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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, 2023

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: 001-40086

 

Portage Biotech Inc.
(Exact name of Registrant as specified in its charter)
 
N/A
(Translation of Registrant's name into English)
 
British Virgin Islands A6
(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 – 17,801,391 as at July 31, 2023

 

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. ☐

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

 

 

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

 

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 19
Item 5. Operating and Financial Review and Prospects 31
Item 6. Directors and Senior Management 43
Item 7. Major Shareholders and Related Party Transactions 63
Item 8. Financial Information 66
Item 9. The Offer and Listing 66
Item 10. Additional Information 68
Item 11. Quantitative and Qualitative Disclosures about Market Risk 81
Item 12. Description of Securities Other than Equity Securities 83
     
Part II    
     
Item 13. Defaults, Dividend Arrearages and Delinquencies 83
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 83
Item 15. Controls and Procedures 83
Item 16. Audit Committee, Code of Ethics, and Principal Accountant's Fees and Services 85
     
Part III    
     
Item 17. Financial Statements 87
Item 18. Financial Statements 87
Item 19. Exhibits 87

 

 

 

 

 

 

 

 

 

 

 

iii

 

FORWARD-LOOKING STATEMENTS

 

This annual report on Form 20-F (“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,” “will,” “may,” “should,” “could,” “targets,” “projects,” “predicts,” “plans,” “potential,” or “continue,” 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 timing for availability and release of results of current and future clinical trials;

 

·our expectations regarding regulatory communications, submissions or approvals;

 

·the potential functionality, capabilities, 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.

 

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 commercialization of the product candidates we develop.

 

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”.

 

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 residents as of the last measurement date. 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 $"), except where otherwise indicated, 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.

 

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, 2023, 2022 and 2021, and the Balance Sheet data as of March 31, 2023 and 2022 are derived from our audited Consolidated Financial Statements appearing elsewhere in this Annual Report. The selected Operations Data for the years ended March 31, 2020 and 2019 and the Balance Sheet data as of March 31, 2021, 2020 and 2019 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,  2023  2022  2021  2020  2019
   All amounts in 000'$ (except for per share amounts)
Net loss before non-controlling interests  $(104,666)  $(19,169)  $(17,189)  $(7,249)  $(3,594)
Net loss attributable to owners of the Company  $(104,611)  $(16,870)  $(15,833)  $(5,333)  $(2,635)
Comprehensive loss  $(109,949)  $(19,169)  $(17,189)  $(6,373)  $(3,544
Comprehensive loss attributable to owners of the Company  $(109,894)  $(16,870)  $(15,833)  $(4,457)  $(2,585)
Working capital  $11,811   $24,049   $1,738   $1,226   $4,757 
Total assets  $99,129   $194,662   $174,860   $173,174   $173,715 
Capital stock  $218,782   $158,324   $130,649   $117,817   $116,237 
Warrants  $   $33   $1,120   $   $ 
Stock option reserves  $21,204   $16,928   $7,977   $58   $324 
Equity attributable to owners of the Company  $76,045   $121,205   $101,449   $96,531   $99,674 
Weighted average number of shares outstanding - Basic   16,119    13,060    11,733    10,952    4,820 
Weighted average number of shares outstanding - Diluted   16,119    13,060    11,733    10,952    4,820 
Net loss per share - Basic  $(6.49)  $(1.29)  $(1.35)  $(0.49)  $(0.55)
Net loss per share - Diluted  $(6.49)  $(1.29)  $(1.35)  $(0.49)  $(0.55)

 

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 presented.

 

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 (“SalvaRx”), which has been accounted for using the acquisition method as explained elsewhere in this Annual 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.

 

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 pound sterling (“GBP”) and 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, 2023, 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$1.32, for the conversion of British pound sterling into United States dollars was approximately US$1 = £0.79 and for the conversion of EU euros into United States dollars was approximately US$1 = €0.92.

 

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

 

Fiscal year 2023  October  November  December  January  February  March
Canadian Dollar                              
High   1.39    1.37    1.37    1.36    1.36    1.38 
Low   1.36    1.33    1.34    1.33    1.33    1.35 
British Pounds                              
High   0.91    0.89    0.83    0.84    0.84    0.85 
Low   0.86    0.83    0.81    0.81    0.81    0.81 
EU Euros                              
High   1.03    1.02    0.96    0.95    0.95    0.95 
Low   1.00    0.96    0.93    0.92    0.91    0.92 

 

 3 

 

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,  2023  2022  2021  2020  2019
Average for the Fiscal Year                         
Canadian Dollar   1.32    1.25    1.32    1.33    1.31 
British Pounds   0.83    0.73    0.77    0.79    0.76 
EU Euros   0.96    0.86    0.86    0.90    0.86 

 

We operate in various jurisdictions and are subject to exchange rates for the Canadian dollar, British pound and the Euro. We are subject to currency risk with respect to certain liabilities settleable in foreign currency, as well as invoices payable in foreign currency. While the rates have changed period to period, the overall effect of exchange rates on our financial statements have historically not been significant.

 

(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 the most significant risk factors that are specific to the Company's operations and industry and that may have a material impact on, or constitute the most significant risk factors in respect of, the Company's future financial performance.

 

Risks Related to our Business

 

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 if approved.

 

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/or 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.

 

 4 

 

We have incurred, and we expect to continue to incur substantial costs related to the development of our product candidates, including costs related to the clinical trials for our iNKT platform and adenosine platform. 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.

 

Furthermore, under General Instruction I.B.5 to Form F-3, or the Baby Shelf Rule, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form F-3 is limited to one-third of the aggregate market value of the ordinary shares held by non-affiliates of our company, which limitation may change over time based on our stock price, number of ordinary shares outstanding and the percentage of ordinary shares held by non-affiliates. We therefore are limited by the Baby Shelf Rule as of the filing of this Annual Report, until such time as our non-affiliate public float exceeds $75 million.

 

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 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 guarantee 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 research and development business.

 

Our business must be evaluated in light of the risks, 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 under development, or that may be developed in the future, will be determined to be safe and effective by the governing regulatory bodies, will be able to receive and maintain necessary regulatory approvals in order to be commercialized, or will be commercially viable. Any failure to successfully develop and obtain regulatory approval for our product candidates would have a material adverse effect on our business, financial condition and results of operations.

 

Rapidly changing medical technology within the life sciences industry 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 our product candidates 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. Our new product candidates and products may not be accepted in the intended markets. Our inability to gain market acceptance of new products could harm our future operating results.

 

 5 

 

Clinical trials for our product candidates will be expensive and will take a considerable amount of time, and the outcomes of such 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 us, 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 or have unexpected results.

 

The timing of the commencement, continuation and completion of clinical trials has 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;

 

·measures related to the COVID-19 pandemic or other similar circumstances;

 

·delays arising from our collaborative partnerships;

 

·delays in obtaining regulatory permission to commence a clinical trial, or government intervention to delay, suspend or terminate a clinical trial;

 

·delays in approving, or refusal to approve, or suspension, or termination of a clinical trial by the institutional review board or independent ethics board responsible for overseeing the trial;

 

·delays in identifying and reaching agreement on acceptable terms with prospective clinical trial sites, clinical research organizations, laboratories and testing facilities, or other vendors providing clinical trial services;

 

·slower than expected rates of patient recruitment and enrollment or patients’ early withdrawal from participation;

 

·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 trial 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 could result in incomplete data;

 

·unforeseen safety issues or side effects;

 

·lack of demonstrated efficacy during the clinical trials;

 

·our reliance on clinical trial sites, clinical research organizations, laboratories and testing facilities and other vendors to conduct clinical trials or provide clinical trial services, which may not conduct those trials in compliance with applicable laws and regulations, or current good clinical or laboratory practices;

 

·changes in laws or regulations applicable to clinical trial requirements; or

 

·other regulatory delays.

 

 6 

 

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 product candidate if approved by a regulatory authority.

 

We have limited personnel with experience in manufacturing, and we do not own facilities for manufacturing product candidates for the potential clinical trials and/or commercial manufacturing of product candidates if approved. 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, or obtain the materials necessary to produce, any approved product in sufficient quantities to meet the requirements for the launch of any such product or to meet future demand, our revenues and gross margins could be adversely affected. To be successful, any approved product 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 third-party facilities to manufacture 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 of our product candidates and future sales of any product candidates, if approved, as well as our business, results of operations and prospects, and the value of our ordinary shares could be materially adversely affected.

 

We and our collaboration partners may encounter problems with aspects of manufacturing our product candidates or any approved products, 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 trial supplies and commercial production for 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 current Good Manufacturing Practice ("cGMP”) regulations, a requirement for all pharmaceutical products in the U.S. We cannot be certain that we and our collaboration partners will be able to contract with any of these companies on acceptable terms to us, if at all, which could harm our business, results of operations and prospects, and the value of our ordinary shares.

 

In addition, any manufacturing facility will be required to be registered 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 cGMP requirements. We do not directly 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 regulations for the manufacture of both active drug substances and finished drug products. If we or our collaboration partners or any third-party manufacturer fail to maintain regulatory compliance, the FDA, the Competent Authorities of the Member States of the EEA, or other regulatory authorities may take enforcement action that may include issuing a warning letter, instituting a clinical hold, withdrawing regulatory approval, seeking product seizures or injunctions and, where appropriate, pursuing criminal prosecution, any of which could have an adverse effect on our business, financial condition and results of operations.

 

 7 

 

The results of pre-clinical studies and initial clinical trials may not be predictive of future results, and our 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, to understand the side effects of product candidates, and to explore efficacy at various doses and schedules. Favorable results in early trials may not be repeated in later trials. Any success that we may experience in pre-clinical or animal studies and early clinical trials does not ensure that later large-scale efficacy trials will be successful, and does not predict final trial results, which could have an adverse effect on our business, financial condition and results of operations.

 

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, which could also cause a clinical trial to be repeated or terminated.

 

There is typically a high rate of attrition for 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 qualifying patients in our clinical trials. The timing of our current and future clinical trials depends, in part, on the speed at which we can recruit qualifying patients to participate in testing our therapeutic candidates. If qualifying 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, then the timeline for recruiting patients, conducting trials and obtaining regulatory approval of potential products may be delayed. 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 qualifying 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 qualifying patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which could have an adverse effect on our business.

 

The outcomes of clinical trials are uncertain and our clinical trials may fail to demonstrate adequately the safety or 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 product 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 product candidates. We will need to demonstrate that the product candidate are safe and effective for use in each target indication. Each product 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 collaborations with third parties in connection with services we will need for the development, marketing and commercialization of our products candidates, if approved.

 

The success of our business will be largely dependent on our ability to enter into collaborations regarding the development, clinical testing, regulatory approval and commercialization of our product candidates. We may not be able to find collaborative partners to support the future development, marketing and commercialization of our product candidates, 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.

 

 8 

 

Even if we are able to find new collaborative partners, our success is highly dependent upon the performance of these new collaborators. The amount and timing of resources to be devoted to activities by future collaborators, if any, are not within our direct control and, as a result, we cannot assure you that any future collaborators will commit sufficient resources to our research and development projects or the commercialization of our product candidates if approved. Any future collaborators might not perform their 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 which could have a material adverse effect on our business, financial condition, prospects and results of operations.

 

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 product candidates. Despite our best efforts to limit them, disputes may arise with respect to ownership of technology developed under any such corporate collaboration which could have a material adverse effect on our business, financial condition, prospects and results of operations.

 

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 and maintain patent protection or patent licenses for our current and future technology related to our product candidates. 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.

 

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

 

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications in jurisdictions of interest at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, such as with respect to the LICR License described below, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If such licensors fail to maintain such patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated. Moreover, changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

 

 9 

 

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

 

The development, manufacture and sale of some of the products we develop will involve the use of processes, products, or information, the rights to which are owned by third parties. For example, we rely on certain in-licenses for the development and commercialization of our INKT engager and adenosine receptor antagonists platforms, respectively. If we are unable to obtain and maintain patent protection for technology related to our product candidates, or if our licensors are unable to obtain and maintain patent protection for the technology or products that we license from them, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. In addition, invalidation of our patent rights by third parties could jeopardize the anticipated revenue streams from current licensees.

 

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our licensors’ patent rights are highly uncertain. Any of the abovementioned risks could have a material adverse on us and our business.

 

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, such as our recent acquisition of Tarus Therapeutics. 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 our capital, (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.

 

 

 

 10 

 

We rely on information technology and security systems and any damage, interruption or compromise of our information technology and security systems or data could disrupt and harm our business.

 

We use information technology and security systems to process, transmit and store electronic information in connection with the operation of our business. We also use such systems to protect proprietary and confidential information, including that of physicians, patients, and other individuals involved in clinical trials, suppliers, and employees. We face risks associated with cybersecurity incidents and other significant disruptions of such systems, including denial of service or other similar attacks, to our facilities or systems; unauthorized access to or acquisition of personal information, confidential information or other data we process or maintain; or viruses, loggers, or other malfeasant code, including ransomware, in our data or software. These cybersecurity incidents or other significant disruptions could be caused by persons inside our organization, persons outside our organization with authorized access to systems inside our organization, or by individuals outside our organization. The risk of a cybersecurity incident or disruption, particularly through cyber-attack or cyber-intrusion, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Although we have not experienced any cybersecurity incidents to date, and have not been affected by any incidents incurred by third-party partners, such incidents could have a material adverse effect on our business, financial condition or results of operations in the future. Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks, as our information technology and systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may learn of cybersecurity issues that were not identified during due diligence of such entities, and it may be difficult to integrate entities into our information technology environment and security program.

