underlying Unexercised
Options
(#)
Unexercisable (1)
    

Equity Incentive
Plan Awards:
Number of Securities
Underlying Unexercised

Unearned Options (#)

    

 

 

Option
Exercise
Price
($)

  

 

 

Option
Expiration
Date

   Number of Shares or Units of Stock That Have Not Vested (#)    Market Value of Shares or Units of Stock That Have Not Vested (#)    Equity Incentive
Plan Awards:
Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
    Equity Incentive
Plan Awards:
Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#)
 
Ian B. Walters   50,333(2)   100,667(2)   100,667(2)  $17.75   January 13, 2031                
Ian B. Walters       125,700(3)   125,700(3)  $10.22   January 19, 2032                
                                            
Allan Shaw   43,667(2)   87,333(2)   87,333(2)  $17.75   January 13, 2031                
Allan Shaw       33,600(3)   33,600(3)  $10.22   January 19, 2032                
                                            
Robert Kramer   20,333(2)   40,667(2)   40,667(2)  $17.75   January 13, 2031                
Robert Kramer       25,100(3)   25,100(3)  $10.22   January 19, 2032                
                                            
Steve Innaimo   58,333(2)   116,667(2)   116,667(2)  $17.75   January 13, 2031                
Steve Innaimo       13,800(3)   13,800(3)  $10.22   January 19, 2032                
                                            
Brian Wiley       60,000(3)   60,000(3)  $10.22   January 19, 2032                
                                            

 

(1)

Amounts represent options to purchase ordinary shares.

 

(2)

These options to purchase ordinary shares were granted on January 13, 2021, have a ten-year term and vest ratably on each of the first three anniversaries of the grant date.

 

(3)

These options to purchase ordinary shares were granted on January 19, 2022, have a ten-year term and vest ratably on each of the first four anniversaries of the grant date.

 

(4)

The above table excludes 152,000 restricted stock units to Mr. Walters granted January 13, 2021 with a grant day value of $2,698,000, which vested on grant date but are subject to certain restrictions and 86,100 restricted stock units granted January 19, 2022 with a grant day value of $879,942, which vested on grant date but are subject to certain restrictions.

 

(5)

The above table excludes 23,040 restricted stock units to Mr. Shaw granted January 19, 2022 with a grant day value of $235,469, which vested on grant date but are subject to certain restrictions.

 

(6)

The above table excludes 91,000 restricted stock units to Mr. Kramer granted January 13, 2021, with a grant day value of $1,615,250, which vested on grant date but are subject to certain restrictions and 17,200 restricted stock units granted January 19, 2022 with a grant day value of $175,784, which vested on grant date but are subject to certain restrictions.

 

(7)

The above table excludes 9,400 restricted stock units to Mr. Innaimo granted January 19, 2022, with a grant day value of $96,068, which vested on grant date but are subject to certain restrictions.

 

 

 45 

 

Indebtedness of Directors, Executive Officers and Senior Officers

 

None.

 

Directors' and Officers' Liability Insurance

 

The Company has purchased, at its expense, directors' and officers' liability insurance policy to provide insurance against possible liabilities incurred by them in their capacity as directors and officers of the Company.

 

(C) BOARD PRACTICES

 

Audit Committee

 

Our audit committee consists of Mr. Steven Mintz, Mr. James Mellon and Mr. Mark Simon, with Mr. Steven Mintz serving as Chairperson. Each member of our audit committee meets the financial literacy requirements of Nasdaq listing standards. In addition, our board of directors has determined that Mr. Steven Mintz is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933. Mr. Steven Mintz is a Canadian Chartered Professional Accountant. He has over sixteen years of international experience in corporate financial analysis, mergers and acquisitions. He has been on the board of directors of several private and public corporations, operating in various sectors, including technology, oil & gas and biotechnology.

 

Mr. Mellon is an author, entrepreneur and investor. He was one of the founders of Portage Biotech and is the co-author of five books, all written with a view toward identifying emerging thematic trends leading to investment opportunities.

 

Mr. Simon has over 30 years advising experience for biotech and pharma companies as an investment banker and research analyst.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 46 

 

Our audit committee will, among other things:

 

·review our consolidated financial statements and our critical accounting policies and practices;
·select a qualified firm to serve as the independent registered public accounting firm to audit our consolidated financial statements;
·help to ensure the independence and performance of the independent registered public accounting firm;
·discuss the scope and results of the audit with the independent registered public accounting firm and review, with management and the independent registered public accounting firm, our interim and year-end results of operations;
·pre-approve all audit and all permissible non-audit services to be performed by the independent registered public accounting firm;
·oversee the performance of our internal audit function when established;
·review the adequacy of our internal controls;
·develop procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
·review our policies on risk assessment and risk management; and
·review related party transactions.

 

Pre-Approval Policies and Procedures

 

In the event that the Company plans to retain the services of the external auditors to the Company for tax compliance, tax advice or tax planning, the Chief Financial Officer of the Company must consult with the chair of the ACC, who has the authority to approve or disapprove on behalf of the committee, those non-audit services. All other permissible non-audit services shall be approved or disapproved by the ACC as a whole.

 

The Company external auditors are prohibited from performing for the Company non-audit services of the following nature: (a) bookkeeping or other services related to the accounting records or financial statements; (b) financial information systems design and implementation; (c) appraisal or valuation services, fairness opinions or contribution in-kind reports; (d) actuarial services; (e) internal audit outsource services; (f) management functions; (g) human resources; (h) broker or dealer, investment adviser or investment banking services; (i) legal services; (j) expert services unrelated to the audit; and (k) any other service that the Canadian and the United States Public Company Accounting Oversight Board determines is impermissible.

 

The ACC Charter relating to compensation matters sets forth the evaluation and review requirements for incentive and equity-based compensation plans for the executives based on their periodic performance evaluation.

 

Compensation Committee

 

Our compensation committee consists of Ms. Linda Kozick, Mr. Gregory Bailey and Mr. Steven Mintz, with Ms. Linda Kozick serving as Chairperson. Each member of the compensation committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. The purpose of our compensation committee is to discharge the responsibilities of our board of directors relating to compensation of our executive officers. Our compensation committee will, among other things:

 

·review, approve and determine, or make recommendations to our board of directors regarding, the compensation of our executive officers;
·administer our stock and equity incentive plans;
·review and approve, or make recommendations to our board of directors regarding, incentive compensation and equity plans; and
·establish and review general policies relating to compensation and benefits of our employees.

 

 

 47 

 

Nominating Committee

 

Our nominating and corporate governance committee consists of Mr. Mark Simon, Ms. Linda Kozick and Mr. James Mellon with Mr. Mark Simon as Chairperson. Our nominating and corporate governance committee will, among other things:

 

·identify, evaluate and select, or make recommendations to our board of directors regarding, nominees for election to our board of directors and its committees;
·evaluate the performance of our board of directors and of individual directors;
·consider and make recommendations to our board of directors regarding the composition of our board of directors and its committees;
·review developments in corporate governance practices;
·oversee environmental, social and governance (ESG) matters;
·evaluate the adequacy of our corporate governance practices and reporting; and
·develop and make recommendations to our board of directors regarding corporate governance guidelines and matters.

 

Role of Board of Directors in Risk Oversight Process

 

Our board of directors has responsibility for the oversight of our risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from board committees and members of senior management to enable our board of directors to understand our risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, cybersecurity, strategic and reputational risk.

 

Code of Business Conduct

 

The Company has established a Code of Conduct applicable to our directors, officers and employees. The Code of Conduct is accessible on our website at www.portagebiotech.com. If we make any substantive amendments to the Code of Conduct or grant any waiver, including any implicit waiver, from a provision of the Code of Conduct to our officers, we will disclose the nature of such amendment or waiver on that website or in a report on Form 8-K.

 

Compensation Committee Interlocks and Insider Participation

 

All compensation and related matters are reviewed by our Compensation Committee. None of the members of our compensation committee is or has at any time during the past year been an officer or employee of ours. None of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or on our compensation committee.

 

 

 48 

 

EXECUTIVE COMPENSATION

 

For the year ended March 31, 2022, our NEOs, which are each person who served as our principal executive officer during 2022 and the next four most highly compensated executive officers, are:

 

·Ian B. Walters, President and Chief Executive Officer and Director
·Allan Shaw, Chief Financial Officer
·Steven Innaimo, Vice President of Project Management & Operations
·Robert Kramer, Chief Scientific Officer
·Brian Wiley, Chief Business Officer

 

Executive Compensation Overview

 

Through November 30, 2021, the compensation of our NEOs has primarily consisted of consulting fees (and in some cases bonuses), and share-based compensation. During Fiscal 2022, the Company entered into Employment contracts with five employees that provide for a combination of base salary, bonuses and long-term incentive compensation in the form of restricted stock units and options to purchase common stock. Our NEOs, like all full-time employees, are eligible to participate in our health and dental benefit plans and 401(k) plan matching program. At a minimum, we expect to review executive compensation annually with input from a compensation consultant. As part of this review process, we expect the board of directors and the compensation committee to apply our values and philosophy, while considering the compensation levels needed to ensure our executive compensation program remains competitive. We will also review whether we are meeting our retention objectives and the potential cost of replacing a key employee.

 

Narrative Disclosure to the Summary Compensation Table

 

Annual Base Salary

 

Our NEOs each receive a base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. Base salaries are reviewed annually, typically in connection with our annual performance review process, approved by our board of directors or the compensation committee, and may be adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, and experience.

 

Employment Agreements

 

PDS entered into a Services Agreement with Mr. Walters effective on December 15, 2021. The Services Agreement provides that Mr. Walters will receive a base salary of $618,000, plus cost-of-living increases. The Services Agreement provides for annual increases based upon the review of the base salary by the board of directors prior to the anniversary of the Services Agreement provided that the annual increase cannot be less than the cost-of-living increase. The Services Agreement also provides that Mr. Walters is eligible to receive an annual performance-based bonus targeted at 59% of the applicable year’s base salary, which bonus is earned based on the achievement of performance targets, as determined annually by the Board of Directors and communicated to Mr. Walters in the first quarter of the year. Any annual bonus, to the extent earned, is to be paid no later than March 15 of the following year. The Services Agreement is for an initial term of three years, after which it will automatically renew annually unless terminated in accordance with the Services Agreement.

 

Under the Services Agreement, Mr. Walters may terminate his employment at any time for Good Reason, as defined in the Services Agreement. We may terminate Mr. Walter’s employment immediately upon his death, upon a period of disability or without “Just Cause”, as defined. In the event that Mr. Walter’s employment is terminated due to his death or Disability, for “Good Reason” or without “Just Cause”, Mr. Walters will be entitled to Accrued Benefits (accrued unpaid portion of base salary, accrued unused vacation time and any unpaid expenses). Additionally, he may be entitled to Severance Benefits, which include his then current base salary and the average of his annual bonus for the prior two completed performance years, paid over 12 monthly installments. Additionally, Mr. Walters will be entitled to life insurance benefits and medical and dental benefits for a period of 12 months at the same rate Mr. Walters and the Company shared such costs during his period of employment.

 

 49 

 

Additionally, all stock options (and any other unvested equity incentive award) held by the CEO relating to shares of the Company will be deemed fully vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be increased by a period of two years from the Termination Date.