 

We also rely on a number of third-party service providers to host, store or otherwise process information for us, or to provide other facilities or infrastructure that we make use of, including “cloud-based” providers of corporate infrastructure services relating to, among other things, human resources, communication services and some financial functions, and we are therefore dependent on the security systems of these providers. These third-party entities are subject to similar risks as we are relating to cybersecurity, business interruption and systems and employee failures and a cybersecurity incident or other significant disruption affecting such third parties could have a material adverse effect on our business. While we may be entitled to damages if our third-party service providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

 

Because the techniques used to obtain unauthorized access to or sabotage security systems change frequently and are often not recognized until after an attack, we and our third-party service providers may be unable to anticipate the techniques or implement adequate preventative measures, thereby exposing us to material adverse effects on our business, financial condition, results of operations and growth prospects. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world, including in jurisdictions where operate, like the U.S. and EU, often require “reasonable,” “appropriate,” or “adequate” technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed appropriate, reasonable and/or in accordance with applicable legal requirements may not be able to protect the information we maintain. A cybersecurity incident or other significant disruption impacting us or our third-party service providers could require a substantial level of financial resources to rectify and otherwise respond to, may be difficult to identify or address in a timely manner, may compromise our research, the therapies we are developing or other intellectual property or trade secrets, and may divert management’s attention and require the expenditure of significant time and resources. Such cybersecurity incidents or other significant disruptions could result in claims, increased regulatory scrutiny or investigations, and may cause us to incur substantial fines, penalties or other liability and related legal and other costs. Any actual or perceived cybersecurity incident or significant disruption may also interfere with our ability to comply with financial reporting requirements and harm our reputation and market position, especially given that we handle sensitive information, including clinical trial data. Any of the foregoing matters could harm our operating results and financial condition.

 

While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyber-attacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as adequate for our operations.

 

 11 

 

Any actual or perceived failure by us to comply with government or other obligations related to privacy or data protection could adversely affect our business.

 

We are subject to compliance risks and uncertainties under a variety of global laws and regulations governing privacy, data protection and the collection, storage, transfer, use, retention, sharing, disclosure, protection and processing of personal data, including personal data of physicians, patients, and other individuals involved in clinical trials. These laws may include sector-specific requirements, including laws or regulations that govern health or clinical trial data. In addition, we may obtain health data from third parties (including research institutions from which we obtain clinical trial data) that is subject to privacy and security requirements. For example, the U.S. Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) imposes obligations on certain types of individuals and entities, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. Privacy and data protection laws may be interpreted and applied differently depending on the jurisdiction and continue to evolve, making it difficult to predict how they may develop and apply to us. The regulatory frameworks for these issues worldwide are rapidly evolving and are likely to remain uncertain for the foreseeable future. Federal, state, or non-U.S. government bodies or agencies have in the past adopted, and may in the future adopt, new laws and regulations or may make amendments to existing laws and regulations affecting data privacy or data protection. In addition to government regulation, industry groups have established or may establish new and different self-regulatory standards that may legally or contractually apply to us or our prospective customers. Failure to comply with these varying laws and standards may subject us to investigations, enforcement actions, civil litigation, fines, claims for damages by third parties or affected individuals, damage to our reputation and loss of goodwill, impact our ability to conduct our research and produce therapies and result in other civil or criminal penalties, all of which may generate negative publicity and have a negative impact on our business, financial condition, results of operations or prospects.

 

In the United States, there are numerous federal and state laws and regulations related to the privacy and security of personal data that may be applicable to our current and future activities. Numerous federal and state laws and regulations protect the confidentiality, privacy, availability, integrity and security of personal data in the United States. Legal requirements vary from state to state, and these laws and regulations in many cases are more restrictive than, and may not be preempted by, federal privacy laws and regulations. These laws and regulations are often uncertain, contradictory, and subject to changing or differing interpretations. Certain state laws may include a private right of action for certain data breaches or noncompliance with privacy obligations, may provide for penalties and other remedies, and may require us to incur substantial costs and expenses and liabilities in connection with our compliance. Other U.S. states and the U.S. federal government are considering or have enacted similar privacy legislation.

 

Outside the United States, an increasing number of laws, and regulations may govern data privacy and security. As a company doing business in Europe, we are also subject to European data protection laws and regulations. The European Union General Data Protection Regulation (“GDPR”) imposes stringent requirements regarding how we collect and process personal data and provides for significant penalties for noncompliance. Several other countries have passed laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer restrictions. In addition, the United Kingdom has adopted a framework similar to the GDPR. The EU has confirmed the UK data protection framework as being “adequate” to receive EU personal data. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. For example, there have been recent updates to laws and regulations governing transfers of EU data, including updates to Standard Contractual Clauses and a proposed EU-US data transfer adequacy agreement. In light of these and other ongoing developments relating to cross-border data transfers, we may experience additional costs associated with increased compliance burdens, and this regulation may impact our ability to transfer personal data across our organization, to clinical trial physicians or patients, to our customers, or to third parties.

  

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We are 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, and we will be subject to political, economic, operational, legal, regulatory and other risks that are inherent in conducting business globally. For example, we currently have ongoing clinical operations in the U.K. and are contemplating expanding to other countries. These risks include foreign exchange fluctuations, exchange controls, capital controls, requirements to comply with 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 potential 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 our 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, if approved, will be commercialized.

 

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

 

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

 

We are highly dependent upon the efforts of our senior management. The loss of the services of one or more members of senior management could have a material adverse effect on us as a small company with a streamlined management structure, 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, continues to result in regulatory uncertainty which may have a negative effect on global economic conditions, financial markets and our business.

 

Brexit 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 conduct of clinical trials and the approval of our product candidates, may change, potentially significantly, and the impact of these changes is difficult to quantify until new regulation and guidance is published.

 

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 the expiry of the Brexit transitional arrangements, separate applications for marketing authorizations for Great Britain (England, Scotland and Wales) are required to place medicinal products on the market in Great Britain. The European Commission Decision Reliance Procedure, which allows the U.K. regulatory to “rely” on EU centralized marketing authorization decisions, will expire on 31 December 2023. The EU mutual recognition and decentralized procedures no longer apply to Great Britain. From January 1, 2024, under the Windsor Framework, the EU will no longer have jurisdiction over medicines placed on the market in Northern Ireland and all medicines intended for Northern Ireland (or the U.K. market more generally) will require a U.K. marketing authorisation. Additional regulation and guidance is anticipated to govern how this new regime will operate, including as to labelling of medicines in Northern Ireland.

 

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To replace EU based mutual recognition procedures, the U.K. has announced plans to introduce an international reliance route for the approval of medicinal products in the U.K. From January 1, 2024, the U.K. intends to recognize approvals of medicinal products from: Australia, Canada, the European Union, Japan, Switzerland, Singapore and the United States. This approach may benefit out strategy and operations as it could lead to approval in the U.K. of “cutting-edge medicines” more quickly and through a more streamlined regulatory process. However, the procedure will not come into effect until new regulations are introduced and these have not yet been published. Delays in implementing this new legislation may lead to regulatory uncertainty and delays.

 

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. If batch release and quality control testing sites for our product candidates are located only in the U.K., manufacturers will need to use sites in other EU member states for EU batch release. All of these changes, if they occur, could increase our costs and otherwise adversely affect our business.

 

Currency exchange rates for the British pound and the Euro, with respect to each other and to the U.S. dollar, were affected by Brexit, and could be affected in the future by other global events.

 

We have an office in Oxford, England which is focused on developing our products outside of the U.S. We continue to evaluate whether the U.K.’s withdrawal from the EU could impact our business long-term, 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. 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 future gross margins or otherwise negatively impact our financial results.

 

Risks Related to Ownership of our Shares

 

The issuance of additional ordinary shares, including upon the exercise of our outstanding stock options, will dilute the ownership interest of our existing shareholders and increase the number of ordinary shares eligible for future resale.

 

As of March 31, 2023, we had 378,740 vested restricted stock units outstanding, which are subject to certain restrictions. Additionally, as of March 31, 2023, we had an aggregate of 1,963,420 stock options to acquire ordinary shares outstanding. During fiscal 2023, we issued stock as follows: (i) on July 1, 2022, we issued 2,425,999 ordinary shares in connection with the acquisition of Tarus Therapeutics; (ii) on July 6, 2022, we issued 94,508 ordinary shares to Lincoln Park Capital Fund L.L.C. (“Lincoln”) in consideration for entering into the $30 million Committed Share Purchase Agreement (the “Committed Purchase Agreement”), described more fully below; (iii) on July 18, 2022, we executed a Share Exchange Agreement, under which we exchanged 1,070,000 of our ordinary shares for the remaining minority interest of 21.68% of iOx Therapeutics Ltd. (“iOx”); (iv) at various times during fiscal 2023, 480,000 ordinary shares were sold in the aggregate pursuant to the Committed Purchase Agreement with Lincoln; (v) at various times during fiscal 2022 and 2023, 166,145 ordinary shares were sold pursuant to our “at-the-market” (“ATM”) offering program; and (vi) 20,154 ordinary shares were issued to a service provider for services rendered. Additionally, a payment of $25,000,000 in ordinary shares or cash to the former iOx equity holders would be triggered upon the achievement of a certain clinical milestone in the PORT-2 or PORT-3 programs. Upon enrolling the first patient in a Phase 2 clinical trial utilizing Tarus’ adenosine receptor antagonists, we will pay an additional one-time milestone payment of $15 million to the former Tarus shareholders. Payment will be in the form of cash or our ordinary shares (at our discretion). In the past we have used, and we may continue to use, our capital stock to reward and encourage our employees through the use of options and similar equity grants and to pursue and pay consideration for acquisitions. Each of these issuances will have a dilutive effect on the ownership interest of the Company held by our existing shareholders. The additional ordinary 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.

 

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

 

As of July 30, 2023, our senior management, board members, holders of 5% or more of our share capital and their respective affiliates beneficially owned approximately 46.4% of our outstanding voting securities. As a result, these security holders may 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 certain 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 our business. Such control and concentration of ownership may affect the market price of our ordinary 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 us 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, as amended (the “Securities Act”) and, therefore, we are not required to file annual reports on Form 10-K, 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 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 Securities Exchange Act of 1934, as amended (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 associated with legal and accounting compliance 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 (a “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 and that we were as PFIC for the fiscal year ended March 31, 2023. In addition, we may have been a PFIC in other years and may continue to be a PFIC in the future.

 

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 (“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. We made the information available for the fiscal years 2018 and 2019 to those shareholders who requested it, and can make this information available for our fiscal years 2020, 2021, 2022 or 2023, if requested.

 

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

 

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

 

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

 

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

 

The British Virgin Islands courts are also unlikely:

 

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

 

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

 

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

 

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

 

As a foreign private issuer, and as permitted by the listing requirements of the Nasdaq Capital Market (“Nasdaq”), we will rely on certain home country governance practices, which are different from the corporate governance requirements that apply to U.S. domestic companies that are listed Nasdaq.

 

We are a foreign private issuer, and in accordance with Nasdaq Listing Rule 5615(a)(3), we comply with home country governance requirements and certain exemptions thereunder rather than complying with certain of the corporate governance requirements of Nasdaq which may afford less protection to our stockholders than they would otherwise have if we complied filly with Nasdaq’s corporate governance requirements.

 

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.

 

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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.

 

If we lose our status as a foreign private issuer, we would be required to fully comply with Nasdaq’s corporate governance requirements, which could have an adverse effect on us. For example, Nasdaq’s director independence requirements could make it more difficult for us to attract directors and Nasdaq’s shareholder approval requirements could make it more difficult and time-consuming to raise capital or engage in certain transactions.

 

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, at least 50% of our outstanding ordinary shares must continue to be either directly or indirectly owned of record by non-residents of the United States. If more than 50% 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, would 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.

 

Macro-economic Risks Related to our Business

 

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

 

The jurisdictions in which we conduct our business 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 populations and the economic activities of their respective economies. These mandates, regulations and measures have changed over the course of the pandemic and have been substantially eased or eliminated.  However, the Company has been affected in a number of ways, primarily in the delay in planning for and carrying out clinical trials, which have experienced short-term disruptions and may have a long-term negative impact on the way we will do business.  Actions such as government lock downs slowed or, in some cases, temporarily stopped research and development activities and clinical trials. To date, we are primarily focused on our activities related to research and development, and longer timelines for our research and development, clinical trials, regulatory approvals and bringing our product candidates to market, if approved, has caused our operational costs to be greater than anticipated in our most recently completely fiscal year and is expected to cause such costs to be greater in this current fiscal year and going forward. The financial effect of such longer timelines has been and will be that our development expenses will be higher than previously expected 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 may 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 favorable or acceptable to the Company.

 

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

 

As has been widely reported, we are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical instability and historically high domestic and global inflation. The U.S. Federal Reserve and other central banks may be unable to contain inflation through more restrictive monetary policy and inflation may increase or continue for a prolonged period of time. Inflationary factors, such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs have and may continue to have adversely affect our operating results. We continue to monitor these events and the potential impact on our business.

 

As a result of inflation and overall economic uncertainty, the cost of capital has dramatically increased in the last 12 months, making capital, if available, very expensive. We will require significant financial resources to complete the current development plans with respect to our assets.

 

Further, there can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable or acceptable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon some or all of our clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals and adversely impact our business, financial condition and results of operations.

 

 

 

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ITEM 4 – INFORMATION ON THE COMPANY

 

(A) HISTORY AND DEVELOPMENT OF THE COMPANY

 

We were originally incorporated in Ontario, Canada in 1973. We were inactive until 1985. Between 1986 and 2009, we were engaged in a 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, we acquired an indirect interest in two drilling licenses in Israel, which were subsequently disposed of in June 2012. During the period 1986 to 2012, we went through several name changes ending with Bontan Corporation Inc.

 

In December 2012, we decided to change the focus of our 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, we signed a letter of intent with Portage Pharma Ltd., a biotech private limited company formed under the laws of the British Virgin Islands, to acquire Portage Pharma Ltd. through an exchange of shares. The transaction was completed on June 4, 2013.

 

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

 

We are a BVI business company incorporated under the BVI Act with our registered office located at Clarence Thomas Building, P.O. Box 4649, Road Town, Tortola, British Virgin Islands, VG1110. Our U.S. agent, Portage Development Services Inc. (“PDS”), is located at 61 Wilton Road, Westport, CT 06880.

 

We currently are a foreign private issuer under the SEC rules. We are also a reporting issuer under the securities legislation of the provinces of Ontario and British Columbia. Our ordinary shares were listed on the Canadian Securities Exchange (“CSE”) under the symbol “PBT.U”. On February 25, 2021, our ordinary shares began trading on the Nasdaq Capital Market under the symbol “PRTG”. As the principal market for our ordinary shares is Nasdaq, we voluntarily delisted from the CSE on April 23, 2021.