 

If the CEO’s employment by the Company is terminated by the Company or any successor entity without “Just Cause” (not including termination by virtue of the CEO’s death or Disability) or by the CEO for Good Reason within twelve (12) months following the effective date of a “Change in Control” (as defined), then in addition to paying or providing Executive with the Accrued Obligations, the Company will provide the following “Change in Control Severance Benefits”:

 

(1)The Company will pay the Base Salary continuation benefit for eighteen (18) months;

 

(2)The Company will pay the life insurance benefit for eighteen (18) months;

 

(3)The Company will pay an additional amount equivalent to the CEO’s target annual bonus calculated using the Bonus Percentage for the performance year in which Executive’s termination occurs. This bonus will be paid in twelve equal installments commencing on the first payroll date that is more than sixty (60) days following the date of termination of Executive’s employment, with the remaining installments occurring on the first day of the month for the eleven (11) months thereafter;

 

(4)The Company will provide the CEO with continued medical and dental benefits, as described above, for eighteen (18) months; and

 

(5)All stock options (and any other unvested equity incentive award) held by the CEO relating to shares of the Company or its parent will be deemed fully vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be increased by a period of two years from the Termination Date.

 

PDS entered into Services Agreements with each of Messrs. Shaw, Kramer and Innaimo and Wiley (individually, “Executive” and collectively, “Executives”) dated as of December 1, 2021 (except Mr. Iannaimo, which was dated December 15, 2021). Each of the Services Agreements provides for an initial term of two years and are automatically renewed for one-year periods (except Mr. Wiley, which provides for an initial term of one year and is automatically renewed for one-year periods). The Services Agreements initially provide for base salary and annual bonus, as described in the table below. They also provide for long-term incentives in the form of equity awards from time to time under the Portage Biotech Inc. Amended and Restated 2021 Equity Incentive Plan.

 

   BASE SALARY  TARGET BONUS
Allan Shaw  $348,000    40%
Robert Kramer  $216,000    40%
Steven Innaimo  $310,000    30%
Brian Wiley  $175,000    30%

 

The Services Agreements can be terminated by the Company without “Just Cause”, by death or Disability, or by the Executive for “Good Reason”. In such instances, the Services Agreements provide for the payment of Accrued Obligations (accrued unpaid portion of base salary, accrued unused vacation time and any unpaid expenses). Additionally, Executives (except Mr. Wiley) are entitled to 50% of base salary plus 50% of average annual bonus earned over the prior two performance years, as well as prevailing life insurance benefits for a period of six months and medical and dental benefits for a period of six months at the prevailing rate the Company and the Executive were sharing such expenses.

 

Additionally, all stock options (and any other unvested equity incentive award) held by the Executives relating to shares of the Company will be deemed fully vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be increased by a period of two years from the Termination Date.

 

 50 

 

If Executive’s employment by the Company is terminated by the Company or any successor entity without “Just Cause” (not including termination by virtue of CEO’s death or Disability) or by Executive for Good Reason within twelve (12) months following the effective date of a “Change in Control” (as defined), then in addition to paying or providing Executive with the Accrued Obligations, the Company will provide the following “Change in Control Severance Benefits” (except in one case in which Executive is entitled to Item (5) and 50% of Items (1) and (3) below):

 

(1)The Company will pay the Base Salary continuation benefit for twelve (12) months;

 

(2)The Company will pay the life insurance benefit for twelve (12) months;

 

(3)The Company will pay an additional amount equivalent to Executive’s target annual bonus calculated using the Bonus Percentage for the performance year in which Executive’s termination occurs. This bonus will be payable in twelve equal installments commencing on the first payroll date that is more than sixty (60) days following the date of termination of Executive’s employment, with the remaining installments occurring on the first day of the month for the eleven (11) months thereafter;

 

(4)The Company will provide the Executive with continued medical and dental benefits, as described above, for twelve (12) months; and

 

(5)All stock options (and any other unvested equity incentive award) held by the Executive relating to shares of the Company or its parent will be deemed fully vested and exercisable on the Termination Date and the exercise period for such stock options will be increased by a period of two years from the Termination Date.

 

The Services Agreements also include customary confidentiality, as well as provisions relating to assignment of inventions. The Services Agreements also includes non-competition and non-solicitation of employees and customers provision that run during the Executive’s employment with the Company and for a period of one year after termination of employment.

 

Director Compensation

 

Non-Employee Director Compensation Policy

 

Effective January 1, 2022, our board of directors adopted a non-employee director compensation policy that is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. Under the policy, each director who is not an employee will be paid cash compensation quarterly in arrears based upon the following table:

 

   ANNUAL RETAINER
Board of Directors:     
Chair  $30,000 
All non-employee members  $40,000 
Audit Committee:     
Chair  $15,000 
Members  $7,500 
Compensation Committee:     
Chair  $12,000 
Members  $6,000 
Nominating Committee:     
Chair  $8,000 
Members  $4,000 

 

 

 51 

 

(D) EMPLOYEES

 

The Company currently has six employees. It also uses the services of consultants from time to time.

 

(E) SHARE OWNERSHIP

 

The Board decided to discontinue the 2013 Option Plan, under which stock options to acquire common shares of the Company were granted to directors, employees and consultants of the Company. At March 31, 2022, no stock options were outstanding under the 2013 Option Plan.

 

On January 13, 2021, the Company approved the 2021 Equity Incentive Plan, which amended and restated the Portage Biotech Inc. 2020 Stock Option Plan. On January 13, 2021, the Company granted in total 868,000 stock options to purchase ordinary shares to four members of our Board of Directors and four executives, including our CEO, who also is a member of our Board of Directors. The stock options have an exercise price of US$17.75 per share and vest over various terms. The Company also granted 243,000 restricted stock units to two executives, one of whom is our CEO, which vested immediately and are subject to certain restrictions.

 

On January 19, 2022, the Board of Directors unanimously approved the Amended and Restated 2021 Equity Incentive Plan. The Amended and Restated 2021 Equity Incentive Plan provides for:

 

(1)An increase of aggregate number of shares available for awards to 2,001,812, which is equal to 15% of the issued and outstanding common shares in the capital of the Company as of January 19, 2022 subject to discretionary annual increases (on a cumulative basis) as may be approved by the Board in future years by a number of shares not to exceed an additional five percent (5%) of the aggregate number of shares then outstanding;

 

(2)The authorization of incentive stock options (should shareholder approval be sought and obtained) under the Amended and Restated 2021 Equity Incentive Plan; and

 

(3)The provision of dividend equivalent rights to be issued when authorized.

 

 

 

 

 

 

 

 

 

 52 

 

The following table sets forth the share ownership of our executive officers and directors as at March 31, 2022:

 

   Ordinary Shares
Beneficially Owned
Name  Number  Percentage *
Gregory Bailey   3,458,862(1)   25.35%
Steven Mintz   109,905(1)(2)    0.65%
James Mellon   3,031,721(7)   17.89%
Linda Kozick   (7)   %
Mark Simon   (7)   %
Ian Walters   265,424(3)   1.56%
Allan Shaw   43,666(4)   0.26%
Robert Kramer   161,067(5)   0.95%
Steven Innaimo   58,333(6)   0.34%
Brian Wiley   (8)   %

 

* Based on issued and outstanding ordinary shares at August 1, 2022 plus vested stock options and stock options that vest in the next 60 days.

 

(1)Includes 56,667 vested stock options to purchase ordinary shares and excludes 28,333 unvested stock options granted January 13, 2021. Excludes 6,900 unvested stock options granted January 19, 2022.
(2)Excludes 60,000 shares for which Mr. Mintz has shared investment control and disclaims beneficial ownership.
(3)Includes 50,333 vested stock options to purchase ordinary shares and excludes 152,000 vested restricted stock units subject to certain restrictions and 100,667 unvested stock options granted January 13, 2021. Excludes 86,100 vested restricted stock units subject to certain restrictions and 125,700 unvested stock options granted January 19, 2022. Additionally, excludes 87,519 shares held in trusts for the benefit of his children for which Mr. Walters disclaims beneficial ownership.
(4)Includes 43,666 vested stock options to purchase ordinary shares and excludes 87,334 unvested stock options granted January 13, 2021. Excludes 23,040 vested restricted stock units and 33,600 unvested stock options granted January 19, 2022.
(5)Includes 20,333 vested stock options and excludes 91,000 vested restricted stock units subject to certain restrictions and 40,667 unvested stock options granted January 13, 2021. Excludes 17,200 vested restricted stock units granted January 13, 2021 and 25,100 unvested stock options granted January 19, 2022.
(6)Includes 58,333 vested stock options to purchase ordinary shares and excludes 116,667 unvested stock options granted January 13, 2021. Excludes 9,400 vested restricted stock units subject to certain restrictions and 13,800 unvested stock options granted January 19, 2022.
(7)Excludes 13,800 unvested stock options granted February 15, 2022.
(8)Excludes 60,000 unvested stock options granted January 19, 2022.

 

All shares held by the above persons carry same rights as the other holders of the ordinary shares of the Company.

 

 

 

 

 

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ITEM 7 – MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

(A) MAJOR SHAREHOLDERS

 

The Company's ordinary shares are recorded on the books of its transfer agent in registered form. A large number of the ordinary shares are, however, registered in the name of intermediaries such as brokerage houses and clearing firms on behalf of their respective clients. The Company does not have knowledge of all the beneficial owners of its ordinary shares. Intermediaries like CDS & Co, Toronto, Canada and Cede & Co., New York, USA held approximately 17% of the issued and outstanding ordinary shares of the company on behalf of beneficial shareholders whose individual holdings details were not available.

 

At March 31, 2022, the Company had 13,348,943 ordinary shares issued and outstanding and at August 1, 2022, the Company had 16,944,783 ordinary shares issued and outstanding.

 

The following table sets forth persons known by us to be beneficial owners of more than 5% of our ordinary shares as of August 1, 2022. Beneficial ownership of shares is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Shares subject to options and warrants that are currently exercisable or exercisable within 60 days of the date indicated above are deemed to be beneficially owned by the person holding the option and warrant and included in the holding. These beneficially held ordinary shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

 

Name of Beneficial Owner  No. of Shares  Percentage of Shares*
       
Gregory Bailey   3,458,862    20.35%
James Mellon   3,031,721    17.89%

 

* Based on shares issued and outstanding as of August 1, 2022.

 

The Company is a publicly owned BVI business company. The Company is not owned or controlled directly or indirectly by another corporation or any foreign government. There are no arrangements, known to the Company, the operation of which may at a subsequent date result in a change of control of the Company.

 

 

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Insider Reports under Canadian Securities Legislation

 

Since the Company is a reporting issuer under the Securities Acts of each of the province of Ontario and British Columbia in Canada, certain "insiders" of the Company (including its directors, certain executive officers, and persons who directly or indirectly beneficially own, control or direct more than 10% of its ordinary shares) are generally required to file insider reports of changes in their ownership of the Company's ordinary shares five days following the trade under National Instrument 55-104 - Insider Reporting Requirements and Exemptions, as adopted by the Canadian Securities Administrators. Insider reports must be filed electronically five days following the date of the trade at www.sedi.ca. The public is able to access these reports at www.sedi.ca.