 

During August 2018, we reached a definitive agreement to acquire 100% of SalvaRx Limited in exchange for 8,050,701 of our ordinary shares. 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 our company. The acquisition of SalvaRx was 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 we acquired 100% of the equity of SalvaRx, which has full or partial ownership of four immune-oncology companies that are developing nine product candidates.

 

 

 

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We filed a shelf registration statement with the 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”). In connection with the Registration Statement, we have filed with the SEC:

 

·a base prospectus, which covers the offering, issuance and sale 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 prospectus supplement, which covers the offer, issuance and sale by us in an ATM program of up to a maximum aggregate offering price of $50,000,000 of Portage’s ordinary shares that may be issued and sold from time to time under a Controlled Equity Offering Sales Agreement, dated February 24, 2021 (the “Sales Agreement”), with Cantor Fitzgerald & Co., the sales agent (“Cantor Fitzgerald”);
·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 underwritten public offering with Cantor Fitzgerald; and
·a prospectus supplement dated August 19, 2022, for the resale by us of up to $30,000,000 in ordinary shares that Portage may sell from time to time to Lincoln and an additional 94,508 shares that were issued to Lincoln.

 

The Sales Agreement permits us to sell in an ATM program 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 ATM program as defined in Rule 415(a)(4) promulgated under 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.

 

During the quarter ended June 30, 2021, we commenced an ATM program, and we sold 90,888 ordinary shares during the June 2021 quarter, generating gross proceeds of approximately $2.6 million ($2.5 million, net of commissions).

 

On June 24, 2021, we sold 1,150,000 ordinary shares in a firm commitment public offering, including the underwriters’ option, 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.

 

On July 1, 2022, we, our wholly-owned subsidiary, Portage Merger Sub I, Inc., our wholly-owned subsidiary, Portage Merger Sub II, LLC and Tarus Therapeutics, Inc., a Delaware corporation advancing adenosine receptor antagonists 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 Portage Merger Sub II, LLC with the surviving entity renamed Tarus Therapeutics, LLC (“Tarus”).

 

As consideration for Tarus, we issued to the former Tarus shareholders an aggregate of 2,425,999 ordinary shares of Portage, calculated on the basis of $18 million divided by the 60-day volume weighted average price per share of ordinary shares of Portage. Such ordinary shares have not been registered with the SEC and were subject to lock-up agreements for terms ranging from six to twelve months, which expired on February 1, 2023 and July 1, 2023, respectively. Additionally, the ordinary shares that were subject to a twelve month lock-up period, are also subject to a three month dribble-out period which commenced July 1, 2023. During the dribble out period, each holder may not sell more than 10% of the average trading volume of our ordinary shares for the rolling three month period prior to the date on which the holder executes a trade of our ordinary shares without our prior written consent (which we are permitted to withhold at our sole discretion). Additionally, payments of up to $32 million in cash or our ordinary shares (at our discretion) would be triggered upon achievement of future development and sales milestones, as described below. As a result of the transaction:

 

·We also assumed $2 million in short-term debt held by Tarus and deferred license milestones obligations ($1 million plus interest), for an aggregate of $3 million in liabilities. We repaid the short-term debt in July 2022.

 

·Upon enrolling the first patient in a Phase 2 clinical trial utilizing Tarus’s adenosine receptor antagonists, we will pay an additional one-time payment of $15 million to the former Tarus shareholders. Payment will be in the form of cash or our ordinary shares (at our discretion). The remaining $17 million milestone is based on target commercial sales.

 

 

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On July 6, 2022, we entered into the Committed Purchase Agreement with Lincoln, pursuant to which we may require Lincoln to purchase our ordinary shares having an aggregate value of up to $30 million (the “Purchase Shares”) over a period of 36 months. Upon execution of the Committed Purchase Agreement, we issued to Lincoln 94,508 ordinary shares, representing a 3% commitment fee. Pursuant to the Committed Purchase Agreement, Lincoln will be obligated to purchase the Purchase Shares in three different scenarios that are based on various market criteria and share amounts. We have the right to terminate the Committed Purchase Agreement for any reason, effective upon one business day prior written notice to Lincoln. Lincoln has no right to terminate the Committed Purchase Agreement. The requirement that Lincoln must make a purchase will be suspended based on various criteria such as there not being an effective registration statement for Lincoln to be able to resell the ordinary shares it is committed to purchase and market criteria such as us continuing to be Depository Trust Company eligible, among other things. The Committed Purchase Agreement does not impose any financial or business covenants on the Company, and there are no limitations on the use of proceeds. We may raise capital from other sources in its sole discretion; provided, however, that we shall not enter into any similar agreement for the issuance of variable priced equity-like securities until the three-year anniversary of the date of the Committed Purchase Agreement, excluding, however, an ATM transaction with a registered broker-dealer, which includes any sales under the Sales Agreement with Cantor Fitzgerald.

 

On July 18, 2022, we and our wholly-owned subsidiary, SalvaRx, entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with each of the minority shareholders of iOx (the “Sellers”) resulting in the acquisition of the outstanding non-controlling ownership interest (approximately 22%) of iOx, which is developing the iNKT engager platform.

 

In October 2022, we began selling shares pursuant to the ATM program and the Sales Agreement. From October 2022 through March 31, 2023, we sold 166,145 ordinary shares under the ATM, generating net proceeds of approximately $0.9 million. Separately, between October 2022 and March 31, 2023, we sold 480,000 ordinary shares to Lincoln under the Committed Purchase Agreement for net proceeds totaling approximately $2.0 million. Our access to the ATM program and the Committed Purchase Agreement is generally limited by our trading volume on Nasdaq.

 

On March 1, 2023, the Company, through Tarus, entered into a clinical service agreement with a third-party service provider. The term of the agreement is through the earlier of August 14, 2025 or the completion of provision of services and the payment of contractual obligations. The budgeted costs for the services to be provided is approximately $12.1 million.

 

Capital Expenditures and Divestitures

 

We had no capital expenditures or divestitures in Fiscal 2023 or Fiscal 2022

 

On March 3, 2021, we disposed of 100% of our interest in Portage Pharmaceuticals Ltd. (“PPL”), which included PPL’s interest in Portage Glasgow Ltd. (“PGL”) and EyGen for $10 to an entity controlled by two of the Company’s current directors (the “Purchaser’s Executives”). Under the terms of the arrangement, all outstanding payable obligations were assumed by the purchaser. Simultaneously, we and the Purchaser’s Executives entered into a Revenue Share Deed with PPL under which they will be entitled to certain revenue shares based on the achievement of milestones defined in the Revenue Share Deed. We may also be entitled to recover an intercompany receivable from the purchaser in the amount of $229,848 on the fourth anniversary of the Revenue Share Deed. All other intercompany balances were cancelled. We no longer have any interest or obligations associated with PPL, PGL and EyGen, other than the interests provided for in the Revenue Share Deed.

 

The SEC maintains an internet site at www.sec.gov that contains reports and information statements and other information regarding registrants like us that file electronically with the SEC.

 

We routinely post important information on our website at www.portagebiotech.com. This website and the information contained therein or connected thereto shall not be deemed to be incorporated into this Annual Report.

 

 

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(B) BUSINESS OVERVIEW

 

Nature of Operations and Overview

 

Portage is a clinical stage immune-oncology company advancing treatments it believes will be first-in-class therapies that target known checkpoint resistance pathways to improve long-term treatment response and quality of life in patients with evasive cancers. Our access to next-generation technologies coupled with a deep understanding of biological mechanisms enables the identification of clinical therapies and product development strategies that accelerate these medicines through the translational pipeline. We currently are working on 9 immuno-oncology assets, of which five are pre-clinical and four of which are clinical stage. This excludes backup compounds. We source, nurture and develop the creation of early- to mid-stage treatments that we believe will be first-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 product candidates or technologies based on biology addressing known resistance pathways/mechanisms of current checkpoint 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 and expanding the addressable patient population. 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 for broad targets with disciplined ongoing evaluation;

 

·Focus on translational medicine and therapeutic candidates with single agent activity;

 

·Conduct randomized trials early and test non-overlapping mechanisms of action; and

 

·Improve potential outcomes for patients with evasive cancers.

 

Our execution is achieved, in part, through our internal core team and our large network of experts, contract labs, and academic partners.

 

The Company believes that it is not subject to the regulation of the Investment Company Act of 1940, as amended (“40 Act”), based on the definition of “investment company” and the compositions of its assets. Additionally, as the Company primarily operates within the biomedical industry as a research and development (“R&D”) 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.

 

 

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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, broad targets, 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 Investigational New Drug (“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 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 set forth, as of July 31, 2023, 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-tumor 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 tumor 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. The Company’s operating subsidiary, iOx, holds an exclusive license (with the right to sub-license) from the Ludwig Institute for Cancer Research (the "Ludwig Institute") to use, research, develop and commercialize iNKT cell engagers, 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 engager formulated in a liposome with a six-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 animal models, PORT-2 enhanced the frequency of tumor specific immune responses. iNKT cells are unique lymphocytes defined by their co-expression of surface markers associated with NK cells along with a T-cell antigen receptor. They recognize 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 DC maturation and IL-12 production.

 

In August 2021, we dosed the first patient in the IMP-MEL PORT-2 clinical trial, a Phase 1/2 dose escalation and randomized expansion trial. The PORT-2 trial is expected to enroll up to 88 patients with melanoma or non-small cell lung carcinoma (“NSCLC”) in order to evaluate safety and efficacy. In November 2022, the Company announced that it had entered into a clinical trial collaboration with Merck to evaluate PORT-2 in combination with pembrolizumab for patients with NSCLC. Under the terms of the collaboration, Merck will supply pembrolizumab for the Company’s Phase 1/2 trial of PORT-2 in patients with NSCLC and melanoma.

  

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Preliminary Phase 1 data, presented at the American Society of Clinical Oncology (“ASCO”) Annual Meeting in June 2023, suggests PORT-2 was well tolerated when administered as a monotherapy, with no related severe or serious 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 pembrolizumab, in parallel with the ongoing high dose monotherapy cohort. As of June 2023, one patient had received the combination with pembrolizumab, and no related severe or serious adverse events were reported. The adverse event profile was consistent with pembrolizumab. Previously reported biomarker data confirmed the mechanism of action (i.e., both activation of the innate and adaptive arms of the immune system). The following figure illustrates the different lesion responses. Although these are preliminary results, several lesions showed shrinkage, and the responses in liver metastases were encouraging.

 

 

We are encouraged by the growing patient data set that supports proof of concept for using an iNKT engager in cancer treatment. Preliminary Phase 1 data suggests that PORT-2 has a favorable safety and tolerability profile as a monotherapy at all doses tested to date (as noted above), has demonstrated evidence of single agent activity, and biomarkers confirm mechanistic potential of PORT-2 to activate both the adaptive and innate immune systems.

 

To accelerate development, Portage has decided to expand the PORT-2 trial beyond the U.K. while addressing COVID-19 headwinds. The Company has hired a global clinical research organization, CRO-Parexel, and has submitted regulatory applications in other countries. By expanding the regions and sites contributing to the trial, Portage expects to accelerate enrollment in the planned Phase 2 portions of this trial. Should there be delays in recruiting patients, this could result in increasing overall costs of program administration and ultimately, slow down the completion of the trial and achievement of results.

 

In December 2022, the FDA allowed the PORT-2 IND to go into effect. Given the safety data shown at all planned doses, the trial protocol is being amended to escalate patient dosing to include one additional higher dose, and we anticipate the Phase 2 portion of the trial to commence in the first half of calendar 2024.

 

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PORT-3 (IMM65)

 

PORT-3 is a PLGA-nanoparticle formulation of IMM60 combined with a NY-ESO-1 peptide vaccine. 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 engager with a peptide vaccine in a particle has shown to be approximately five times more potent in killing cancer cells and generating an antigen-specific CD8 T-cell response than giving the two agents individually.

 

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.

 

The first patient was dosed in 2021 and patients continue to enroll in the PRECIOUS Phase 1 trial of PORT-3 in patients with solid tumors. The Phase 1 portion of the trial is expected to enroll 15 patients. The trial was having difficulty identifying tumors that expressed NY-ESO-1, so the trial protocol was amended to include all solid tumors regardless of expression to facilitate assessment of safety. This platform is designed to demonstrate proof of concept. The combination of NY-ESO-1 and IMM-60 is being evaluated to determine its 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. 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, shows a favorable safety profile. The investigator trial has paused while we await more data. It is our understanding that the investigators with who we work with have continued to explore next generation targeted nanoparticles.

 

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 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 a poor prognosis in multiple cancers, including prostate cancer, colorectal cancer and lung adenocarcinoma, driven by a reduced ability to generate an immune response against the tumor.

 

These findings have made A2A and A2B high-priority targets for immunotherapeutic intervention. Portage is advancing four first-in-class adenosine antagonists, which together represent a broad suite of adenosine-targeting approaches and are expected to enable a comprehensive exploration of how targeting the adenosine pathway could potentially improve response in multiple cancer and non-cancer indications. By modulating the adenosine pathway in four different ways, Portage expects to determine the optimal approach to maximize the impact of the mechanism of action on different tumors.

 

Portage has designed the ADPORT-601 clinical 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.

 

PORT-6 (TT-10)

 

PORT-6 is an adenosine receptor type 2A (“A2A”) antagonist being studied for the treatment of A2A expressing solid tumors. We believe PORT-6 is more potent, more durable and more selective than other clinical stage A2A agents.

 

The ADPORT-601 portion of the Phase 1 trial for PORT-6, dosed its first patient in June 2023.

 

PORT-7 (TT-4)

 

PORT-7 is an adenosine receptor type 2B (“A2B”) antagonist that we expect to study for the treatment of solid tumors. PORT-7 has a very selective profile that focuses on A2B. We expect to commence a Phase 1 trial in late calendar 2023 or early calendar 2024.

  

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PORT-8 (TT-53)

 

PORT-8 is a dual antagonist of adenosine receptors 2A and 2B (A2A/A2B) that we expect to study for the treatment of solid tumors. Portage has the ability to combine these two adenosine receptors to titrate the levels of A2A and A2B or has the ability to give the dual antagonist (PORT-08). The PORT-8 program is a pre-clinical stage program.

 

PORT-9 (TT-3)

 

PORT-9 is an A2B antagonist to treat colorectal and gastrointestinal cancers.

 

In connection with the adenosine programs, Portage will focus on solid tumor types with high adenosine expression of receptors A2A and A2B and enrich for patients that have high adenosine expression and therefore have potential to benefit most from treatment. The PORT-9 program is currently in the pre-clinical stage.

 

Other Programs and Investee Programs in Development

 

The Company is focused on delivering clinical data with the iNKT and adenosine programs and prioritizing the allocation of financial resources to these programs. Developmental work continues on some of the other developmental assets, through collaborations such as that with the U.S. National Cancer Institute (“NSCI”) and other academic groups, as further described below. These developmental assets may be re-evaluated at a future point depending on market conditions, ongoing data, funding priorities and status.

 

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 tumors, 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 cells. The payloads are able to disperse to areas of the tumor that do not have blood supply and hence oral or IV drugs will not reach.

 

PORT-1 (INT230-6)

 

Intensity Therapeutics, Inc., (“Intensity”), which we have an investment in, is developing INT230-6 (“PORT-1”) as a fixed dose formulation of cisplatin, vinblastine and a penetration enhancer.  In animal models, the drug has shown efficacy in the majority of the animals, by a combination of direct killing of the cancer cells, and also a CD4 and CD8 T-cell response.  Interim safety and survival data from the Phase 1/2 IT-01 trial exploring the safety and efficacy of PORT-1 in patients with refractory or metastatic cancers presented at ASCO Annual Meeting in 2021 demonstrated that both PORT-1 monotherapy and combination therapy with immune checkpoint drugs are well-tolerated. The 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. The specific rapid local killing in the normal three-dimensional environment inside the body Portage believes is critical for robust antigen presentation and immune activation.  Animal studies also showed synergy when combined with checkpoint inhibition. PORT-1 has shown proof of concept in humans in that the vast majority of the drug has been shown to stay in the tumor, and a dose equivalent to three times the approved dose of the cytotoxic agent was well tolerated without the typical chemotherapy side effects.  The most common adverse event related to the treatment was pain at the injection site.  As a result, PORT-1 is being studied in nine Phase 2 trials including seven clinical collaborations with the two largest immuno-oncology drug manufacturers, Bristol Myers Squibb (“BMS”) and Merck, in combination with their respective checkpoints in high unmet need medical types (including pancreatic, gall bladder, sarcoma, non-microsatellite unstable colorectal).

 

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Intensity has also launched a randomized Phase 2 trial of PORT-1 for the treatment in early stage breast cancer for patients who are ineligible or chose not to have presurgical chemotherapy (compared to no treatment, which is the standard of care) (the “INVINCIBLE Trial”) and has expanded its collaboration efforts with the INVINCIBLE Trial, conducted by the Ottawa Hospital and the Ontario Institute for Cancer Research. The INVINCIBLE Trial suggests that one treatment with PORT-1, can result in near complete necrosis of breast tumors greater than 3 cm with an influx of key immune cells to process the dying tumor. Intensity presented clinical data from the PORT-1 INVINCIBLE Trial at the ASCO Annual Meeting in June 2023, which demonstrated significant necrosis of presurgical breast cancer tumors in the majority of patients injected with PORT-1 in the window period from diagnosis to surgery and a pathway enrichment analysis that demonstrated changes in T-cell activation, lymphocyte activation and inflammatory response from the INVINCIBLE Trial.

 

As of March 31, 2023, the Company owned approximately 7.00% of Intensity’s outstanding shares on a fully diluted basis. On July 5, 2023, Intensity completed an initial public offering of its common stock, which became listed on the Nasdaq Capital Market under the ticker symbol “INTS.” As of July 7, 2023, we owned approximately 4.7% of Intensity’s issued and outstanding stock, including the sale of overallotment shares, which closed on the same date.

 

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.

 

As of March 31, 2023, the Company owned approximately 70% of the outstanding shares of Saugatuck Therapeutics, Ltd. (“Saugatuck”), the subsidiary on which the PORT-4 platform is managed.

 

PORT-5, STING Agonist Platform

 

Proprietary immune priming and boosting technology (using a STING agonist delivered in a virus-like particle) has shown proof of concept in animal models and Stimunity S.A. (“Stimunity”) is beginning to progress its 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.  The 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 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.  Stimunity is progressing this project towards clinical trials as well as developing next generation compounds.  To that end, Stimunity 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, the American Association for Cancer Research showcased 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, Stimunity is preparing to file an IND for PORT-5.

 

As of March 31, 2023, the Company owned approximately 44% of the outstanding shares of Stimunity, the subsidiary on which the PORT-5 platform is managed.

 

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Early-Stage Research and Development Collaborations

 

We continue to evaluate and test new antibody targets.  Our interest here lies in the suppressive tumor microenvironment, and how we can down regulate or remove MDSC, TAMs, Tregs and other signals that impede the immune response from clearing cancer cells.  One 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 to fast track an asset to the clinic with a re-purposed product candidate.

 

·Portage is collaborating with Dr. Robert Negrin and his team at Stanford University in an IST study to evaluate the use of PORT-2 with iNKT cell therapies in animals. This work will evaluate if an engager 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 engagers have on driving an adaptive immune response and correcting the suppressive tumor microenvironment.
·Portage has entered into a Cooperative Research and Development Agreement (“CRADA”) with the NCI. Portage and NCI will advance preclinical and potential clinical development of STING agonists and anti-RAGE agents for cancer vaccines. Portage and NCI will develop agents to enhance the efficacy of proprietary cancer vaccines and mouse model cancer vaccines developed by NCI. After the Tarus acquisition, Portage amended the CRADA to include exploration of the different adenosine compounds.

 

Our Business Model

 

Portage is a development organization that is structured to facilitate flexibility in financing and ease of partnering, licensing, and merger/acquisition of individual assets and or technology platforms.  The intellectual property (“IP”) for each platform is held in separate private entities.  Our employees and consultants work across the pipeline of assets and we believe that this 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 allocate resources while empowering managers to 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 partnered with a number of service providers 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: Our pipeline is comprised of therapies we believe will be first-in-class therapies for a variety of cancers sourced via our extensive industry contacts and relationships (including academia and pharmaceutical industry executives). On preclinical programs/technology, we initially established development structures enabling us to keep licensors economically incentivized at the program level. We believe that our experienced drug development leadership team and approach to resource allocation differentiate us from other potential licensees.

 

·Leverage the commoditized checkpoint marketplace and explore the potential to further enhance long-term clinical benefits for patients with cancer and also expand the eligible population to include those who do not currently receive anti-PD-1 therapy: Presently there are multiple approved checkpoint therapeutics that lack differentiation, resulting in a competitive market dynamic, which will favor combination therapy. There is substantial opportunity for potential expansion in the PD-1 market with our iNKT engagers and adenosine antagonists. Studies show that 70-80% of patients do not respond or have a limited response to existing monotherapies, such as PD-1 checkpoint inhibitors. We see potential for our unique approach of using iNKT engagers to initiate an immune response in tumors that have become refractory to checkpoint therapy or to increase the number of front-line patients achieving more durable responses. 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 pharmaceutical company competes in this space. One illustrative example of potentially expanding eligible patients is with iNKT engagers upregulating expression of PD-L1. Patient populations that are typically not good candidates for PD-1 antibodies due to their lack or low expression of PD-L1 may be able to utilize iNKTs to sensitize tumors to PD-1 agents. Extending the use of PD-1 antibodies represents a significant potential upside for one of these companies competing for market share, should they choose to partner with Portage.

 

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·Promote asset flexibility: Our structure is designed to maximize flexibility and cost efficiency. This allows us to efficiently pursue various subsidiary-level transactions, such as stock or asset sales, licensing transactions, strategic partnerships and/or co-development arrangements. It also provides us with the flexibility to terminate programs with minimal costs if results do not meet our de-risking criteria for advancement.

 

Competition

 

The Company competes in a global marketplace.

 

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 companies that are focusing their efforts in this space. Some of the smaller entrants in this space with which we may compete over time include Cullinan Oncology, Inc., which develops therapeutics geared toward improving the standard of care for those living with cancer; PureTech Health, which develops medicines for diseases including intractable cancers and 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.

 

Nevertheless, we believe our strategic approach is sufficiently differentiated in that we focus on multiple aspects of resistance to current immunotherapies based on the experience of our management at BMS developing Opdivo and Yervoy. We believe one of our strengths beyond the experience of our management and directors is our keen ability to understand what technology is attractive from the eyes of a major pharmaceutical partner.  We have a broad understanding of what the market will look like by the time our product candidates, if approved, are commercialized and the interests and motivations of our potential partners or acquirers.  We pair that with focused execution plans on value added development. We also believe 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, among others, provides us to access and develop potentially innovative technologies.

 

(C) ORGANIZATIONAL STRUCTURE

 

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

 

Our significant subsidiaries includes:

 

(a)SalvaRx, a wholly-owned subsidiary, incorporated on May 6, 2015 in the British Virgin Islands;

 

(b)iOx, a wholly-owned subsidiary incorporated in the U.K. on February 10, 2015;

 

(c)Saugatuck, a 70% owned subsidiary incorporated in the British Virgin Islands.;

 

(d)PDS, a wholly-owned subsidiary incorporated in Delaware;

 

(e)SalvaRx LLC, a wholly-owned subsidiary through SalvaRx incorporated in Delaware;

 

(f)Saugatuck Rx LLC, a wholly-owned subsidiary of Saugatuck incorporated in Delaware;

 

(g)Tarus, a wholly-owned subsidiary of Portage incorporated in Delaware; and

 

(h)Stimunity, a 44% owned subsidiary incorporated in France.

 

 

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(D) PROPERTY, PLANT AND EQUIPMENT

 

The Company currently does not have any material tangible fixed assets or leased properties.

 

ITEM 4A – UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 5 – OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

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

 

The following discussion should be read in conjunction with the Audited Consolidated Financial Statements of the Company and notes thereto for the fiscal year ended March 31, 2023, contained elsewhere in this Annual Report.

 

Years ended March 31,  2023  2022  2021
   in 000’$  in 000’$  in 000’$
Operating expenses  $(16,575)  $(15,588)  $(12,440)
Change in fair value of deferred purchase price payable - Tarus and deferred obligation - iOx milestone   2,711         
Impairment loss - iOx IPR&D   (59,320)        
Impairment loss - Tarus IPR&D   (4,585)        
Impairment loss - Goodwill   (43,862)        
Impairment loss - Stimunity   (818)        
Share of loss in associate accounted for using equity method   (260)   (62)   (490)
Change in fair value of warrant liability   33    852    (790)
Loss on equity issued at a discount           (1,256)
Loss on extinguishment of notes payable           (223)
Gain on sale of marketable equity securities           72 
Gain on disposition of subsidiaries           412 
Foreign exchange transaction (loss) gain   (53)   24     
Depreciation   (1)        
Interest income (expense), net   208    (43)   (177)
Loss before provision for income taxes   (122,522)   (14,817)   (14,892)
Income tax benefit (expense)   17,856    (4,352)   (2,297)
Net loss   (104,666)   (19,169)   (17,189)
Other comprehensive income (loss)               
Net unrealized loss on investments   (5,283)        
Total comprehensive loss for year  $(109,949)  $(19,169)  $(17,189)
                
Comprehensive loss attributable to:               
Owners of the Company  $(109,894)  $(16,870)  $(15,833)
Non-controlling interest   (55)   (2,299)   (1,356)
Total comprehensive loss for year  $(109,949)  $(19,169)  $(17,189)

 

 

 31 

 

Overview

 

Portage is a clinical stage immune-oncology company advancing treatments it believes will be first-in-class therapies that target known checkpoint resistance pathways to improve long-term treatment response and quality of life in patients with evasive cancers. Our access to next-generation technologies coupled with a deep understanding of biological mechanisms enables the identification of clinical therapies and product development strategies that accelerate these medicines through the translational pipeline. We currently are working on 9 immuno-oncology assets, four of which are clinical stage. We source, nurture and develop the creation of early- to mid-stage treatments that we believe will be first-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 product candidates or technologies based on biology addressing known resistance pathways/mechanisms of current checkpoint 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 and expanding the addressable patient population. 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 for broad targets with disciplined ongoing evaluation;

 

·Focus on translational medicine and therapeutic candidates with single agent activity;

 

·Conduct randomized trials early and test non-overlapping mechanisms of action; and

 

·Improve potential outcomes for patients with evasive cancers.

 

Our execution is achieved, in part, through our internal core team and our large network of experts, contract labs, and academic partners.

 

The Company believes that it is not subject to the regulation of the Investment Company Act of 1940, as amended (“40 Act”), based on the definition of “investment company” and the composition of its assets. Additionally, as the Company primarily operates within the biomedical industry as a research and development (“R&D”) 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.

 

 32 

 

Results of Operations for Fiscal 2023 Compared to Fiscal 2022

 

The Company generated a net loss of approximately $104.7 million and other comprehensive loss of approximately $109.9 million during the year ended March 31, 2023 (“Fiscal 2023”), which include approximately $88.0 million of non-cash expenses, net compared to a net loss and comprehensive loss of approximately $19.2 million during the year ended March 31, 2022 (“Fiscal 2022”), an increase in net loss of $85.5 million and an increase in other comprehensive loss of $90.7 million, year-over-year.

 

The components of the change in net loss and other comprehensive loss are as follows:

 

·Operating expenses, which include R&D and general and administrative (“G&A”) expenses, were $16.6 million in Fiscal 2023, compared to $15.6 million in Fiscal 2022, an increase of $1.0 million, which is discussed more fully below.