 

The United States also has rules governing public reporting of the ownership of securities held in public companies. Section 13 of the Exchange Act imposes reporting requirements on persons who acquire beneficial ownership (as such term is defined in the Rule 13d-3 under the Exchange Act) of more than five per cent of a class of an equity security registered under Section 12 of the Exchange Act. In general, these persons must file, within 10 days after such acquisition, a report of beneficial ownership with the United States Securities and Exchange Commission containing the information prescribed by the regulations under Section 13 of the Exchange Act. This information is also required to be sent to the issuer of the securities and to each exchange where the securities are traded.

 

As a foreign private issuer, the reporting and short-swing profit re-capture rules of Section 16 of the Exchange Act are not applicable to our directors, offices and holders of 10% or more of our issued and outstanding ordinary shares, calculated on a beneficial basis under Rule 13d-3.

 

(B) RELATED PARTY TRANSACTIONS

 

All related party transactions that occurred with key management personnel are discussed below. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company. The board of directors has determined that the Chairman, Chief Executive Officer and Chief Financial Officer are key management personnel.

 

SalvaRx Acquisition

 

On January 8, 2019, the Company acquired 100% of SalvaRx Limited from SalvaRx Group plc. in exchange for 8,050,701 ordinary shares of the Company for an aggregate consideration of US$92.6 million. Four of the six directors of the Company are also directors of SalvaRx Group plc.  The Company's CEO is also the CEO of SalvaRx Limited and employees of the Company comprise the management team of SalvaRx Limited.

 

Payable

 

In January 2020, the Chairman of the Company advanced the Company $1.0 million which was repaid in July 2020.  There was no interest or fees associated with this advance.

 

Investments

 

The Company has entered into related party transactions and certain services agreement with the companies that it has invested in.  Key management of the Company has also entered into related party transactions with these invested companies. The related party transactions are as follows:

 

The following subsidiaries and associates are considered related parties:

 

(a)Stimunity. The CEO of Portage is one of three members of the Board of Directors of Stimunity. In July 2022, the Company entered into a commitment with Stimunity to provide €600,000 under a Convertible Note with a maturity date of September 1, 2023 (“Maturity Date”). The Convertible Note provides for interest at 7% per annum. The Convertible Note is automatically converted upon Stimunity commencing a Series A subscription round for €20 million. If such Subscription round is completed prior to the Maturity Date, the Company will be entitled to convert the Convertible Note at the subscription share price less 15%. Additionally, if subscribers create a new category of shares with additional rights of less than €5 million (the “Minimum Raise”), the Company will have the right to convert the Convertible Note and historical shares owned into the new category of shares. In the event that Stimunity does not close a subscription prior to the Maturity Date or raises less than the Minimum Raise, the Company will have the right to convert at €363.00 per share or the raise price less 15%, whichever is lower.

 

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(b)iOx. Two of the three directorships on the Board of Directors of iOx are controlled by Portage. Additionally, Portage has an observer on the Board of iOx. The CEO of Portage is also the CEO of iOx, and the management team of the Company comprise the management team of iOx.

 

(c)Saugatuck. One of the three directorships on the Board of Directors of Saugatuck is controlled by Portage. Additionally, the CEO of the Company is also the CEO of Saugatuck and the management team of the Company comprise the management team of Saugatuck.

 

(d)Intensity. The CEO of Portage is an officer of Intensity and both he and the VP of Projects and Operations of the Company provide services to Intensity. The Company commenced invoicing Intensity for such services in February 2022. Additionally, Intensity provides services (primarily rent) to Portage, which is billed monthly. Portage paid Intensity $83,437, $77,088 and $62,132 for the years ended March 31, 2022, 2021 and 2020, respectively.

 

(e)PGL. PPL held 65% equity in PGL, committed to provide financing and also handles financial and administrative matters of PGL. The Company disposed of 100% of its interests in PPL and PGL on March 3, 2021.

 

(f)Portage Development Services. Portage Development Services is a 100% owned subsidiary of the Company, incorporated in Delaware, which provides human resources, and other services to each operating subsidiary via a shared services agreement.

 

The following are significant related party balances and transactions other than those disclosed elsewhere in the consolidated financial statements:

 

Interest expense includes $78,427 and $226,018 interest incurred in the years ended March 31, 2021 and 2020, respectively, on notes issued to members of the Portage Board of Directors. The SalvaRx Notes were settled as of August 6, 2020 and, accordingly, no further interest expense was incurred. In connection with the settlement of the SalvaRx Notes, $692,045 of accrued interest and $805,000 of principal was paid to directors. The directors also exchanged an aggregate $2,415,000 of notes payable for SalvaRx warrants at a price of $6.64, which were exchanged for Portage warrants and converted to Portage stock on October 13, 2020.

 

In January 2020, a board member of the Company advanced the Company $1.0 million, which was repaid in July 2020. There was no interest or fees associated with this advance.

 

Transactions between the parent company and its subsidiaries, which are related parties, have been eliminated in consolidation and are not disclosed in this note.

 

On September 8, 2021, the Company, through SalvaRx, completed a settlement of loans (including interest) to and receivables from iOx for services rendered in exchange for 23,772 ordinary shares of iOx at a price of £162. Simultaneously, the Company entered into an agreement with Oxford Sciences Innovation, Plc (“OSI”), the holder of $0.15 million notes plus accrued interest under which OSI exchanged the notes plus accrued interest for 820 shares of iOx. The Company followed the guidance provided by an IFRS Discussion Group Public Meeting dated November 29, 2016, following the general tenets of IAS 39, “Financial Instruments: Recognition and Measurement,” and IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments” and recorded the exchange at historical cost. Additionally, no profit or loss was recorded in connection with the exchange. As a result of these transactions, the Company, through SalvaRx, increased its ownership up from 60.49% to 78.32%.

 

Employment Agreements

 

PDS entered into a Services Agreement with Mr. Walters effective on December 15, 2021. The Services Agreement provides that Mr. Walters will receive a base salary of $618,000, plus cost-of-living increases. The Services Agreement provides for annual increases based upon the review of the base salary by the board of directors prior to the anniversary of the Services Agreement provided that the annual increase cannot be less than the cost-of-living increase. The Services Agreement also provides that Mr. Walters is eligible to receive an annual performance-based bonus targeted at 59% of the applicable year’s base salary, which bonus is earned based on the achievement of performance targets, as determined annually by the Board of Directors and communicated to Mr. Walters in the first quarter of the year. Any annual bonus, to the extent earned, is to be paid no later than March 15 of the following year. The Services Agreement is for an initial term of three years, after which it will automatically renew annually unless terminated in accordance with the Service Agreement.

 

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Under the Service Agreement, Mr. Walters may terminate his employment at any time for Good Reason, as defined in the Service Agreement. We may terminate Mr. Walter’s employment immediately upon his death, upon a period of disability or without “just cause”, as defined. In the event that Mr. Walter’s employment is terminated due to his death or disability, for “Good Reason” or without “just cause”, Mr. Walters will be entitled to Accrued Benefits (accrued unpaid portion of base salary, accrued unused vacation time and any unpaid expenses). Additionally, he may be entitled to Severance Benefits, which include his then current base salary and the average of his annual bonus for the prior two completed performance years, paid over 12 monthly installments. Additionally, Mr. Walters will be entitled to life insurance benefits and medical and dental benefits for a period of 12 months at the same rate Mr. Walters and the Company shared such costs during his period of employment.

 

Additionally, all stock options (and any other unvested equity incentive award) held by the CEO relating to shares of the Company will be deemed fully vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be increased by a period of two years from the Termination Date.

 

If CEO’s employment by the Company is terminated by the Company or any successor entity without “Just Cause” (not including termination by virtue of CEO’s death or Disability) or by the CEO for Good Reason within twelve (12) months following the effective date of a “Change in Control” (as defined), then in addition to paying or providing Executive with the Accrued Obligations the Company will provide the following “Change in Control Severance Benefits”:

 

(1)The Company will pay the Base Salary continuation benefit for eighteen (18) months;

 

(2)The Company will pay the life insurance benefit for eighteen (18) months;

 

(3)The Company will pay an additional amount equivalent to CEO’s target annual bonus calculated using the Bonus Percentage for the performance year in which Executive’s termination occurs. This bonus will be paid in twelve equal installments commencing on the first payroll date that is more than sixty (60) days following the date of termination of Executive’s employment, with the remaining installments occurring on the first day of the month for the eleven (11) months thereafter;

 

(4)The Company will provide the CEO with continued medical and dental benefits, as described above, for eighteen (18) months; and

 

(5)All stock options (and any other unvested equity incentive award) held by the CEO relating to shares of the Company or its parent will be deemed fully vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be increased by a period of two years from the Termination Date.

 

We entered into Service Agreements with each of Messrs. Shaw, Kramer and Innaimo and Wiley (individually, “Executive” and collectively, “Executives”) dated as of December 1, 2021 (except Mr. Innaimo, which was dated December 15, 2021). Each of the Service Agreements provides for an initial term of two years and are automatically renewed for one-year periods (except Mr. Wiley, which provides for an initial term of one year and is automatically renewed for one-year periods). The Service Agreements initially provide for base salary and annual bonus, as described in the table below. They also provide for long-term incentives in the form of equity awards from time to time under the Portage Biotech Inc. Amended and Restated 2021 Equity Incentive Plan.

 

   BASE SALARY  TARGET BONUS
Allan Shaw  $348,000    40%
Robert Kramer  $216,000    40%
Steven Innaimo  $310,000    30%
Brian Wiley  $175,000    30%

 

The Service Agreements can be terminated by the Company “without cause”, by death or disability, or by the Executive for “good reason”. The Service Agreements provide for the payment of Accrued Obligations (accrued unpaid base salary plus earned but unused vacation time). Additionally, Executives (except Mr. Wiley) are entitled to 50% of base salary plus 50% of average annual bonus earned over the prior two performance years, as well as prevailing life insurance benefits for a period of six months and medical and dental benefits for a period of six months at the prevailing rate the Company and the Executive were sharing such expenses.

 

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Additionally, all stock options (and any other unvested equity incentive award) held by the Executives relating to shares of the Company will be deemed fully vested and exercisable on the Termination Date, as defined, and the exercise period for such stock options will be increased by a period of two years from the Termination Date.

 

If Executive’s employment by the Company is terminated by the Company or any successor entity without “Just Cause” (not including termination by virtue of CEO’s death or Disability) or by Executive for Good Reason within twelve (12) months following the effective date of a “Change in Control” (as defined), then in addition to paying or providing Executive with the Accrued Obligation, the Company will provide the following “Change in Control Severance Benefits” ( except in one case in which Executive is entitled to 50% of Items 1-4 below):

 

(1)The Company will pay the Base Salary continuation benefit for twelve (12) months;

 

(2)The Company will pay the life insurance benefit for twelve (12) months;

 

(3)The Company will pay an additional amount equivalent to Executive’s target annual bonus calculated using the Bonus Percentage for the performance year in which Executive’s termination occurs. This bonus will be payable in twelve equal installments commencing on the first payroll date that is more than sixty (60) days following the date of termination of Executive’s employment, with the remaining installments occurring on the first day of the month for the eleven (11) months thereafter;

 

(4)The Company will provide the Executive with continued medical and dental benefits, as described above, for twelve (12) months; and

 

(5)All stock options (and any other unvested equity incentive award) held by the Executive relating to shares of the Company or its parent will be deemed fully vested and exercisable on the Termination Date and the exercise period for such stock options will be increased by a period of two years from the Termination Date.

 

The Service Agreements also include customary confidentiality, as well as provisions relating to assignment of inventions. The Employment Agreements also includes non-competition and non-solicitation of employees and customers provision that run during the executive’s employment with the Company and for a period of one year after termination of employment.

 

Bonuses & Board Compensation Arrangements

 

In December 2021, the Compensation Committee approved performance bonuses payable to senior management totaling $0.7 million. The bonuses were paid in December 2021.

 

In addition, the Compensation Committee of the Board established board of director compensation. Effective January 1, 2022, each non-executive board member will be entitled to receive cash board fees of $40,000 per annum, payable quarterly in arrears. Additionally, each non-executive board member will be entitled to an annual grant of 6,900 options to purchase common shares, which would vest the first annual anniversary of the date of grant.

 

The chairman of the Board will be entitled to an annual cash fee of $30,000, payable quarterly in arrears. Additionally, the chairperson of each of the Audit Committee, Compensation Committee and Nominating Committee will be entitled to annual fees of $15,000, $12,000 and $8,000, respectively, payable quarterly in arrears. Members of those committees will be entitled to annual fees of $7,500, $6,000 and $4,000, respectively, payable quarterly in arrears.

 

(C) INTERESTS OF EXPERTS AND COUNSEL

 

Not applicable.

 

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ITEM 8 – FINANCIAL INFORMATION

 

(A) CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

 

Financial Statements

 

Information regarding our financial statements is contained under Item18 of this Annual Report.

 

Dividend Policy

 

Since its incorporation, the Company has not declared or paid, and has no present intention to declare or to pay in the foreseeable future, any cash dividends with respect to its ordinary shares. Earnings will be retained to finance further growth and development of the business of the Company. However, if the Board of Directors declares dividends; all the ordinary shares will participate equally in the dividends, and, in the event of liquidation, in the net assets, of the Company.

 

In January 2018, the Company declared and distributed its then holdings of common shares of Biohaven Pharmaceuticals Holding Company Ltd. as stock dividend. Whether or not the Board of Directors will determine to do any other distributions of property of the Company in the future is in their sole discretion and will depend on their determination at the future time.

 

(B) SIGNIFICANT CHANGES

 

There were no significant events or changes to report that happened subsequent to March 31, 2022, to the date of this report.

 

ITEM 9 – THE OFFER AND LISTING

 

(A) OFFER AND LISTING DETAILS

 

The following tables set forth the reported high and low sale prices for our ordinary shares as quoted on the Nasdaq Capital Market (“NASDAQ”) since February 25, 2021, the over-the-counter (“OTC”) market where the ordinary shares were trading until February 25, 2021, and on the Canadian Securities Exchange (“CSE”), where the Company's ordinary shares were listed and trading from October 28, 2013 until April 23, 2021, when the Company voluntarily delisted its ordinary shares from the CSE. The Company’s shares trade on NASDAQ on the Nasdaq Capital Market under the symbol “PRTG”.

 

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The following table outlines the annual high and low market prices for an ordinary share for the five most recent fiscal years. Except as noted, reflects share price prior to the 100 to 1 reverse stock split effective June 5, 2020:

 

   High  Low
   NASDAQ  CSE  NASDAQ  CSE
Year ended March 31,  US$  US$  US$  US$
2022*   42.81    N/A    6.57    N/A 
2021*   39.50    38.99    8.88    0.09 
2020   0.15    0.14    0.07    0.08 
2019   0.14    0.15    0.07    0.07 
2018   0.66    0.66    0.06    0.06 
2017   0.25    0.22    0.10    0.12 

 

* Reflects share price subsequent to the 100 to 1 reverse stock split effective June 5, 2020.

 

The following table outlines the high and low market prices for an ordinary share for each fiscal financial quarter for the two most recent fiscal periods and subsequent periods. Except as noted, reflects share price prior to the 100 to 1 reverse stock split effective June 5, 2020:

 

   High  Low
   NASDAQ  CSE (a)  NASDAQ  CSE (a)
Quarter ended:  US$  US$  US$  US$
30-Jun-22*   11.95    N/A    5.16    N/A 
31-Mar-22*   12.00    N/A    6.57    N/A 
31-Dec-21*   23.74    N/A    10.73    N/A 
30-Sept-21*   22.40    N/A    13.65    N/A 
30-Jun-21*   42.81    N/A    20.96    N/A 
31-Mar-21*   39.50    38.99    17.55    17.54 
31-Dec-20*   19.59    19.50    8.88    8.85 
30-Sept-20*   10.75    10.80    9.06    9.29 
30-Jun-20   0.14    0.14    0.09    0.10 

 

* Reflects share price subsequent to the 100 to 1 reverse stock split effective June 5, 2020.

 

(a)The Company voluntarily delisted its common shares from the CSE at the market close on April 23, 2021.

 

The following table outlines the high and low market prices for each of the most recent six months:

 

   High  Low
   NASDAQ  NASDAQ
Month  US$  US$
July 2022 (through July 29)   10.12    7.09 
June 2022   11.95    6.70 
May 2022   10.00    5.16 
April 2022   7.06    5.28 
March 2022   8.44    6.57 
February 2022   8.84    7.25 

 

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(B) PLAN OF DISTRIBUION

 

Not applicable.

 

(C) MARKETS

 

The Company's ordinary shares currently trade in one place. Before April 23, 2021, the Company’s ordinary shares were traded in two places.

 

1.Since February 25, 2021, the ordinary shares of the Company began trading on NASDAQ under the trading symbol “PRTG”. Before then, the ordinary shares had been traded in the OTC market since 2000 under the trading symbol "PTGEF”.

 

2.Effective October 28, 2013, the Company's ordinary shares were also listed for trading in United States currency on the Canadian Securities Exchange (formerly, Canadian National Stock Exchange) under the symbol "PBT.U". The Company voluntarily delisted its common shares from the CSE at the market close on April 23, 2021, since the Company’s shares were trading on NASDAQ from February 2021.

 

(D) SELLING SHAREHOLDERS

 

Not applicable.

 

(E) DILUTION

 

Not applicable.

 

(F) EXPENSES OF THE ISSUE

 

Not applicable.

 

ITEM 10 – ADDITIONAL INFORMATION

 

(A) SHARE CAPITAL

 

This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

 

(B) MEMORANDUM AND ARTICLES OF ASSOCIATION

 

General

 

Portage Biotech Inc., by action of its board of directors, amended its Memorandum of Association and Articles of Association (the “M&A”) on June 19, 2022 and filed an updated version thereof with the Registrar of Companies in the British Virgin Islands on June 21, 2022.

 

Pursuant to our Memorandum and Articles of Association, we are authorized to issue an unlimited number of ordinary shares of no-par value.

 

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The following are summaries of material terms and provisions of our Memorandum and Articles of Association and the BVI Act, insofar as they relate to the material terms applicable to our ordinary shares. Unless otherwise stated, the following summaries are of the terms of our shares as of the date of this annual report. This summary is not intended to be complete, and you should read the form of our Memorandum and Articles of Association, which has been filed as an exhibit to this report.

 

Meetings of shareholders

 

If our shareholders want us to hold a meeting of shareholders of the company, they may requisition the directors to hold one upon the written request of shareholders entitled to exercise at least 10% of the voting rights in respect of the matter for which the meeting is requested. Under British Virgin Islands law, this 10% threshold may only be increased to a maximum of 30% and any such increase would require an amendment to the Memorandum and Articles of Association.

 

Subject to our Memorandum and Articles of Association, a meeting of shareholders of the company will be called by not less than ten days' written notice and no more than 60 days’ notice. Notice of every meeting of shareholders may be delivered electronically and will be given to all of our shareholders. However, the inadvertent failure of the convener or conveners of a meeting of shareholders to give notice of the meeting to a shareholder, or the fact that a shareholder has not received the notice, does not invalidate the meeting.

 

A meeting of shareholders is duly constituted if, at the commencement of the meeting, there are present in person or by proxy two or more shareholders entitled to vote at the meeting.

 

Rights attaching to shares

 

Voting rights

 

Holders of our ordinary shares have identical rights, including dividend and liquidation rights, provided that, except as otherwise expressly provided in our Amended Memorandum and Articles of Association or required by applicable law, on any matter that is submitted to a vote of our shareholders, holders of our ordinary shares are entitled to one vote per ordinary share.

 

Under the BVI Act, the ordinary shares are deemed to be issued when the name of the shareholder is entered in our register of members. Our register of members is maintained by our transfer agent, TSX Trust Company, which enters the names of our shareholders in our register of members. If (a) information that is required to be entered in the register of shareholders is omitted from the register or is inaccurately entered in the register, or (b) there is unreasonable delay in entering information in the register, a shareholder of the company, or any person who is aggrieved by the omission, inaccuracy or delay, may apply to the British Virgin Islands courts for an order that the register be rectified, and the court may either refuse the application or order the rectification of the register, and may direct us to pay all costs of the application and any damages the applicant may have sustained.

 

Subject to any rights or restrictions attached to any shares, at any general meeting on a show of hands every shareholder of record who is present in person (or, in the case of a shareholder being a corporation, by its duly authorized representative) or by proxy shall have one vote and on a poll every shareholder present in person (or, in the case of a shareholder being a corporation, by its duly appointed representative) or by proxy shall have one vote for each share which such shareholder is the holder. Voting at any meeting of the shareholders is by show of hands unless a poll is demanded. A poll may be demanded by shareholders present in person or by proxy if the shareholder disputes the outcome of the vote on a proposed resolution and the chairman shall cause a poll to be taken. In the case of a tie vote at a meeting of shareholders, the chairman shall be entitled to a second or casting vote.

 

No shareholder shall be entitled to vote or be reckoned in a quorum, in respect of any share, unless such shareholder is registered as our shareholder at the applicable record date for that meeting. Shareholders of record may also pass written resolutions without a meeting by a majority vote.

 

 

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Protection of minority shareholders

 

Under the laws of the British Virgin Islands, there is little statutory law for the protection of minority shareholders other than the provisions of the BVI Act dealing with shareholder remedies. The principal protection under statutory law is that shareholders may bring an action to enforce the BVI Act or the constituent documents of the Company, our Memorandum and Articles of Association. Shareholders are entitled to have our affairs conducted in accordance with the BVI Act and the Memorandum and Articles of Association.

 

There are common law rights for the protection of shareholders that may be invoked, largely dependent on English company law, since the common law of the British Virgin Islands is limited. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company's affairs by the majority or the board of directors. However, every shareholder is entitled to have the affairs of the company conducted properly according to British Virgin Islands law and the constituent documents of the company. As such, if those who control the company have persistently disregarded the requirements of the BVI Act or the provisions of the company's Memorandum and Articles of Association, then the courts may grant relief. Generally, the areas in which the courts will intervene are the following: (1) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority; (2) acts that constitute fraud on the minority where the wrongdoers control the company; (3) acts that infringe or are about to infringe on the personal rights of the shareholders, such as the right to vote; and (4) where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded minority shareholders under the laws of many states in the U.S.