 

·The Company’s other items of income and expense were substantially non-cash in nature and aggregated approximately $105.9 million net loss in Fiscal 2023, compared to approximately $0.8 million net income in Fiscal 2022, a change in other items of income and expense of approximately $106.7 million, year-over-year. The primary reason for the year-over-year difference in other items of income and expense were non-cash impairment adjustments relating to the carrying value of in-process research and development (“IPR&D”) for iOx and Tarus of $59.320 million and $4.585 million, respectively, the impairment of goodwill totaling $43.862 million, and the loss on impairment relating to our investment in Stimunity and the Stimunity Convertible Note of $0.607 million and $0.211 million, respectively. The impairment analysis was undertaken as a result of indications of impairment from the overall life sciences market and our market capitalization. We considered a number of factors relating to the fair value analysis of the assets at March 31, 2023, including the cost of capital, discount rates, and the impact of timing delays of obtaining data. These losses were slightly offset by non-cash gains from the change (decrease) in fair value of the deferred purchase price payable to the former Tarus shareholders and the deferred obligation - iOx milestone totaling $2.711 million and net interest income from investments in short-term investments in Fiscal 2023.

 

·Additionally, the Company reflected a non-cash net deferred income tax benefit of $17.9 million in Fiscal 2023, compared to a net deferred income tax expense of $4.4 million in Fiscal 2022. Fiscal 2023 includes $11.3 million to recognize the deferred tax effect of loss on impairment recognized with respect to the iOx IPR&D, $0.7 million related to other current year losses, $3.8 million to reflect the change related to the future U.K. tax rates and $2.1 million to reflect the effect of the change in exchange rates on the liability settleable in British pound sterling. Fiscal 2022 reflected recoverable R&D tax credits generated in the U.K., partially offset by the foreign currency effect on deferred tax liability balance settleable in British pound sterling.

 

·At March 31, 2023, the Company performed a fair value analysis on its investment in Intensity, and determined a fair value of $2.087 million, which was $5.322 million less than the then-carrying value. Accordingly, the Company recognized an unrealized loss in value in Intensity of $5.322 million through other comprehensive income (loss) in Fiscal 2023, which was partially offset by an unrealized gain on the change in fair value of the Stimunity Convertible Note (as defined below) of $0.039 million recognized through other comprehensive income (loss).

 

We may be required to record additional charges during the period in which there is an indication of impairment and the fair value of any of our intangible assets or other long-lived assets is determined to be less than the then carrying value, which could have a material adverse impact on our results of operations. Even though these charges are non-cash items, do not necessarily reflect the underlying fundamentals of our development programs and may not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities.

 

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 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 R&D and G&A 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.

 

 33 

 

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 were:

 

·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 Fiscal 2022, which were not outstanding in Fiscal 2021.

 

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 British pound sterling. The Fiscal 2021 net deferred income tax expense was attributable to the foreign currency effect on the deferred tax liability balance settleable in British pound sterling, which was partially offset by recoverable R&D development tax credits.

 

Other comprehensive loss was $19.2 million in Fiscal 2022, compared to $17.2 million in Fiscal 2021.

 

Operating Expenses

 

Total operating expenses (in 000’$) for the last three completed fiscal years are as follows:

 

Years ended March 31,  2023  2022  2021
          
Research and development  $8,214   $6,769   $7,312 
General and administrative expenses   8,361    8,819    5,128 
Total operating expenses  $16,575   $15,588   $12,440 

 

Research and Development Costs

 

Fiscal 2023

 

R&D costs increased by approximately $1.4 million, or approximately 21%, from approximately $6.8 million in Fiscal 2022, to approximately $8.2 million in Fiscal 2023. The increase was primarily attributable to the start-up and manufacturing costs associated with the adenosine assets (PORT-6 and PORT-7) acquired in the Tarus acquisition of $1.9 million and the clinical trial costs of $1.5 million associated with the iNKT clinical trial for PORT-2. There were no such costs incurred in Fiscal 2022. Additionally, the Company incurred costs of $0.2 million associated with the NCI trial for clinical development of STING agonists and anti-RAGE agents for cancer vaccines in Fiscal 2023 and an increase of $0.2 million in other R&D costs relating to services and storage. These increases were partially offset by a reduction in non-cash share-based compensation expense of $2.4 million with respect to stock options to purchase ordinary shares granted to employees, which was attributable to (a) the vesting over time of a portion of prior year grants; and (b) the decrease in the fair value of grants of stock options made in Fiscal 2023, as well as the timing of the grants.

 

 34 

 

Fiscal 2022

 

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 certain clinical 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 of stock options made under the Company’s Amended and Restated 2021 Equity Incentive Plan (as defined below) 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 supplier costs, control activities and medical writing, 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 and consultants involved in R&D 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 of stock options made under the Amended and Restated 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 product candidates, as well as a general slow down in activity of $0.5 million year over year resulting from the COVID-19 pandemic.

 

General and Administrative Expenses

 

Fiscal 2023

 

G&A expenses decreased by approximately $0.4 million, or approximately 5%, from approximately $8.8 million in Fiscal 2022, to approximately $8.4 million in Fiscal 2023. Professional fees increased by $1.3 million, of which $0.8 million was attributable to legal fees associated with the Tarus acquisition and $0.3 million was attributable to audit and accounting related expenses in Fiscal 2023 associated with the updating of public filings, as well as costs associated with the Tarus acquisition review. $0.2 million of the increase was attributable to stamp fees in the U.K. related to acquiring the outstanding minority interest of iOx, our subsidiary that manages our iNKT engager platform. Additionally, payroll-related expenses increased by $0.8 million due to the adoption of a compensation program in Fiscal 2023 designed to attract and retain management; along the same lines, the Company incurred $0.3 million in compensation to its directors in Fiscal 2023. These increases were partially offset by a decrease in non-cash share-based compensation expense of $2.4 million attributable to the vesting of certain stock options granted in prior years and lower fair value associated with more recent grants and the decrease of $0.4 million associated with D&O insurance, which was attributable to a decrease in the D&O premium market year-over-year.

 

Fiscal 2022

 

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 of stock options 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 and business development. Finally, D&O insurance premiums increased $1.4 million in Fiscal 2022 compared to Fiscal 2021 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, which includes transfer agent fees, Nasdaq fees and investor meeting costs.

 

Fiscal 2021

 

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 Amended and Restated 2021 Equity Incentive Plan in Fiscal 2021. No share-based compensation expense under the Amended and Restated 2021 Equity Incentive Plan was incurred in Fiscal 2020. Additionally, the Company incurred $0.2 million relating to initiatives associated with a corporate restructuring and public relations and business development and an increase of $0.2 million in D&O insurance premiums.

 

 35 

 

(B) LIQUIDITY AND CAPITAL RESOURCES

 

Capital Resources

 

Portage filed a Registration statement with the 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. In connection with the Registration Statement, Portage has filed with the SEC:

 

·a base prospectus, which covers the offering, issuance and sale by Portage of up to $200,000,000 in the aggregate of the securities identified above from time to time in one or more offerings;
·a prospectus supplement, which covers the offer, issuance and sale by Portage in an ATM program of up to a maximum aggregate offering price of $50,000,000 of Portage’s ordinary shares that may be issued and sold from time to time under a Controlled Equity Offering Sales Agreement, dated February 24, 2021, with Cantor Fitzgerald & Co., the sales agent;
·a prospectus supplement dated June 24, 2021, for the offer, issuance and sale by Portage of 1,150,000 ordinary shares for gross proceeds of approximately $26.5 million in a firm commitment underwritten public offering with Cantor Fitzgerald; and
·a prospectus supplement dated August 19, 2022, for the resale by Portage of up to $30,000,000 in ordinary shares that Portage may sell from time to time to Lincoln and an additional 94,508 shares that were issued to Lincoln.

 

The Sales Agreement permits the Company to sell in an ATM program 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 the Company under the base prospectus. The sales under the prospectus will be deemed to be made pursuant to an ATM program as defined in Rule 415(a)(4) promulgated under 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.

 

During the quarter ended June 30, 2021, we commenced an ATM program, and we sold 90,888 ordinary shares during the June 2021 quarter, 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’ option, 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.

 

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

 

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

 

 36 

 

 

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

 

The Committed 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-year anniversary of the Signing Date, excluding, however, an ATM transaction with a registered broker-dealer, which includes any sales under the Sales Agreement with Cantor Fitzgerald.

 

In connection with the Committed 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, to 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 Committed Purchase Agreement. All reasonable expenses of the Company incurred through the registration of the ordinary shares under the Committed Purchase Agreement shall be paid by the Company.

 

 

 37 

 

In October 2022, we began selling shares pursuant to the ATM program and the Sales Agreement. Through March 31, 2023, the Company sold 166,145 ordinary shares under the ATM, generating net proceeds of approximately $0.9 million. Separately, between October 2022 and March 31, 2023, the Company sold 480,000 ordinary shares to Lincoln under the Committed Purchase Agreement for net proceeds totaling approximately $2.0 million. The Company’s access to the ATM program and the Committed Purchase Agreement is generally limited by the Company’s trading volume.

 

On March 1, 2023, the Company, through Tarus, entered into a clinical service agreement with a third-party service provider. The term of the agreement is through the earlier of August 14, 2025 or the completion of provision of services and the payment of contractual obligations. The budgeted costs for the services to be provided is approximately $12.1 million.

 

Going Concern

 

The accompanying consolidated financial statements for the year ended March 31, 2023 have been prepared on a basis that assumes that we 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 for the year ended March 31, 2023 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, 2023, we had cash and cash equivalents of approximately $10.5 million and total current liabilities of approximately $1.9 million. For the year ended March 31, 2023, we reported a net loss of approximately $104.7 million (which include approximately $105.9 million of non-cash charges), and cash used in operating activities of approximately $12.1 million. As of June 30, 2023, we had approximately $7.7 million of cash and cash equivalents on hand.

 

 Our cash and cash equivalents balance is decreasing and we will not generate positive cash flows from operations for the year ending March 31, 2024. We intend to meet our ongoing capital needs by using our available cash.

 

We have and may continue to delay, scale-back, or eliminate certain of our activities and other aspects of our operations until such time as we are successful in securing additional funding. We are exploring various dilutive and non-dilutive sources of funding, including equity and debt financings, strategic alliances, business development and other sources. Our future success is dependent upon our ability to obtain additional funding. There can be no assurance, however, that we will be successful in obtaining such funding in sufficient amounts, on terms acceptable to us, or at all. As of the date of this filing, we currently anticipate that current cash and cash equivalents, excluding any potential proceeds from our ATM program and Committed Purchase Agreement with Lincoln, will be sufficient to meet our anticipated cash requirements through the end of October 2023. Access to our Committed Purchase Agreement with Lincoln is generally limited based on, among other things, our trading volume. Furthermore, we are limited by the Baby Shelf Rule as of the filing of this Annual Report, until such time as our non-affiliate public float exceeds $75 million. The amount of funds we can raise through primary non-affiliate public offerings of securities in any 12-month period using our registration statement on Form F-3 is limited to one-third of the aggregate market value of the ordinary shares held by non-affiliates of our company, which limitation may change over time based on our stock price, number of ordinary shares outstanding and the percentage of ordinary shares held by non-affiliates. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

 

We have incurred substantial operating losses since inception and expect 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.

 

 

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We historically have funded our operations principally from proceeds from issuances of equity and debt securities. We will require significant additional capital to make the investments it needs to execute its longer-term business plan. Our ability to successfully raise sufficient funds through the sale of debt or equity securities when needed is subject to many risks and uncertainties and, future equity issuances would result in dilution to existing stockholders and any future debt securities may contain covenants that limit our operations or ability to enter into certain transactions.

 

Operating Cash Flow

 

Fiscal 2023

 

During Fiscal 2023, the Company used cash of $12.1 million to fund operating activities. Operations in Fiscal 2023 were funded by the Company’s existing cash and the ATM program and the public offerings in 2022 and 2021 and the ordinary shares issued to Lincoln under the Committed Purchase Agreement, described above under “Capital Resources.”

 

Fiscal 2022

 

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 ATM program and the public offering, described above.

 

Fiscal 2021

 

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.

 

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

 

1.the development and identification of economically recoverable therapeutic solutions;
2.the ability of the Company to obtain the necessary financing to complete the research and development; or
3.the future profitable production, or proceeds, from the disposition of intellectual property.

 

The Company has incurred substantial operating losses since inception due to significant R&D 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, 2023, the Company had cash and cash equivalents of approximately $10.5 million, working capital of approximately $11.8 million (including prepaid expenses of $2.7 million) and an accumulated deficit of approximately $159.6 million.  The Company has funded its operations primarily from proceeds from the sale of equity and debt securities. The Company will require significant additional capital to make the investments that 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.

 

Investing Cash Flows

 

Fiscal 2023

 

During Fiscal 2023, the Company used cash of $0.6 million to fund investing activities.

 

 

 39 

 

On July 13, 2022, the Company entered into a commitment with Stimunity to provide €600,000 under a convertible note (the “Stimunity Convertible Note”) with a maturity date of September 1, 2023 (the “Maturity Date”). The Stimunity Convertible Note provides for interest at 7% per annum. The Stimunity Convertible Note is automatically converted into Series A shares upon Stimunity completing a Series A round for at least €20 million. If such subscription round is completed prior to the Maturity Date, the Company will be entitled to convert the Stimunity Convertible Note into Series A shares of Stimunity at the subscription share price less 15%. Additionally, if Stimunity completes a financing with a new category of shares (other than Common Shares or Series A shares) for at least €5 million (the “Minimum Raise”), the Company will have the right to convert the Stimunity Convertible Note and the historical Series A shares owned into the new category of shares of Stimunity. In the event that Stimunity does not close a financing prior to the Maturity Date or raises less than the Minimum Raise, the Company will have the right to convert the Stimunity Convertible Note into Series A shares at €363.00 per share or the raise price less 15%, whichever is lower. The Stimunity Convertible Note was funded by the Company on September 12, 2022 by existing cash and cash provided under the Committed Purchase Agreement described above.

 

On July 18, 2022, the Company and its wholly-owned subsidiary, SalvaRx, entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with each of the minority shareholders of iOx (the “Sellers”) resulting in the acquisition of the outstanding non-controlling ownership interest (approximately 22%) of iOx, which is developing the iNKT engager platform. The Company followed IFRS 3, “Business Combinations,” and IAS 27, “Separate Financial Statements,” (which substantially replaced IAS 3) to account for this transaction. The Company achieved control of iOx, as defined, on January 8, 2019 upon the completion of its acquisition of SalvaRx. Further transactions whereby the Company acquires further equity interests from non-controlling interests, or disposes of equity interests but without losing control, are accounted for as equity transactions (i.e., transactions with owners in their capacity as owners). As such:

 

·the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary;
·any difference between the amount by which the non-controlling interests is adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the Company; and
·there is no consequential adjustment to the carrying amount of goodwill, and no gain or loss is recognized in profit or loss.