 

Pre-emption rights

 

British Virgin Islands law does not make a distinction between public and private companies and some of the protections and safeguards (such as statutory pre-emption rights) that investors may expect to find in relation to a public company are not provided for under British Virgin Islands law, save to the extent they are expressly provided for in the Memorandum and Articles of Association. There are no pre-emption rights applicable to the issuance of new shares by us under either British Virgin Islands law generally or our Memorandum and Articles of Association more specifically.

 

Modification of rights

 

As permitted by British Virgin Islands law, and our Memorandum and Articles of Association, we may vary the rights attached to our ordinary shares.

 

Transfer of shares

 

Subject to any applicable restrictions set forth in our Memorandum and Articles of Association, any of our shareholders may transfer all or any of his or her shares by a written instrument of transfer in the usual or common form or in any other form which our directors may approve. Shares may be held electronically and transferred electronically.

 

The registration of transfers may be suspended at such times and for such periods as the directors may from time to time determine. If the directors were to refuse (or suspend) a transfer, then the directors should provide the transferor and transferee with a notice providing their reasons for the suspension. The directors can only refuse or delay the registration of a transfer of shares if the transferor has failed to pay amount due in respect of those shares.

 

 

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Changes in authorized ordinary shares

 

By resolution of our directors we may (i) consolidate and divide all or any of our unissued authorized shares into shares of larger amount than our existing shares; (ii) sub-divide our existing ordinary shares, or any of them into shares of smaller amount than is fixed by our memorandum of association, subject nevertheless to the provisions of the BVI Act; or (iii) create new classes of shares with preferences to be determined by the board of directors at the time of authorization.

 

Dividends

 

Subject to the BVI Act and our Memorandum and Articles of Association, our directors may, by resolution, authorize a distribution to shareholders at such time and of such an amount as they think fit, if they are satisfied, on reasonable grounds, that, immediately after the distribution, we will satisfy the 'solvency test'. A company will satisfy the solvency test if (i) the value of the company's assets exceeds its liabilities; and (ii) the company is able to pay its debts as they fall due. Where a distribution is made to a shareholder at a time when the company did not, immediately after the distribution, satisfy the solvency test, it may be recovered by the company from the shareholder unless (i) the shareholder received the distribution in good faith and without knowledge of the company's failure to satisfy the solvency test; (ii) the shareholder has altered his position in reliance on the validity of the distribution; and (iii) it would be unfair to require repayment in full or at all.

 

Share repurchases

 

As permitted by the BVI Act and our Memorandum and Articles of Association, shares may be repurchased, redeemed or otherwise acquired by us provided that, immediately following the repurchase or redemption, we are satisfied we will pass the aforementioned solvency test.

 

We will require member consent before any share can be purchased, redeemed or otherwise acquired by us, save where such redemption is pursuant to certain statutory provisions, such as pursuant to section 179 of the BVI Act (redemption of minority shares) which allows for the holders of 90% or more of the votes to instruct the company to redeem the shares of the company held by the remaining shareholders.

 

Liquidation rights

 

As permitted by British Virgin Islands law and our Memorandum and Articles of Association, a voluntary liquidator may be appointed under Part XII of the BVI Act if we satisfy the solvency test (as aforementioned save that it is satisfied if assets equal or exceed liabilities).

 

Board of directors

 

We are managed by a board of directors, which consisted of six directors at March 31, 2022. On July 1, 2022, in connection with the Tarus Therapeutics transaction, we added a seventh board member. Our Memorandum and Articles of Association provide that the board of directors may be established by the board of directors up to a maximum of 15 members.

 

Our shareholders may, pursuant to our Memorandum and Articles of Association, by resolution of shareholders passed at a meeting of shareholders called for the purpose of removing the director or for purposes including the removal of the director or by a written resolution of shareholders at any time remove any director before the expiration of his or her period of office with or without cause, and may, pursuant to our Memorandum and Articles of Association, elect another person in his or her stead. Subject to our Memorandum and Articles of Association, the directors will have power at any time and from time to time to appoint any person to be a director, either as an addition to the existing directors or to fill a vacancy as long as the total number of directors (exclusive of alternate directors) does not at any time exceed the maximum number fixed by or in accordance with our Memorandum and Articles of Association (if any) and one third times the number of directors to have been elected at the last annual meeting of shareholders.

 

 

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Our Memorandum and Articles of Association do not provide for alternate directors.

 

There are no share ownership qualifications for directors, unless otherwise decided by a resolution of shareholders. Meetings of our board of directors may be convened at any time deemed necessary by any of our directors.

 

Unless the quorum has been otherwise fixed by the board, a meeting of our board of directors will be competent to make lawful and binding decisions if at least one-half of the directors are present or represented. Unless there are only two directors, in which case, the quorum shall be two. At any meeting of our directors, each director, whether by his or her presence or by his or her alternate, is entitled to one vote.

 

Questions arising at a meeting of our board of directors are required to be decided by simple majority votes of the directors' present or represented at the meeting. In the case of a tie vote, the chairman of the meeting shall not have a second or deciding vote. Our board of directors may also pass written resolutions without a meeting by a majority vote.

 

The remuneration to be paid to the directors shall be such remuneration as the directors or shareholders shall determine through a resolution.

 

Issuance of additional ordinary shares

 

Our Memorandum and Articles of Association authorize our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.

 

Our Memorandum and Articles of Association authorize our board of directors from time to time to issue ordinary shares to the extent permitted by the BVI Act.

 

Changes in authorized shares

 

We are authorized to issue unlimited number of ordinary shares without par value, which will be subject to the same provisions with reference to the payment of calls, liens, transfers, transmissions, forfeitures and otherwise as the shares in issue. We may by resolution:

 

consolidate and divide all or any of our unissued authorized shares into shares of a larger amount than our existing shares;

 

sub-divide our existing ordinary shares, or any of them into shares of smaller amount than is fixed by our memorandum of association, subject nevertheless to the provisions of the BVI Act; or

 

create new classes of shares with preferences to be determined by the board of directors at the time of authorization.

 

 

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Inspection of books and records

 

Under British Virgin Islands law holders of our ordinary shares will be entitled, on giving written notice to us, to inspect and make copies or take extracts of our: (a) Memorandum and Articles of Association; (b) register of shareholders; (c) register of directors; and (d) minutes of meetings and resolutions of shareholders and those classes of shareholders of which he is a shareholder.

 

Subject to our Memorandum and Articles of Association, our board of directors may, if they are satisfied that it would be contrary to our interest to allow a shareholder to inspect any document, or part of a document as referenced above, refuse to permit the shareholder to inspect the document or limit the inspection of the document, including limiting the making of copies or the taking of extracts from the records. Where our directors exercise their powers in these circumstances, they shall notify the shareholder as soon as reasonably practicable.

 

Conflicts of interest

 

Pursuant to the BVI Act and the company's memorandum and articles of association, a director of a company who has an interest in a transaction and who has declared such interest to the other directors, may:

 

vote on a matter relating to the transaction;

 

attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum; and

 

sign a document on behalf of the company or do any other thing in his capacity as a director, that relates to the transaction.

 

Anti-money laundering laws

 

In order to comply with legislation or regulations aimed at the prevention of money laundering we are required to adopt and maintain anti-money laundering procedures and may require subscribers to provide evidence to verify their identity. Where permitted, and subject to certain conditions, we may also delegate the maintenance of our anti-money laundering procedures (including the acquisition of due diligence information) to a suitable person.

 

We reserve the right to request such information as is necessary to verify the identity of a subscribe for our ordinary shares. In the event of delay or failure on the part of the subscriber in producing any information required for verification purposes, we may refuse to accept the application, in which case any funds received will be returned without interest to the account from which they were originally debited.

 

If any person resident in the British Virgin Islands knows or suspects that another person is engaged in money laundering or terrorist financing and the information for that knowledge or suspicion came to their attention in the course of their business, the person will be required to report his belief or suspicion to the Financial Investigation Agency of the British Virgin Islands, pursuant to the Proceeds of Criminal Conduct Act (Revised Edition, as amended). Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.

 

Duties of directors

 

British Virgin Islands law provides that every director of the company in exercising his powers or performing his duties shall act honestly and in good faith and in what the director believes to be in the best interests of the company. Additionally, the director shall exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances taking into account the nature of the company, the nature of the decision and the position of the director and his responsibilities. In addition, British Virgin Islands law provides that a director shall exercise his powers as a director for a proper purpose and shall not act, or agree to the company acting, in a manner that contravenes British Virgin Islands law or the memorandum and articles of association of the company.

 

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Anti-takeover provisions

 

The BVI Act does not prevent companies from adopting a wide range of defensive measures, such as staggered boards, blank check preferred shares, removal of directors only for cause and provisions that restrict the rights of shareholders to call meetings and submit shareholder proposals.

 

Voting rights and quorum requirements

 

Under British Virgin Islands law, the voting rights of shareholders are regulated by the company's Memorandum and Articles of Association and, in certain circumstances, the BVI Act. The articles of association will govern matters such as quorum for the transaction of business, rights of shares, and majority votes required to approve any action or resolution at a meeting of the shareholders or board of directors. Unless the articles of association otherwise provide, the requisite majority is usually a simple majority of votes cast. Under the M&A, a resolution of shareholders requires a majority vote of those persons voting at a meeting or in the case of a written resolution of shareholders, the vote of a majority of the shareholders.

 

Mergers and similar arrangements

 

Under the BVI Act, two or more companies may merge or consolidate in accordance with the statutory provisions. A merger means the merging of two or more constituent companies into one of the constituent companies, and a consolidation means the uniting of two or more constituent companies into a new company. In order to merge or consolidate, the directors of each constituent company must approve a written plan of merger or consolidation which must be authorized by a resolution approved, at a duly convened and constituted meeting of the shareholders of the Company, by the affirmative vote of a majority of those persons voting at a meeting or in the case of a written resolution of shareholders, the vote of a majority of the shareholders.

 

Shareholders not otherwise entitled to vote on the merger or consolidation may still acquire the right to vote if the plan or merger or consolidation contains any provision which, if proposed as an amendment to the memorandum of amended association and articles of association, would entitle them to vote as a class or series on the proposed amendment. In any event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to vote at the meeting or consent to the written resolution to approve the plan of merger or consolidation.

 

Shareholder suits

 

We are not aware of any reported class action or derivative action having been brought against the company in a British Virgin Islands court.

 

Under the BVI Act, if a company or a director of a company engages in, or proposes to engage in, conduct that contravenes the BVI Act or the memorandum of association or articles of the company, the BVI Court may, on the application of a shareholder or a director of the company, make an order directing the company or director to comply with, or restraining the company or director from engaging in that conduct.

 

In addition, under the BVI Act, the BVI Court may, on the application of a shareholder of a company, grant leave to that shareholder to bring proceedings in the name and on behalf of that company or to intervene in proceedings to which the company is a party for the purpose of continuing, defending or discontinuing the proceedings on behalf of the company. In determining whether to grant leave for such derivative actions, the Court must take into account certain matters, including whether the shareholder is acting in good faith, whether the derivative action is in the interests of the company taking account of the views of the company's directors on commercial matters and whether an alternative remedy to the derivative claim is available.

 

A shareholder of a company may bring an action against the company for breach of a duty owed by the company to him as a shareholder. The BVI Act also includes provisions for actions based on oppression, and for representative actions where the interests of the claimant are substantially the same as those of other shareholders.

 

Corporate governance

 

British Virgin Islands laws do not restrict transactions between a company and its directors, requiring only that directors exercise a duty to act honestly, in good faith and in what the directors believe to be in the best interests to the companies for which they serve.

 

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Indemnification

 

British Virgin Islands law does not limit the extent to which a company's memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the British Virgin Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our Memorandum and Articles of Association provide for the indemnification of our directors against all losses or liabilities incurred or sustained by a director as a director of our company in defending any proceedings, whether civil or criminal and this indemnity only applies if he or she acted honestly and in good faith with a view to our best interests and, with respect to any criminal action, he or she must have had no reasonable cause to believe his or her conduct was unlawful.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, officers or persons controlling us under the foregoing provisions, we have been advised that, in the opinion of the U.S. Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and therefore is unenforceable.

 

Staggered board of directors

 

The BVI Act does not contain statutory provisions that require staggered board arrangements for a British Virgin Islands company and our Memorandum and Articles of Association do not provide for a staggered board.

 

(C) MATERIAL CONTRACTS

 

The Company had no material contract, other than contracts entered into in the ordinary course of business, to which we or any of our subsidiaries is a party, for the fiscal year immediately preceding the filing of this report that are not otherwise discussed herein.

 

(D) EXCHANGE CONTROLS

 

There is no income or other tax of the British Virgin Islands imposed by withholding or otherwise on any payment to be made by us.

 

We are free to acquire, hold and sell foreign currency and securities without restriction. There is no exchange control legislation under British Virgin Islands law and accordingly there are no exchange control regulations imposed under British Virgin Islands law that would prevent us from paying dividends to shareholders in United States Dollars or any other currencies, and all such dividends may be freely transferred out of the British Virgin Islands, clear of any income or other tax of the British Virgin Islands imposed by withholding or otherwise without the necessity of obtaining any consent of any government or authority of the British Virgin Islands.

 

(E) TAXATION

 

British Virgin Islands Tax Consequences

 

Under the law of the British Virgin Islands as currently in effect, a holder of shares of the Company who is not a resident of the British Virgin Islands is not liable for British Virgin Islands income tax on dividends paid with respect to the shares of the Company, and all holders of securities of the Company are not liable to the British Virgin Islands for income tax on gains realized on the sale or disposal of securities. The British Virgin Islands does not impose a withholding tax on dividends paid by a company incorporated or continued under the BVI Act.

 

There are no capital gains, gift or inheritance taxes levied by the British Virgin Islands on companies incorporated under the BVI Act. In addition, securities of companies incorporated under the BVI Act are not subject to transfer taxes, stamp duties or similar charges.

 

There is no income tax treaty or convention currently in effect between (i) the United States and the British Virgin Islands or (ii) Canada and the British Virgin Islands, although a Tax Information Exchange Agreement is in force between the United States and the BVI and Canada and the BVI.

 

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The BVI Economic Substance (Companies and Limited Partnership) Act (Revised Edition 2020) (“ESA”)

 

The above legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities, which attract profits without real economic activity provides (among other things) that BVI companies that carry out certain defined activities, need to take steps to establish substance in the British Virgin Islands. We have taken advice and will be filing our economic substance declaration in the BVI shortly in accordance with the requirements of the legislation. The Company itself will not be subject to any such requirements to establish economic substance in the BVI. Although it is presently anticipated that the ESA will have little material impact on the Company or its operations, as the legislation is new and remains subject to further clarification and interpretation, it is not currently possible to ascertain the precise impact of these legislative changes on the Company.

 

BVI Data Protection

 

The Data Protection Act, 2021 (the “BVI DPA”) came into force in the British Virgin Islands on July 9, 2021. The BVI DPA establishes a framework of rights and duties designed to safeguard individuals’ personal data, balanced against the need of public authorities, businesses and organizations to collect and use personal data for lawful purposes. The BVI DPA is centered around seven data protection principles (the General Principle, the Notice and Choice Principle, the Disclosure Principle, the Security Principle, the Retention Principle, the Data Protection Principle and the Access Principle) which require that:

 

·personal data must not be processed without consent unless specific conditions are met and must not be transferred outside the British Virgin Islands, unless there is proof of adequate data protection safeguards or consent from the data subject;

 

·where consent has been given to processing of personal data, the data subject may at any time withdraw his or her consent;

 

·a data controller must inform a data subject of specific matters, for instance the purposes for which it is being collected and further processed;

 

·personal data must not be disclosed for any purpose other than the purpose for which it was to be disclosed at the time of collection or a purpose directly related thereto or to any party other than a third party of a class previously notified to the data subject;

 

·a data controller shall, when processing personal data, take practical steps to protect personal data from loss, misuse, modification, unauthorized or accidental access or disclosure, alteration or destruction;

 

·personal data must not be kept for longer than is necessary for the purpose;

 

·personal data must be accurate, complete, not misleading and kept up to date; and

 

·a data subject must be given access to his or her own personal data and be able to correct that data where it is inaccurate, incomplete, misleading or not up to date, except where a request for such access or correction is refused under the BVI DPA.

 

The BVI DPA imposes specific obligations on data controllers, including the duty to (i) apply the data protection principles; and (ii) respond in a timely fashion to requests from data subjects in relation to their personal data.

 

The Information Commissioner is the regulator responsible for the proper functioning and enforcement of the BVI DPA. Offences under the BVI DPA include:

 

·processing sensitive personal data in contravention of the BVI DPA;

 

·willfully obstructing the Information Commissioner or an authorized officer in the conduct of his or her duties and functions;

 

·willfully disclosing personal information in contravention of the BVI DPA; and

 

·collecting, storing or disposing of personal information in a manner that contravenes the BVI DPA.

 

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Offences committed under the BVI DPA may result in fines (up to US$500,000 in certain cases) or imprisonment. Further, a data subject who suffers damage or distress as a result of their data being processed in contravention of the DPA may institute civil proceedings in the British Virgin Islands courts.

 

U.S. Federal Income Tax Consequences

 

The discussion below is for general information only and is not, and should not be interpreted to be, tax advice to any holder of our ordinary shares. Each holder or a prospective holder of our ordinary shares is urged to consult his, her or its own tax advisor.

 

General

 

This section is a general summary of the material United States federal income tax consequences to U.S. Holders, as defined below, of the ownership and disposition of our ordinary shares as of the date of this report. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, the applicable Treasury regulations promulgated and proposed thereunder, judicial decisions and current administrative rulings and practice, all of which are subject to change, possibly on a retroactive basis. The summary applies to you only if you hold our ordinary shares as a capital asset within the meaning of Section 1221 of the Code. In addition, this summary generally addresses certain U.S. federal income tax consequences to U.S. Holders related to classification as a PFIC. The United States Internal Revenue Service, or the IRS, may challenge the tax consequences described below, and we have not requested, nor will we request, a ruling from the IRS or an opinion of counsel with respect to the United States federal income tax consequences of acquiring, holding or disposing of our ordinary shares. This summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to the ownership of our ordinary shares. In particular, the discussion below does not cover tax consequences that depend upon your particular tax circumstances nor does it cover any state, local or foreign law, or the possible application of the United States federal estate or gift tax. You are urged to consult your own tax advisors regarding the application of the United States federal income tax laws to your particular situation as well as any state, local, foreign and United States federal estate and gift tax consequences of the ownership and disposition of the ordinary shares. In addition, this summary does not take into account any special United States federal income tax rules that apply to a particular U.S. or non-U.S. holder of our common shares, including, without limitation, the following:

 

a dealer in securities or currencies;
   
a trader in securities that elects to use a mark-to-market method of accounting for its securities holdings;
   
a financial institution or a bank;
   
an insurance company;
   
a tax-exempt organization;
   
a person that holds our common shares in a hedging transaction or as part of a straddle or a conversion transaction;
   
a person whose functional currency for United States federal income tax purposes is not the U.S. dollar;
   
a person liable for alternative minimum tax;
   
a person that owns, or is treated as owning, 10% or more, by voting power or value, of our ordinary shares;
   
certain former U.S. citizens and residents who have expatriated; or
   
a person who receives our shares pursuant to the exercise of employee stock options or otherwise as compensation.

 

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U.S. Holders

 

For purposes of the discussion below, you are a "U.S. Holder" if you are a beneficial owner of our ordinary shares who or which is:

an individual United States citizen or resident alien of the United States (as specifically defined for United States federal income tax purposes);
   
a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, any State or the District of Columbia;
   
an estate whose income is subject to United States federal income tax regardless of its source; or
   
a trust (x) if a United States court can exercise primary supervision over the trust's administration and one or more United States persons are authorized to control all substantial decisions of the trust or (y) if it was in existence on August 20, 1996, was treated as a United States person prior to that date and has a valid election in effect under applicable Treasury regulations to be treated as a United States person.

 

If a partnership holds our ordinary shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner of a partnership holding our ordinary shares, you should consult your tax advisor.

 

Passive Foreign Investment Company (PFIC)

 

Under the Code, we will be a PFIC for any taxable year in which, after the application of certain "look-through" rules with respect to related companies, either (i) 75% or more of our gross income consists of "passive income," or (ii) 50% or more of the average quarterly value of our assets consist of assets that produce, or are held for the production of, "passive income." Passive income generally includes interest, dividends, rents, rents and royalties other than certain rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business, and capital gains. Whether we will be a PFIC in any year depends on the composition of our income and assets, and the relative fair market value of our assets from time to time, which we expect may vary substantially over time. We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change from year to year based on our income and assets and our anticipated future operations, we were a PFIC in the fiscal year ended in 2018 and may have been a PFIC in prior years and may be a PFIC in the future. We do not believe, at this time, that we will be a PFIC for the fiscal year ended March 31, 2020, due to the fact that we made the acquisition of several immune-oncology related businesses in 2018.

 

If we are a PFIC for any fiscal year during which a U.S. Holder holds our ordinary shares, we generally will continue to be treated as a PFIC with respect to that U.S. Holder for all succeeding fiscal years during which the U.S. Holder holds our ordinary shares, unless we cease to meet the threshold requirements for PFIC status and that U.S. Holder makes a qualifying "deemed sale" election with respect to the ordinary shares. If such an election is made, the U.S. Holder will be deemed to have sold the ordinary shares it holds at their fair market value on the last day of the last fiscal year in which we qualified as a PFIC, and any gain from such deemed sale will be subject to the consequences described below. After the deemed sale election, the ordinary shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.