 

Fiscal 2022

 

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

 

Fiscal 2021

 

During Fiscal 2021, the Company used cash of $0.9 million to fund 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.

 

 

 40 

 

Financing Cash Flows

 

Fiscal 2023

 

During Fiscal 2023, the Company used cash of $0.1 million to fund financing activities.

 

During Fiscal 2023, as consideration for the Tarus acquisition, the Company issued to the former Tarus shareholders an aggregate of 2,425,999 ordinary shares of Portage, calculated on the basis of $18 million divided by the 60-day volume weighted average price per ordinary share of Portage. The ordinary shares have not been registered with the SEC and were subject to lock-up agreements for terms ranging from six to twelve months. We also assumed certain liabilities totaling $3.0 million for short-term debt held by Tarus and deferred license milestones obligations, which were repaid by us in July 2022. Additionally, milestone payments of up to $32 million in cash or Portage ordinary shares would be triggered upon achievement of future development and sales milestones, as further described above.

 

In October 2022, the Company began selling shares pursuant to the ATM program and the Sales Agreement. Through March 31, 2023, the Company sold 166,145 ordinary shares under the ATM, generating net proceeds of approximately $0.9 million. Separately, the Company sold 480,000 ordinary shares to Lincoln under the Committed Purchase Agreement for net proceeds totaling approximately $2.0 million.

 

Fiscal 2022

 

During Fiscal 2022, the Company generated net cash from financing activities of $27.3 million.

 

During the three months ended June 30, 2021, the Company commenced an ATM program, under which it sold 90,888 ordinary 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 on 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.

 

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.

 

(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 Annual Report. Research and development expenses analysis and details are provided under Item 5 (A) “Operating Results” of this Annual Report. All research and development expenses are expensed as they are incurred.

 

iOx License

 

On July 1, 2015, iOx entered into a licensing agreement with Ludwig Institute for Cancer Research Ltd. (“LICR”), which covers certain technology, intellectual property and know-how and development with respect to iNKT cell agonists to treat human diseases. Under the terms of the License (“LICR License”), LICR granted iOx exclusive worldwide license with the right to grant sublicenses under the Licensed Patent and Licensed Technology, each as defined in the LICR License, in each case, to development, make, have made, use, sell, offer for sale and import Licensed Products, as defined in the LICR License, subject to certain rights retained by LICR for academic and research purposes. The LICR License provides for a royalty term of ten years after the first commercial sale, on a Licensed Product by Licensed Product, country by country basis. Upon the expiration of the applicable royalty term, the license with respect to such Licensed Product in such country will convert to a non-exclusive, fully paid-up license.

 

 41 

 

LICR is entitled to 15,000 GBP as an annual license fee on each annual anniversary of the effective date of the LICR License until royalties become duly payable and 15,000 GBP as a patent reimbursement fee until LICR has been fully reimbursed for all patent costs incurred prior to the LICR License.

 

Additionally, LICR is entitled to milestone payments totaling up to 20.45 million GBP based upon the first Licensed Product achieving specific clinical, regulatory and sales based milestones. LICR is also entitled to milestone payment totaling up to 10.25 million GBP based upon a second Licensed Product achieving specific clinical, regulatory and sales based milestones.

 

Finally, LICR is entitled to a low-single digit royalty on net sales of Licensed Products that marginally escalates upon sales levels all determined by territory. LICR is also entitled to a percentage of any sublicensing income that gradually decreases based on the stage of development of the most advanced Licensed Product that is the subject of the applicable sublicense agreement.

 

Pursuant to the terms and conditions of the LICR License, LICR is responsible for managing the preparation, filing, prosecution and maintenance of all Licensed Patent Rights, as defined in the LICR License. iOx will reimburse LICR for all reasonable patent costs it incurs after the effective date of the LICR License. Further, the LICR License provides that both parties have the right to termination for material breach or default in the performance of obligations under the LICR License by the other party and in the event of insolvency of the other party.

 

Tarus License

 

On July 1, 2022, we acquired Tarus Therapeutics, Inc. Pursuant to the license agreement entered into by Tarus Therapeutics, Inc. and Impetis Biosciences Limited (“Impetis”) dated October 29, 2019 (“Impetis License”), Impetis granted to Tarus an exclusive sublicensable worldwide license to develop and commercialize the adenosine receptor antagonists for all indications and certain other assets which were granted upon exercise of a call option on November 5, 2020.

 

Under the terms of the Impetis License, Impetis is eligible to receive payments totaling up to $38 million on an Impetis Compound (as defined in the Impetis License) based upon achievement of certain clinical and commercial milestones. Milestone payments due in the amount of USD $1 million for achievement of certain regulatory milestones were paid in July 2022.

 

Additionally, commencing upon the First Commercial Sale (as defined in the Impetis License) of a Licensed Product (as defined in the Impetis License), Impetis is entitled to royalties on worldwide net sales that begin in the mid-single digits and escalate through multiple tiers, with net sales over $1 billion receiving low double digit royalties.

 

Pursuant to the terms and conditions of the Impetis License, Tarus has exclusive and full authority to manage all intellectual property (whether licensed or not) underlying the assets covered by the Impetis License and any other aspects related to exploitation, development and commercialization thereof at its own cost, and Impetis must provide Tarus reasonable assistance as requested at Tarus’ cost and expense. Further, the Impetis License provides that both parties have the right to termination for material breach by the other party and in the event that the other party undergoes certain events such as a voluntary winding-up, a liquidation or entry into receivership.

 

(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 Annual Report (refer to the heading entitled "Risk Factors") under Item 3 (D) and Item 4 (B) “Business Overview” and elsewhere in this Item 5).

 

 

 42 

 

(E) CRITICAL ACCOUNTING ESTIMATES

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

 

Significant areas where estimates are made include valuation of financial instruments (including the Stimunity Convertible Note (as defined below), deferred tax assets and liabilities, research and development costs, fair value used for acquisition of intangible assets, contingent consideration assumed and measurement of share-based compensation. Significant areas where critical judgments are applied include assessment of impairment of investments, goodwill and in-process research and development and the determination of the accounting acquirer and acquiree in the business combination accounting.

 

ITEM 6 – DIRECTORS AND SENIOR MANAGEMENT

 

(A) DIRECTORS AND SENIOR MANAGEMENT

 

At March 31, 2023, we had seven members on the Board of Directors – Dr. Gregory Bailey, Mr. Steven Mintz, Dr. Ian Walters, Mr. James Mellon, Ms. Linda Kozick, Mr. Mark Simon and Dr. Robert Glassman. In connection with the acquisition of Tarus Therapeutics, Dr. Robert Glassman joined our Board of Directors on July 1, 2022. Dr. Walters is our Chairman of the Board and Chief Executive Officer (“CEO”), Dr. Bailey is our Lead Director and Mr. Allan Shaw is our Chief Financial Officer (“CFO”).

 

Biographical information of the key people in our organization is provided below.

 

Ian B. Walters, MD, MBA – Chairman of the Board and CEO

 

Ian B. Walters, M.D., M.B.A., is the CEO of Portage Biotech Inc. Over his 25-year plus career, he has demonstrated both leadership and expertise in drug development, including the advancement of multiple cancer compounds from research stages through regulatory 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 a part-time consultant to Intensity Therapeutics, Inc.

 

 

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Gregory Bailey MD – Lead Director

 

Dr. Bailey is the Lead Director 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 such IP.

 

Greg was the co-founder of Portage, Ascent Healthcare Solutions, VirnetX Inc. (VHC: AMEX) 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. His current company board positions include Biohaven, Culminant Reinsurance, Chelsea Avondale, Agex, Manx Financial, and Portage.  He is also a director and the CEO of Juvanescence Ltd. Dr. Bailey is a Member of the Compensation Committee of our Board of Directors.

 

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

 

Steven Mintz – Director

 

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

 

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

 

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 Nominating Committees of our Board of Directors.

 

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 of our Board of Directors.

 

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.

 

 44 

 

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, which was acquired by Stifel Financial Corporation, a global investment bank serving companies in the life sciences industry on March 1, 2023. 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 of our Board of Directors.

 

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

 

Robert Glassman, MD – 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. Robert also serves on the boards of directors of Umoja Biopharma, Pharvaris, and Jubilant Therapeutics. He previously served as clinical assistant professor at Weill Cornell Medicine and has also held academic positions at the Hospital University of Pennsylvania, Cornell and Rockefeller University. Robert holds an M.D. from Harvard Medical School and is a Board-certified hematologist-oncologist.

 

Allan L. Shaw – CFO

 

Allan brings more than two decades of public company financial, operational, and strategic global business leadership. Allan serves as our CFO and is a five-time public company CFO 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 CFO 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 CFO 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 Calcimedica (Nasdaq: CALC) as an independent director and 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. Mr. Shaw received a B.S. from the State University of New York at Oswego College.

 

Robert Kramer, PhDChief Scientific Officer

 

Robert has 25 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.

 

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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.

 

Justin Fairchild – Vice President of Development

 

Justin Fairchild has nearly 20 years of oncology drug development experience. Prior to joining Portage, Justin served as Vice President of Clinical Development at the Parker Institute for Cancer Immunotherapy, where he was responsible for a cross-functional team dedicated to the delivery of novel immunotherapy combination clinical trials. He also previously held several roles in both clinical operations and clinical development at Bristol Myers Squibb, where he contributed to both early- and late-stage studies of multiple targeted and immunotherapy oncology agents, including ipilimumab, nivolumab, dasatinib and cetuximab. 

 

Justin earned an M.P.H. from The Johns Hopkins School of Public Health, and a B.A. in Chemistry from Colgate University. 

 

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 Annual Report, and the month and year in which they became directors or executive 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.

Lead Director effective August 16, 2022 (formerly Chairman of the Board)

June 4, 2013 See Item 6 (A) above

Mr. Steven Mintz (3)

Ontario, Canada

Director

April 6, 2016 See Item 6 (A) above

Mr. James Mellon (4)

Isle of Man

Director

February 15, 2022 See Item 6 (A) above

Mr. Mark Simon (5)

New Jersey, USA

Director

February 15, 2022 See Item 6 (A) above

 

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

Ms. Linda M. Kozick (6)

Florida, USA

Director

February 15, 2022 See Item 6 (A) above

Dr. Robert Glassman (7)

New Jersey, USA

Director

July 1, 2022 See Item 6 (A) above

Dr. Ian Walters

Connecticut, USA

Chairman of the Board effective August 16, 2022 and CEO effective May 1, 2019 (formerly Director)

August 1, 2016 See Item 6 (A) above

Mr. Allan Shaw

New York, USA

CFO

May 12, 2020 See Item 6 (A) above

Mr. Robert Kramer (8)

Utah, USA

Chief Scientific Officer

January 8, 2019 See Item 6 (A) above

Mr. Steven Innaimo (8)

Connecticut, USA

Vice President of Project Management & Operations

January 8, 2019 See Item 6 (A) above

Mr. Brian Wiley

Massachusetts, USA

Chief Business Officer

February 15, 2022 See Item 6 (A) above

Mr. Justin Fairchild

Connecticut, USA

Vice President of Development

June 1, 2022 See Item 6 (A) above

 

(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)Lead Director of the Company and Member of the Compensation Committee (formerly Chair of the Company).
(3)Chair of the Audit Committee and Member of the Compensation Committee.
(4)Member of the Nominating Committee.
(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. Glassman joined the Board of Directors on July 1, 2022 in connection with the Tarus Therapeutics transaction. Dr. Glassman joined the Audit Committee on July 19, 2023.
(8)Reflects the date of the SalvaRx acquisition by the Company. Prior to that, this individual was contracted by SalvaRx.

 

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.

 

 

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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 July 31, 2023)
Country of Principal Executive Offices: British Virgin Islands
Foreign Private Issuer Yes
Disclosure Prohibited under Home Country Law No
Total Number of Directors 7
  Female Male Non-Binary Did Not Disclose Gender
Part I: Gender Identity  
Directors 1 6
Part II: Demographic Background  
Under-represented person in Home Country 4
LGBTQ+
Did not Disclose Demographic Background 1

 

(B) COMPENSATION

 

1.General

 

During Fiscal 2023 and Fiscal 2022, the Company engaged two separate third-party compensation consultants 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 compensation consultant’s studies and resulting recommendations, in November 2021, the Board, as recommended by the Compensation Committee, approved cash fees and stock options to be paid and awarded, as applicable, to the Company’s independent Board members for both participation as a member, as well as membership of Board committees. Cash fees to board members commenced as of January 1, 2022.

 

As a result of the compensation consultants’ studies and resulting recommendations, in December 2022, the Board approved, and as recommended by the Compensation Committee, salaries for officers and employees commencing January 1, 2023 and approved achievement of 73% of the target bonus for Fiscal 2023, of which 25% was paid in January 2023 and the balance of which accrued as of March 31, 2023 and is payable upon achievement of a successful financing. Additionally, as part of this effort, on March 30, 2023, the Board approved grants of stock options for all employees and directors.

 

Additionally, as a result of the compensation consultant’s studies and resulting recommendations, in December 2022, the Compensation Committee recommended and the Board approved a compensation regime based upon targeted goals and other metrics.

 

The Company does not have any plans that provide for pensions, retirement or similar benefits.