 

If we are a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, the U.S. Holder may be subject to adverse tax consequences. Generally, gain recognized upon a disposition (including, under certain circumstances, a pledge) of our ordinary shares by the U.S. Holder would be allocated ratably over the U.S. Holder's holding period for such ordinary shares. The amounts allocated to the taxable year of disposition and to years before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for that taxable year for individuals or corporations, as appropriate, and would be increased by an additional tax equal to interest on the resulting tax deemed deferred with respect to each such other taxable year. Further, to the extent that any distribution received by a U.S. Holder on our ordinary shares exceeds 125% of the average of the annual distributions on such ordinary shares received during the preceding three years or the U.S. Holder's holding period, whichever is shorter, that distribution would be subject to taxation in the same manner described immediately above with respect to gain on disposition.

 

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If we are a PFIC for any fiscal year during which any of our non-U.S. subsidiaries is also a PFIC, a U.S. Holder of our ordinary shares during such year will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules to such subsidiary. U.S. Holders should consult their tax advisers regarding the tax consequences if the PFIC rules apply to any of our subsidiaries. Alternatively, if we are a PFIC and if our ordinary shares are "regularly traded" on a "qualified exchange," a U.S. Holder may be eligible to make a mark-to-market election that would result in tax treatment different from the general tax treatment described above. Our ordinary shares would be treated as "regularly traded" in any calendar year in which more than a de minimis quantity of the ordinary shares are traded on a qualified exchange on at least 15 days during each calendar quarter. NASDAQ is a qualified exchange for this purpose. Additionally, because a mark-to-market election cannot be made for equity interests in any lower-tier PFIC that we may own, a U.S. Holder that makes a mark-to-market election with respect to us may continue to be subject to the PFIC rules with respect to any indirect investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. If a U.S. Holder makes the mark-to-market election, the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of the ordinary shares at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election, the U.S. Holder's tax basis in the ordinary shares will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition of our ordinary shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless our ordinary shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. U.S. Holders are urged to consult their tax advisers about the availability of the mark-to-market election, and whether making the election would be advisable in their particular circumstances.

 

Alternatively, a U.S. Holder of stock in a PFIC may make a so-called "Qualified Electing Fund" election to avoid the PFIC rules regarding distributions and gain described above. The PFIC taxation regime would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held our ordinary shares while we are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has made a valid and effective QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder's pro rata share of our ordinary earnings as ordinary income and such U.S. Holder's pro rata share of our net capital gains as long-term capital gain, regardless of whether we make any distributions of such earnings or gain. In general, a QEF election is effective only if we make available certain required information. U.S. Holders should be aware, however, that we are not required to make this information available but have agreed to do so for our fiscal year ended March 31, 2022 for those United States shareholders who ask for it. The QEF election is made on a shareholder-by-shareholder basis and generally may be revoked only with the consent of the IRS. U.S. Holders should consult with their own tax advisors regarding eligibility, manner and advisability of making a QEF election if we are treated as a PFIC.

 

In addition, if we are a PFIC or, with respect to particular U.S. Holders, are treated as a PFIC for the taxable year in which we paid a dividend or for the prior taxable year, the preferential rates discussed above with respect to dividends paid to certain non-corporate U.S. Holders would not apply.

 

If a U.S. Holder owns our ordinary shares during any year in which we are a PFIC, the U.S. Holder generally will be required to file an IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with respect to us, generally with the U.S. Holder's federal income tax return for that year. If we are a PFIC for a given taxable year, then you should consult your tax advisor concerning your annual filing requirements.

 

The U.S. federal income tax rules relating to PFICs are complex. U.S. Holders are urged to consult their own tax advisers with respect to the acquisition, ownership and disposition of our ordinary shares, the consequences to them if we are or become a PFIC, any elections available with respect to our ordinary shares, and the IRS information reporting obligations with respect to the acquisition, ownership and disposition of our ordinary shares.

 

Non-U.S. Holders

 

If you are not a U.S. Holder, you are a "Non-U.S. Holder."

 

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Distributions on Our Ordinary Shares

 

You generally will not be subject to U.S. federal income tax, including withholding tax, on distributions made on our ordinary shares unless:

 

you conduct a trade or business in the United States; and
   
the distributions are effectively connected with the conduct of that trade or business (and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax on a net income basis in respect of income from our ordinary shares, such distributions are attributable to a permanent establishment that you maintain in the United States).

 

If you meet the two tests above, you generally will be subject to tax in respect of such dividends in the same manner as a U.S. Holder, as described above. In addition, any effectively connected dividends received by a non-U.S. corporation may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30 percent rate or such lower rate as may be specified by an applicable income tax treaty.

 

Sale, Exchange or Other Disposition of Our Ordinary Shares

 

Generally, you will not be subject to U.S. federal income tax, including withholding tax, in respect of gain recognized on a sale or other taxable disposition of our ordinary shares unless:

 

your gain is effectively connected with a trade or business that you conduct in the United States (and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax on a net income basis in respect of gain from the sale or other disposition of our ordinary shares, such gain is attributable to a permanent establishment maintained by you in the United States); or
   
you are an individual Non-U.S. Holder and are present in the United States for at least 183 days in the taxable year of the sale or other disposition, and certain other conditions exist.

 

You will be subject to tax in respect of any gain effectively connected with your conduct of a trade or business in the United States generally in the same manner as a U.S. Holder, as described above. Effectively connected gains realized by a non-U.S. corporation may also, under certain circumstances, be subject to an additional "branch profits tax" at a rate of 30 percent or such lower rate as may be specified by an applicable income tax treaty.

 

Backup Withholding and Information Reporting

 

Payments, including dividends and proceeds of sales, in respect of our ordinary shares that are made in the United States or by a United States related financial intermediary will be subject to United States information reporting rules. In addition, such payments may be subject to United States federal backup withholding tax. You will not be subject to backup withholding provided that:

 

you are a corporation or other exempt recipient; or
   
you provide your correct United States federal taxpayer identification number and certify, under penalties of perjury, that you are not subject to backup withholding.

 

Amounts withheld under the backup withholding rules may be credited against your United States federal income tax, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS in a timely manner.

 

 73 

 

Foreign asset reporting

 

Certain U.S. Holders, who are individuals, are required to report information relating to an interest in ordinary shares, subject to certain exceptions (including an exception for ordinary shares held in accounts maintained by U.S. financial institutions). U.S. Holders are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition of ordinary shares.

 

(F) DIVIDEND AND PAYING AGENTS

 

Not applicable.

 

(G) STATEMENT BY EXPERTS

 

Not applicable.

 

(H) DOCUMENTS ON DISPLAY

 

We are currently subject to the informational requirements of the Exchange Act applicable to foreign private issuers. To fulfill these requirements we file with the Securities and Exchange Commission, within four months after the end of our fiscal year an annual report on Form 20-F containing financial statements that will be examined and reported on, with an opinion expressed, by an independent public accounting firm. We also file current reports on Form 6-K for significant corporate events throughout the year. As a foreign private issuer, we are exempt from the rules under the Exchange Act relating to the furnishing of proxy statements.  Also, because we are a foreign private issuer our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act.

 

You may read and copy any document we file with the SEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1 800 SEC 0330 for further information on the public reference room. The SEC also maintains an Internet site that contains reports and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are also available to the public through this web site at http://www.sec.gov.

 

(I) SUBSIDIARY INFORMATION

 

The documents concerning the Company's subsidiaries referred to in this Annual Report may be inspected at the Company's office at 6 Adelaide Street East, Suite 300, Toronto, Ontario, Canada M5C 1H6.

 

ITEM 11 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company is exposed in varying degrees to a number of risks arising from financial instruments. Management's close involvement in the operations allows for the identification of risks and variances from expectations. The Company does not participate in the use of financial instruments to mitigate these risks and has no designated hedging transactions. The Board approves and monitors the risk management processes. The Board's main objectives for managing risks are to ensure liquidity, the fulfilment of obligations, the continuation of the Company's search for new business participation opportunities, and limited exposure to credit and market risks while ensuring greater returns on the surplus funds on hand. There were no changes to the objectives or the process from the prior year.

 

 74 

 

A summary of the Company's risk exposures as it relates to financial instruments are reflected below.

 

Fair Value of Financial Instruments

 

The Company’s financial assets and liabilities are comprised of cash and cash equivalents, receivables and investments in equities and private entities, accounts payable, warrant liability and unsecured notes payable.

 

The Company classifies the fair value of these transactions according to the following fair value hierarchy based on the amount of observable inputs used to value the instrument:

 

·Level 1 – Values are based on unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date.

 

·Level 2 – Values are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as of the reporting date.

 

·Level 3 – Values are based on prices or valuation techniques that are not based on observable market data. Investments are classified as Level 3 financial instrument.

 

Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy.

 

Management has assessed that the fair values of cash and cash equivalents, other receivables and accounts payable approximate their carrying amounts largely due to the short-term maturities of these instruments.

 

The Company’s financial instruments are exposed to certain financial risks: credit risk and liquidity risk.

 

Credit Risk

 

Credit risk is the risk of loss associated with a counterparty’s inability to fulfil its payment obligations. The credit risk is attributable to various financial instruments, as noted below. The credit risk is limited to the carrying value as reflected in the Company’s consolidated statements of financial position.

 

Cash and cash equivalents. Cash and cash equivalents are held with major international financial institutions and therefore the risk of loss is minimal.

 

Other receivables. The Company was exposed to credit risk attributable to its debtor since a significant portion of this amount represents the amount agreed on a settlement of a claim by PPL, originally payable over the next four years. The installment note was repaid in full in July 2021.

 

Liquidity Risk

 

Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due.

 

The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company’s reputation. The Company holds sufficient cash and cash equivalents to satisfy obligations under accounts payable and accruals.

 

The Company monitors its liquidity position regularly to assess whether it has the funds necessary to meet its operating needs and needs for investing in new projects. The Company believes that it has sufficient funding to finance the committed drug development work, apart from meeting its operational needs for the foreseeable future.

 

 75 

 

However, as a biotech company at an early stage of development and without significant internally generated cash flows, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company, or that actual drug development expenditures may exceed those planned. The current uncertainty in global markets could have an impact on the Company’s future ability to access capital on terms that are acceptable to the Company. There can be no assurance that required financing will be available to the Company.

 

ITEM 12 – DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

Not applicable.

 

PART II

 

ITEM 13 – DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

None.

 

ITEM 14 – MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

None

 

ITEM 15 – CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

The Company's disclosure controls and procedures, as such term is defined in Rules 13(a)-13(e) and 15(d)-15(e) of the Exchange Act are designed to provide reasonable assurance that all relevant information is communicated to senior management, including the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO. Based on this evaluation these officers concluded that as of the end of the period covered by this Annual Report on Form 20-F, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. These disclosure controls and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to the Company's management, including our Company's principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that the disclosure controls and procedures were not effective was due to the presence of a material weakness in internal control over financial reporting as identified below under the heading "Internal Controls over Financial Reporting Procedures". Management anticipates that such disclosure controls and procedures will not be effective until the material weakness is remediated.

 

 

 

 

 76 

 

Management's Annual Report on Internal Control over Financial Reporting (ICFR)

 

The management of the Company, including the CEO and CFO, is responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company's internal control system was designed to provide reasonable assurance to the Company's management and the board of directors regarding the reliability of financial reporting and preparation and fair presentation of published financial statements for external purposes in accordance with IFRS. Internal control over financial reporting includes those policies and procedures that:

 

1.pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

2.provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

 

3.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

 

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2022. In making this assessment, it used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation under these criteria, management identified material weaknesses in the Company's internal controls over financial reporting, and as a result, management concluded that the Company's internal control over financial reporting was not effective as of March 31, 2022.