 

2.Statement of Director and Executive Compensation

 

The following tables and accompanying notes set forth all compensation paid or payable by the Company to its directors and senior management for the fiscal years ended March 31, 2023, 2022 and 2021:

 

 

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2.Statement of Director and Executive Compensation (Cont’d)

 

Name & Principal Position   Year   Fee and Salary (2)   Bonus   Other  

Securities Under Options / SARs

Granted (1)

Shares or Units Subject to Resale Restrictions   Other (15)   Total Compensation  
        $   $   $   $ $   $   $  
Gregory Bailey – Lead Director (Former Chairman of the Board of Directors) and Compensation Committee Member  
    2023   68,500       35,478 (4)     103,978  
    2022   21,667       57,063 (8)     78,730  
    2021   --       1,416,100 (12)     1,416,100  
                                   
James Mellon - Independent Director and Audit Committee Member and Nominating Committee Member  
    2023   51,500       35,478 (4)     86,978  
    2022   5,208       99,360 (9)     104,568  
                                   
Steven Mintz - Independent Director and Chairman of the Audit Committee and Compensation Committee Member  
    2023   61,000       35.478 (4)     96,478  
    2022   18,750       57,063 (8)     75,813  
`   2021         1,416,100 (12)     1,416,100  
                                   
Linda Kozick - Independent Director and Chairperson of the Compensation Committee and Nominating Committee Member  
    2023   56,000       35,478 (4)     91,478  
    2022   5,000       99,360 (9)     104,360  
                                   
Mark Simon - Independent Director and Chairman of the Nominating Committee and Audit Committee Member  
    2023   55,500       35,478 (4)     90,978  
    2022   5,208       99,360 (9)     104,568  
                                   
Robert Glassman - Independent Director  
    2023   30,000       168,743 (5)     198,743  
                                   
Ian Walters - Chairman of the Board (Former Director) and CEO  
    2023   624,175   267,996 (3)   748,186 (6)   75,480   1,715,837  
    2022   459,195   375,000     1,101,132 (10) 879,942 (11) 13,952   2,829,221  
    2021   368,503   200,000     2,583,610 (13) 2,698,000 (14)   5,850,113  
                                   
Allan Shaw – CFO and Secretary  
    2023   378,250   102,312 (3)   349,308 (6)   43,519   873,389  
    2022   256,000   161,000     294,336 (10) 235,469 (11) 13,952   960,757  
    2021   186,290       2,241,410 (13)     2,427,700  
                                   
                                   

 

 49 

 

2.Statement of Director and Executive Compensation (Cont’d)

 

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

Securities Under Options / SARs

Granted (1)

  Shares or Units Subject to Resale Restrictions   Other (15)   Total Compensation  
        $   $   $   $   $   $   $  
Robert Kramer - Chief Scientific Officer  
    2023   218,628   63,504 (3)   137,454 (6)   28,025   447,611  
    2022   195,501   83,000     219,876 (10) 175,784 (11)   674,161  
    2021   147,500       1,043,710 (13) 1,615,250 (14)   2,806,460  
                                   
Steven Innaimo - Vice President of Project Management & Operations  
    2023   313,875   68,355 (3)   76,632 (6)   61,827   520,689  
    2022   310,000   93,000     120,888 (10) 96,068 (11) 13,952   633,908  
    2021   298,000       2,994,250 (13)     3,292,250  
                                   
Brian Wiley - Chief Business Officer  
    2023   177,185   38,588 (3)   118,343 (6)   4,915   339,031  
    2022   84,057       525,600 (10)     609,657  
                                   
Justin Fairchild – Vice President of Development  
    2023   190,000   25,358 (3)   544,632 (7)   30,473   790,463  
                                   

 

Notes:

 

1.“SAR” means stock appreciation rights. The Company never issued any SARs.

 

2.Represents base salary earned by officers in accordance with their respective contracts and Director’s fees earned by directors, as applicable, in accordance with the directors’ fee structure established by the Compensation Committee of the Board.

 

3.Represents the bonus for Fiscal 2023 approved the Board, as recommended for approval by the Compensation Committee. Such amount represents 73% of the target bonus for Fiscal 2023, of which 25% was paid in January 2023 and the balance of which is accrued as of March 31, 2023 and is payable upon achievement of a successful financing.

 

4.Represents aggregate grant date fair value of 14,600 options to purchase ordinary shares granted March 30, 2023, which vest on the first anniversary of the date of grant.

 

5.Represents aggregate grant date fair value of 15,900 options to purchase ordinary shares granted July 27, 2022, which vest monthly on the grant date anniversary over three years following the date grant and the grant date fair value of 14,600 options to purchase ordinary shares granted March 30, 2023, which vest on the first anniversary of the date of grant.

 

6.Represents aggregate grant date fair value of options to purchase ordinary shares granted March 30, 2023, which vest ratably on each of the first four anniversaries of the date of grant. See “Outstanding Equity Awards at Fiscal Year-End” below for additional information.

 

 50 

 

2.Statement of Director and Executive Compensation (Cont’d)

 

7.Represents aggregate grant date fair value of 50,000 options to purchase ordinary shares granted June 8, 2022, and 30,900 options to purchase granted March 30, 2023, which vest ratably on each of the first four anniversaries of the respective date of grant.

 

8.Represents aggregate grant date fair value of 6,900 options to purchase ordinary shares granted January 19, 2022, which vest on the first anniversary of the date of grant.

 

9.Represents aggregate grant date fair value of 13,800 options to purchase ordinary shares granted February 15, 2022, which vest monthly on the grant date anniversary over the first three years following the date of grant.

 

10.Represents aggregate grant date fair value of options to purchase ordinary shares granted January 19, 2022, which vest ratably on each of the first four anniversaries of the date of grant. See “Outstanding Equity Awards at Fiscal Year-End” below for additional information.

 

11.Represents aggregate grant date fair value (market value) of restricted stock units granted January 19, 2022, which were vested on grant date and are subject to certain restrictions.

 

12.Represents aggregate grant date fair value of options to purchase ordinary shares granted January 13, 2021, which vested 1/3 on January 13, 2021, and 1/3 each on the first and second anniversaries of the grant date. See “Outstanding Equity Awards at Fiscal Year-End” below for additional information.

 

13.Represents aggregate grant date fair value of options to purchase ordinary shares granted January 13, 2021, which vest ratably on the first, second and third anniversaries of the grant date. See “Outstanding Equity Awards at Fiscal Year-End” below for additional information.

 

14.Represents aggregate grant date fair value (market value) of restricted stock units granted January 13, 2021, which were vested at grant date and are subject to certain restrictions.

 

15.Represents employee benefits paid by the Company.

 

 51 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table and related notes provide information regarding all outstanding equity awards for our executive officers as of March 31, 2023:

 

    Option Awards (1)   Stock Awards (6) (7) (8) (9)
Name   Number of Securities
Underlying Unexercised
Options
(#)
Exercisable (1)
 

Equity Incentive
Plan Awards:
Number of Securities
Underlying Unexercised

Unearned Options

(#) (1)

 

 

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     301,688 (2) $2.92   March 30, 2033        
Ian B. Walters   31,425 (3) 94,275 (3) $10.22   January 19, 2032        
Ian B. Walters   100,667 (4) 50,333 (4) $17.75   January 13, 2031        
                                 
Allan Shaw     140,850 (2) $2.92   March 30, 2033                
Allan Shaw   8,400 (3) 25,200 (3) $10.22   January 19, 2032        
Allan Shaw   87,333 (4) 43,667 (4) $17.75   January 13, 2031        
                                 
Robert Kramer     55,425 (2) $2.92   March 30, 2033                
Robert Kramer   6,275 (3) 18,825 (3) $10.22   January 19, 2032        
Robert Kramer   40,667 (4) 20,333 (4) $17.75   January 13, 2031        
                                 
Steve Innaimo     30,900 (2) $2.92   March 30, 2033                
Steve Innaimo   3,450 (3) 10,350 (3) $10.22   January 19, 2032        
Steve Innaimo   116,667 (4) 58,333 (4) $17.75   January 13, 2031        
                                 
Brian Wiley     47,719 (2) $2.92   March 30, 2033        
Brian Wiley   15,000 (3) 45,000 (3) $10.22   January 19, 2032        
                                 
Justin Fairchild     30,900 (2) $2.92   March 30, 2033                
Justin Fairchild     50,000 (5) $11.00   June 8, 2032        
                                 

 

 52 

 

Outstanding Equity Awards at Fiscal Year-End (Cont’d)

 

(1)

Amounts represent options to purchase ordinary shares.

 

(2)

These options to purchase ordinary shares were granted on March 30, 2023, have a ten-year term and vest ratably on each of the first four 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)

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.

 

(5)

These options to purchase ordinary shares were granted on June 8, 2022, have a ten-year term and vest ratably on each of the first four anniversaries of the grant date.

 

(6)

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.

 

(7)

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.

 

(8)

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.

 

(9) 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.

 

 

 53 

 

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.

 

EXECUTIVE COMPENSATION

 

For the year ended March 31, 2023, our members of senior management are:

 

·Ian B. Walters, Chairman of the Board and CEO
·Allan Shaw, CFO
·Steven Innaimo, Vice President of Project Management & Operations
·Robert Kramer, Chief Scientific Officer
·Brian Wiley, Chief Business Officer
·Justin Fairchild, Vice President of Development

 

Executive Compensation Overview

 

Through November 30, 2021, the compensation of our members of senior management has primarily consisted of consulting fees (and in some cases bonuses), and share-based compensation. During Fiscal 2022 and Fiscal 2023, the Company entered into Employment contracts with Dr. Walters, Mr. Shaw, Mr. Innaimo, Mr. Kramer, Mr. Wiley and Mr. Fairchild 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 ordinary shares. Our members of senior management, 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 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.

 

Components of Executive Compensation

 

Annual Base Salary

 

Our members of senior management each receive a base salary to compensate them for services rendered to our company. The base salary payable to each member of senior management 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 and 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.

 

Annual Bonus

 

In December 2022, the Board approved executive performance bonuses, as recommended by the Compensation Committee, totaling $0.6 million, which is equivalent to 73.5% of original annual targets established by the Board in December 2021. The bonuses were approved based upon the original performance targets established. The Board further approved a payment structure of 25% of approved bonuses, which were paid in January 2023, with the balance of amounts due payable upon a new financing.

 

Equity-Based Compensation

 

In Fiscal 2023, the Compensation Committee approved the granting of options to purchase shares of common stock as follows:

 

On June 8, 2022, the Company granted 50,000 options to purchase shares to an executive of the Company. The options have an exercise price of $11.00, the average price of the stock on that date, vest ratably on each of the first four anniversaries of the grant date and will expire, if unexercised, on June 8, 2032.

 

 

 54 

 

On July 27, 2022, the Company granted 15,900 options to purchase shares to a member of the Board. The options have an exercise price of $10.06, the average price of the stock on that date, vest ratably on each monthly anniversary of the grant date in the three year period following the grant date and will expire, if unexercised, on July 27, 2032.

 

On March 30, 2023, the Board unanimously approved to increase the maximum number of ordinary shares reserved for issuance under the Amended and Restated 2021 Equity Incentive Plan. The aggregate number of shares available for awards under the Amended and Restated 2021 Equity Incentive Plan was increased to 2,880,992, which represented a 5% increase (or 879,180 shares) based on ordinary shares outstanding on March 29, 2023, which is equal to 16% of the issued and outstanding ordinary shares in the capital of the Company as of this date.

 

On March 30, 2023, the Company granted an aggregate of 746,120 stock options exercisable at a price of $2.92 per share, representing the average price of the shares on the grant date (March 30, 2023), which expire on March 30, 2033, to various directors, officers and a consultant of the Company. 14,600 options to purchase ordinary shares (total 87,600), were granted to each non-executive member of the Board and vest on the first anniversary of the grant date. A total of 651,020 stock options were granted to employees (including Mr. Walters, who is Chairman of the Board of Directors), and a consultant, and such stock options vest ratably on each of the first four annual anniversaries of the grant date. The balance of 7,500 stock options were also granted to a consultant, which was fully vested as of the grant date.

 

Employment Agreements

 

PDS entered into a Services Agreement with our CEO effective December 15, 2021 (the “CEO Services Agreement”). The CEO Services Agreement originally provided for a base salary of $618,000, plus cost-of-living increases. On December 19, 2022, the Compensation Committee approved the CEO’s compensation of $642,700 for Fiscal 2024. The CEO Services Agreement provides for annual increases based upon the review of the base salary by the Board prior to the anniversary of the CEO Services Agreement provided that the annual increase cannot be less than the cost-of-living increase. The CEO Services Agreement also provides that the CEO is eligible to receive an annual performance-based bonus targeted at 59% of the applicable year’s base salary, which bonus is earned based on the achievement of performance targets, as determined annually by the Board and communicated to the CEO in the first quarter of the year. Any annual bonus, to the extent earned, is to be paid no later than March 15 of the following year. The CEO Services Agreement is for an initial term of three years, after which it will automatically renew annually unless terminated in accordance with the CEO Services Agreement.

 

Under the CEO Services Agreement, the CEO may terminate his employment with PDS at any time for Good Reason (as defined in the CEO Services Agreement). PDS may terminate the CEO’s employment immediately upon his death, upon a period of disability or without Just Cause (as defined in the CEO Services Agreement). In the event that the CEO’s employment is terminated due to his death or Disability (as defined in the CEO Services Agreement), for Good Reason or without Just Cause, he will be entitled to accrued obligations (accrued unpaid portion of base salary, accrued unused vacation time and any unpaid expenses). Additionally, he may be entitled to Severance Benefits (as defined in the CEO Services Agreement), which include his then current base salary and the average of his annual bonus for the prior two completed performance years, paid over 12 monthly installments. Additionally, the CEO will be entitled to life insurance benefits and medical and dental benefits for a period of 12 months at the same rate the CEO and PDS 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 in the CEO Services Agreement), 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 PDS is terminated by PDS 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 12 months following the effective date of a Change in Control (as defined in the CEO Services Agreement), then, in addition to paying or providing the CEO with the Accrued Obligations (as defined in the CEO Services Agreement), the Company will provide the following Change in Control Severance Benefits (as defined in the CEO Services Agreement):

 

 55 

 

(1)PDS will pay the base salary continuation benefit for 18 months;

 

(2)PDS will pay the life insurance benefit for 18 months;

 

(3)PDS will pay an additional amount equivalent to the CEO’s target annual bonus calculated using the bonus percentage for the performance year in which the CEO’s termination occurs. This bonus will be paid in 12 equal installments commencing on the first payroll date that is more than 60 days following the date of termination of the CEO’s employment, with the remaining installments occurring on the first day of the month for the 11 months thereafter;

 

(4)PDS will provide the CEO with continued medical and dental benefits, as described above, for 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 (individually, an “Executive Service Agreement,” and collectively, the “Executive Service Agreements”) with each of our five other members of senior management (individually, “Executive” and collectively, “Executives”), three of which are dated as of December 1, 2021, one of which is dated December 15, 2021 and one of which is dated June 1, 2022. Each of the Executive Services Agreements provides for an initial term of two years that is automatically renewed for one-year periods (except two of the Executive Services Agreement, which provides for an initial term of one year and that is automatically renewed for one-year periods). The Executive Services Agreements initially provide for annual base salaries ranging from $175,000 to $348,000 (pro-rated for services rendered) and annual bonus targets ranging from 30% to 40%. They also provide for long-term incentives in the form of equity awards from time to time under the Portage Biotech Inc. Amended and Restated 2021 Equity Incentive Plan.