 

Management identified the following material weaknesses set forth below in our internal control over financial reporting.

 

·Management was unable to perform an effective risk assessment or monitor internal controls over financial reporting;

 

·The management of the Company lacks the number of skilled persons it requires given the complexity of the reporting requirements it has to make, which more specifically include the staff and expertise (i) to properly segregate duties and perform oversight of work performed and to perform compensating controls over the finance and accounting functions, (ii) to establish and perform fair value estimates or subsequently monitor fluctuations in fair value estimates, and (iii) to apply complex accounting principles, including those relating to business combination accounting, income taxes and fair value estimates; and

 

·There are insufficient written policies and procedures in place to ensure the correct application of accounting and financial reporting with respect to the current requirements of IFRS and SEC disclosure requirements, some of which specifically relate to investment accounting and fair value measures, assessment of in-process research and development assets, share based payments, carrying amounts of goodwill and intangible assets and business combination accounting.

 

 

 

 

 

 77 

 

Attestation Report of the Registered Public Accounting Firm

 

This Annual Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report is not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Annual Report.

 

Changes in Internal Control over Financial Reporting and Planned Remediation Activities

 

Management is committing additional resources improve and augment its control over financial reporting as well as continue to leverage experienced consultants to assist with ongoing IFRS and SEC compliance requirements.

 

ITEM 16(A) – AUDIT COMMITTEE FINANCIAL EXPERTS

 

The Board of Directors has determined that Mr. Steven Mintz, who is an independent director, is an audit committee financial expert as such term is defined in Rule 10A-3(b)(1) under the Exchange Act.

 

ITEM 16 (B) – CODE OF ETHICS

 

We have adopted a Code of Ethics, which applies to all consultants, officers and directors. A copy of our current code of ethics was included in the exhibits to the fiscal 2014 annual report on Form 20-F.

 

A copy of our Code of Ethics can be obtained by writing to our corporate office at c/o Portage Services Ltd., Ian Walters, 6 Adelaide Street East, Suite 300, Toronto, Ontario, Canada M5C 1H6.

 

During the most recently completed fiscal year, the Company has neither: (a) amended its Code of Ethics; nor (b) granted any waiver (including any implicit waiver) from any provision of its Code of Ethics.

 

ITEM 16 (C) – PRINCIPAL ACCOUNTANT'S FEES AND SERVICES

 

The following outlines the expenditures for accounting fees paid or accrued to the independent auditing firms of the Company for the last two fiscal periods ended:

 

March 31,  2022  2021
       
Audit fee  $196,780   $172,480 
Other services  $30,900   $65,000 

 

Included in audit fees are $67,800 with respect to the three quarterly reviews performed in each of 2022 and 2021. The Company also incurred fees of $30,900 and $65,000 with respect to work performed on the Company’s comfort letter and registration statement in 2022 and 2021, respectively. The Company did not have any engagement with the independent accounting firm of the Company during the fiscal years ended 2022 and 2021 with respect to professional services for tax compliance, tax advice or tax planning or for any other services.

 

Under our existing policies, the audit committee must approve all audit and non-audit related services provided by the independent accounting firms.

 

 78 

 

ITEM 16 (D) – EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

Not applicable.

 

ITEM 16 (E) – PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 

We did not, nor did any affiliated purchaser, purchase any of our equity securities during the fiscal year 2022.

 

ITEM 16 (F) – CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT

 

Not Applicable.

 

ITEM 16 (G) – CORPORATE GOVERNANCE

 

We are incorporated under the BVI Act. Our ordinary shares are registered with the SEC and are listed on the Nasdaq Capital Market. As a result, our corporate governance framework is subject to laws of the British Virgin Islands, or BVI, the securities laws and regulations of the United States and the listing requirements of the Nasdaq Marketplace Rules.

 

Under Rule 5615 of the Nasdaq Marketplace Rules, a foreign private issuer may follow its home country practice in lieu of the requirements of the Nasdaq Marketplace Rules. We follow the exemptions provide under the Nasdaq Marketplace Rules as described below.

 

British Virgin Islands law does not require that a majority of our board of directors consist of independent directors or that our board committees consist of entirely independent directors. Our board of directors and board committees, therefore, may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we will not be subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors must regularly have scheduled meetings at which only independent directors are present. Also, British Virgin Islands law does not require the board of directors to have a nominating committee or compensation committee, but we do plan on having such committees.

 

We also are exempt from the Nasdaq listing rules so as to follow the quorum rules for shareholder meetings under British Virgin Islands law. We also are exempt from the Nasdaq listing rules so as to not be required to obtain shareholder approval for certain issuance of securities, shareholder approval of share option plans and change of control transactions under the Nasdaq Listing Rule 5635.

 

As a foreign private issuer, the Company is exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Securities Exchange Act of 1934. The Company solicits proxies in accordance with applicable rules and regulations in British Virgin Islands.

 

ITEM 16 (H) – MINE SAFETY DISCLOSURE

 

Not applicable.

 

 

 79 

 

PART III

 

ITEM 17 – FINANCIAL STATEMENTS

 

The financial statements are provided pursuant to Item 18.

 

ITEM 18 – FINANCIAL STATEMENTS

 

See the Financial Statements and Exhibits listed in Item 19 hereof and filed as part of this Annual Report.

 

ITEM 19 – EXHIBITS

 

(a) Financial Statements

 

 

 

 

 

 

 

 

 80 

 

 

PORTAGE BIOTECH INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE YEARS ENDED MARCH 31, 2022 AND 2021

 

(U.S. Dollars in thousands)

 

 

TABLE OF CONTENTS

 

Reports of Independent Registered Public Accounting Firm (PCAOB ID: 688) F-1
   
Consolidated Statements of Financial Position F-3
   
Consolidated Statements of Operations and Other Comprehensive Income (Loss) F-4
   
Consolidated Statements of Changes in Equity F-5
   
Consolidated Statements of Cash Flows F-6
   
Notes to Consolidated Financial Statements F-7

 

 

 

 

 

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Board of Directors of

Portage Biotech Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated statements of financial position of Portage Biotech Inc. (the “Company”) as of March 31, 2022 and 2021, the related consolidated statements of operations and other comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended March 31, 2022 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2022, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits 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 audits 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 audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

 

 

F-1

 

 

Impairment of In-Process Research and Development

 

Critical Audit Matter Description

 

As reflected in the Company’s consolidated financial statements at March 31, 2022, the Company’s carrying amount of in-process research and development assets was approximately $117.4 million. As disclosed in Note 4 to the consolidated financial statements, in-process research and development assets are tested for impairment at least annually or more frequently if indicators of impairment require the performance of an interim impairment assessment. As a result of its year end assessment, management concluded that there was no impairment to the Company’s in-process research and development assets during the year ended March 31, 2022.

 

Auditing management’s impairment test of in-process research and development assets was complex and highly judgmental due to the significant measurement uncertainty in determining the fair values of the in-process research and development assets. In particular, the fair value estimates of in-process research and development assets are sensitive to changes in significant assumptions such as discount rates, revenue growth rates and operating margins.. These assumptions are affected by expected future market or economic conditions.

 

How the Critical Audit Matter was addressed in the Audit

 

We obtained a copy of the Company’s impairment assessment including an independent appraisal of the fair value of the Company’s in-process research and development that was used by management to determine their fair values, in accordance with IAS 36 (Impairment of Assets) and assessed the qualifications of the specialist.

 

To test the impairment assessment including fair values of the in-process research and development assets, our audit procedures included:

 

·With obtained the valuation report prepared by management’s third party valuation specialists. We performed the following procedures in respect to the valuation report:
- We assessed the qualifications of the third party specialists who performed the analysis and prepared the report; and
 -We tested the mathematical accuracy of all the schedules used in the analysis.

 

·With assistance from our valuation specialists, we evaluated the reasonableness of the valuation methodology and significant assumptions, including the following:
-Weighted average cost of capital;
-Testing certain inputs utilized by comparing them to similar companies in the industry.

 

·We performed the following additional procedures:
-Performed a sensitivity analysis of the significant assumptions to evaluate the changes in the fair value of the in-process research and development that would result from changes in the assumptions;
-Assessed the reasonableness of the probability of success of current research and development projects;
 -Assessed the reasonableness of the expected timing to realization of revenue;
 -Evaluated the reasonableness of the expected time to a possible liquidation event; and
-Developed an independent expectation for comparison to management’s estimated revenue, costs of revenue and administrative expenses.

 

 

/s/ Marcum llp

 

Marcum LLP

 

We have served as the Company’s auditor since 2019.

 

Melville, NY

August 1, 2022

 

 

 

 

 

F-2

 

 

PORTAGE BIOTECH INC.

Consolidated Statements of Financial Position

(U.S. Dollars in thousands)

 

                
      March 31,
   Notes  2022  2021
Assets               
Current assets               
Cash and cash equivalents   4   $23,352   $2,770 
Prepaid expenses and other receivables   5    1,480    2,176 
 Total Current assets        24,832    4,946 
Long-term assets               
Long-term portion of other receivables   5        22 
Investment in associate   7    1,673    1,735 
Investments in private companies   9    7,409    7,409 
Goodwill   11    43,324    43,324 
In-process research and development   12    117,388    117,388 
Other assets        36    36 
Total assets       $194,662   $174,860 
                
Liabilities and Equity               
Current liabilities               
Accounts payable and accrued liabilities   13   $750   $1,938 
Warrant liabilities   16    33    1,120 
Unsecured notes payable   14        150 
Total Current Liabilities        783    3,208 
Non-current liabilities               
Deferred tax liability   12, 15    28,445    24,050 
Total non-current liabilities        28,445    24,050 
Total liabilities        29,228    27,258 
Shareholders’ Equity               
Capital stock   17    158,324    130,649 
Stock option reserve   18    16,928    7,977 
Accumulated other comprehensive income        958    958 
Accumulated deficit        (55,005)   (38,135)
Total equity attributed to owners of the Company        121,205    101,449 
Non-controlling interest   24    44,229    46,153 
Total equity        165,434    147,602 
Total liabilities and equity       $194,662   $174,860 
Commitments and Contingent Liabilities (Note 20)               

 

On behalf of the Board “Allan Shaw”   Chief Financial Officer “Ian Walters” Director
  (signed)     (signed)  

 

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

 

F-3

 

 

PORTAGE BIOTECH INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(U.S. Dollars in thousands, except per share amounts)

 

                     
      Years Ended March 31,
   Notes  2022  2021  2020
Expenses                    
Research and development       $6,769   $7,312   $4,108 
General and administrative expenses        8,819    5,128    1,870 
Loss from operations        (15,588)   (12,440)   (5,978)
Change in fair value of warrant liability   16    852    (790)   24 
Share of (loss) income in associate accounted for using equity method   7    (62)   (490)   18 
(Loss) on equity issued at a discount   17        (1,256)    
(Loss) on extinguishment of notes payable   14        (223)   (33)
Gain on sale of marketable equity securities   6        72     
Gain on disposition of subsidiaries   8        412