 

On December 19, 2022, the Compensation Committee approved executive compensation for Fiscal 2024, as set forth below. Compensation for Fiscal 2023 is also set forth below:

 

   FISCAL 2024  FISCAL 2023
   BASE
SALARY
  TARGET
BONUS
  BASE
SALARY
  TARGET BONUS
Allan Shaw  $469,000    40%  $348,000    40%
Robert Kramer  $225,000    40%  $216,000    40%
Steven Innaimo  $325,500    30%  $310,000    30%
Brian Wiley  $183,750    40%  $175,000    30%
Justin Fairchild (*)  $300,000    30%  $300,000    30%

 

(*) Mr. Fairchild’s Executive Service Agreement took effect on June 1, 2022 and his base salary for Fiscal 2023 was pro-rated based upon the contract terms.

 

The Executive Services Agreements can be terminated by PDS without Just Cause, by death or Disability, or by the Executive (except Mr. Fairchild) for Good Reason (each as defined in the respective Executive Services Agreements). In such instances, the Executive Services Agreements provide for the payment of accrued obligations (accrued unpaid portion of base salary, accrued unused vacation time and any unpaid expenses). Additionally, the Executives (except Messrs. Wiley and Fairchild) 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 PDS 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 in the respective Executive Services Agreements), and the exercise period for such stock options will be increased by a period of two years from the Termination Date.

 

 

 56 

 

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

 

(1)PDS will pay the Base Salary continuation benefit for 12 months;

 

(2)PDS will pay the life insurance benefit for 12 months;

 

(3)The Company will pay an additional amount equivalent to the Executive’s target annual bonus calculated using the bonus percentage for the performance year in which the Executive’s termination occurs. This bonus will be payable in 12 equal installments commencing on the first payroll date that is more than 60 days following the date of termination of the Executive’s employment, with the remaining installments occurring on the first day of the month for the 11 months thereafter;

 

(4)PDS will provide the Executive with continued medical and dental benefits, as described above, for 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 Executive Services Agreements also include customary confidentiality, as well as provisions relating to assignment of inventions. The Executive Services Agreements also includes non-competition and non-solicitation of employees and customers provisions that run during the Executive’s employment with PDS 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 (if applicable)  $30,000 
Lead  $20,000 
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 

 

 

 57 

 

Effective January 1, 2022, each non-employee Board member is entitled to receive cash Board fees of $40,000 per annum, payable quarterly in arrears. Additionally, each non-employee Board member is entitled to an annual grant of 6,900 options to purchase Portage ordinary shares, which vest the first annual anniversary of the grant date. The Company incurred Board fees totaling $322,500 and $55,833 during the years ended March 31, 2023 and 2022, respectively. There were no Board fees incurred prior to January 1, 2022.

 

Non-executive Board chairpersons are entitled to an annual cash fee of $30,000, payable quarterly in arrears. In lieu of a non-executive chairperson, the lead director is entitled to an annual cash fee of $20,000 per annum paid quarterly in arrears. Additionally, the chairperson of each of the Audit Committee, Compensation Committee and Nominating Committee is entitled to annual fees of $15,000, $12,000 and $8,000, respectively, payable quarterly in arrears. Members of those committees is entitled to annual fees of $7,500, $6,000 and $4,000, respectively, payable quarterly in arrears.

 

(C) BOARD PRACTICES

 

Audit Committee

 

Our audit committee consists of Mr. Steven Mintz, Dr. Robert Glassman 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 Exchange Act. 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.

 

Dr. 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.

 

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

 

Our audit committee will, among other things:

 

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

 

Pre-Approval Policies and Procedures

 

In the event that we plan to retain the services of the external auditors to the Company for tax compliance, tax advice or tax planning, the CFO of the Company must consult with the chair of the Audit Committee, 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.

  

 58 

 

Our 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 Audit Committee 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 annually our compensation strategy, including base salary, incentive compensation and equity-based plans, including whether to adopt, amend and terminate compensation plans or arrangements
·review and approve, or recommend to the Board for review and approval, annually our corporate goals and objectives, including those applicable to the compensation of the CEO and to the extent applicable, other executive officers;
·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;
·evaluate the efficacy of our compensation policy and strategy in achieving gender and minority pay parity, positive social impact and attracting a diverse workforce; and
·establish and review general policies relating to compensation and benefits of our employees.

 

Nominating Committee

 

Our nominating and committee consists of Mr. Mark Simon, Ms. Linda Kozick and Mr. James Mellon with Mr. Mark Simon as Chairperson. Our nominating 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 size and 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.

 

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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 6-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.

 

(D) EMPLOYEES

 

The Company had seven full-time employees as of March 31, 2023, as compared to five employees as of March 31, 2022. The employees are located in the United States. Four employees oversee business operations and management of clinical development, one employee provides business development, one employee is the CFO and one employee is the executive chairman and CEO. It also uses the services of consultants from time to time.

 

(E) SHARE OWNERSHIP

 

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.

 

On June 25, 2020, at the annual meeting of shareholders, the Company’s incentive stock option plan (the “2020 Stock Option Plan”) was approved, which authorized the Company’s directors to fix the option exercise price and to issue stock options under the plan as they see fit. The Company’s 2020 Stock Option Plan was a 10% rolling stock option plan under which the Company’s directors were authorized to grant up to a maximum of 10% of the issued and outstanding ordinary shares on the date of grant.

 

Effective January 13, 2021, the Company amended and restated its 2020 Stock Option Plan to permit the grant of additional types of equity compensation securities, including restricted stock units (“RSUs”) and dividend equivalent rights (the “2021 Equity Incentive Plan”). Pursuant to the 2021 Equity Incentive Plan, on January 13, 2021, the Company granted an aggregate of 868,000 stock options exercisable at a price of $17.75 per share, representing the closing price of the shares on the day immediately preceding the grant date, which expire on January 13, 2031 to various directors, officers and consultants of the Company. 350,000 options granted to members of the Board vest 1/3 on grant date, 1/3 on the first anniversary of the grant and 1/3 on the second anniversary of the grant. 518,000 options granted to consultants (one of whom is also a director of the Company) vest 1/3 on each of the first three anniversaries of the grant date.

 

 

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Additionally, the Company granted 243,000 RSUs on January 13, 2021, with a grant date fair value of $17.75 per share, which was the closing price on the day immediately preceding the grant date. The RSUs vested on the date of grant, but underlying shares cannot be sold until one of four of the following conditions are met: (1) a Change in Control (as defined in the Amended and Restated 2021 Equity Incentive Plan), (2) the participant’s Separation from Service (as defined in the Amended and Restated 2021 Equity Incentive Plan), (3) the participant’s death, or (4) the participant’s Disability (as defined in the Amended and Restated 2021 Equity Incentive Plan).

 

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 ordinary shares available for awards to 2,001,812, which is equal to 15% of the issued and outstanding ordinary shares 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 ordinary shares not to exceed an additional 5% of the aggregate number of shares then outstanding;
(2)The authorization of incentive stock options under the Amended and Restated 2021 Equity Incentive Plan; and
(3)The provision of dividend equivalent rights to be issued when authorized.

 

Pursuant to the Amended and Restated 2021 Equity Incentive Plan, on January 19, 2022, the Company granted an aggregate of 302,000 stock options exercisable at a price of $10.22 per share, representing the average price of the Company’s ordinary shares on the grant date (January 19, 2022), which expire on January 19, 2032, to various directors, officers and consultants of the Company. A total of 13,800 of the 302,000 stock options were granted to two members of the Board and vest on the first anniversary of the grant date. The balance of 288,200 stock options were granted to employees (one of whom is also a director of the Company), and a consultant, and such stock options vest ratably on each of the first four annual anniversaries of the grant date.

 

Additionally, the Company granted 135,740 RSUs to employees (one of whom is also a director of the Company) on January 19, 2022, with a fair value of $10.22 per share, representing the average price of the shares on the grant date (January 19, 2022). The RSUs were fully vested and nonforfeitable as of the grant date and will expire on January 19, 2032.

 

On February 15, 2022, James Mellon, Linda Kozick and Mark Simon were appointed to the Board. Mr. Mellon owned approximately 23.9% of the Company’s outstanding shares at that date. Additionally, Mr. Mellon had previously served as a member of the Board from 2016 to August 14, 2020. On February 15, 2022, in connection with the appointments, each of these directors were granted 13,800 non-qualified stock options, which vest ratably monthly over a three-year period. The options have an exercise price of $8.59 per share, the average price of the stock on February 15, 2022, the day immediately preceding the grant date, and will expire, if unexercised, on February 15, 2032.

 

On June 8, 2022, the Company granted 50,000 options to purchase shares to an executive of the Company. The options have an exercise price of $11.00, the average price of the stock on that date, vest ratably on each of the first four anniversaries of the grant date and will expire, if unexercised, on June 8, 2032.

 

On July 27, 2022, the Company granted 15,900 options to purchase shares to a member of the Board. The options have an exercise price of $10.06, the average price of the stock on that date, vest ratably on each monthly anniversary of the grant date in the three year period following the grant date and will expire, if unexercised, on July 27, 2032.

 

On March 30, 2023, the Board unanimously approved to increase the maximum number of ordinary shares reserved for issuance under the Amended and Restated 2021 Equity Incentive Plan. The aggregate number of shares available for awards under the Amended and Restated 2021 Equity Incentive Plan was increased to 2,880,992, which represented a 5% increase (or 879,180 shares) based on ordinary shares outstanding on March 29, 2023, which is equal to 16% of the issued and outstanding ordinary shares in the capital of the Company as of this date.

 

On March 30, 2023, the Company granted an aggregate of 746,120 stock options exercisable at a price of $2.92 per share, representing the average price of the shares on the grant date (March 30, 2023), which expire on March 30, 2033, to various directors, officers and a consultant of the Company. 14,600 options to purchase ordinary shares, totaling 87,600, were granted to each non-executive member of the Board and vest on the first anniversary of the grant date. A total of 651,020 stock options were granted to employees (including Mr. Walters, who is Chairman of the Board of Directors), and a consultant, and such stock options vest ratably on each of the first four annual anniversaries of the grant date. The balance of 7,500 stock options were also granted to a consultant, which was fully vested as of the grant date.

 

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The following table sets forth the share ownership of our executive officers and directors as at March 31, 2023:

 

   Ordinary Shares
Beneficially Owned
Name  Number  Percentage *
Gregory Bailey   3,494,095(1)(10)   19.63%
Steven Mintz   147,211(1)(2)   0.83%
James Mellon   3,039,004(7)(10)   17.07%
Linda Kozick   7,283(7)   0.04%
Mark Simon   7,283(7)   0.04%
Robert Glassman   29,820(9)   0.17%
Ian Walters   347,183(3)   1.95%
Allan Shaw   95,734(4)   0.54%
Robert Kramer   187,676(5)   1.05%
Steven Innaimo   120,117(6)   0.67%
Brian Wiley   15,000(8)   0.08%

 

* Based on issued and outstanding ordinary shares at July 30, 2023 plus vested stock options and stock options that vest in the following 60 days.

 

(1)Includes 85,000 and 6,900 vested stock options to purchase ordinary shares granted January 13, 2021 and January 19, 2022, respectively. Excludes 14,600 unvested stock options granted March 30, 2023.
(2)Excludes 60,000 shares for which Mr. Mintz has shared investment control and disclaims beneficial ownership.
(3)Includes 100,667 vested stock options to purchase ordinary shares and excludes 152,000 vested restricted stock units subject to certain restrictions and 50,333 unvested stock options granted January 13, 2021. Includes 31,425 vested stock options to purchase ordinary shares and excludes 86,100 vested restricted stock units subject to certain restrictions and 94,275 unvested stock options granted January 19, 2022. Excludes 301,688 unvested stock options granted March 30, 2023. Additionally, excludes 87,519 shares held in trusts for the benefit of his children for which Mr. Walters disclaims beneficial ownership.
(4)Includes 87,334 vested stock options to purchase ordinary shares and excludes 43,666 unvested stock options granted January 13, 2021. Includes 8,400 vested stock options to purchase ordinary shares and excludes 23,040 vested restricted stock units subject to certain restrictions and 25,200 unvested stock options granted January 19, 2022. Excludes 140,850 unvested stock options granted March 30, 2023.
(5)Includes 40,667 vested stock options to purchase ordinary shares and excludes 91,000 vested restricted stock units subject to certain restrictions and 20,333 unvested stock options granted January 13, 2021. Includes 6,275 vested stock options to purchase ordinary shares and excludes 17,200 vested restricted stock units subject to certain restrictions and 18,825 unvested stock options granted January 19, 2022. Excludes 55,425 unvested stock options granted March 30, 2023.
(6)Includes 116,667 vested stock options to purchase ordinary shares and excludes 58,333 unvested stock options granted January 13, 2021. Includes 3,450 vested stock options to purchase ordinary shares and excludes 9,400 vested restricted stock units subject to certain restrictions and 10,350 unvested stock options granted January 19, 2022. Excludes 30,900 unvested stock options granted March 30, 2023.
(7)Includes 6,516 vested stock options to purchase ordinary shares and 767 stock options that vest in the following 60 days and excludes 6,517 unvested stock options granted February 15, 2022. Excludes 14,600 unvested stock options granted March 30, 2023.
(8)Includes 15,000 vested stock options to purchase ordinary shares and excludes 45,000 unvested stock options granted January 19, 2022. Excludes 47,719 unvested stock options granted March 30, 2023.
(9)Includes 5,300 vested stock options to purchase ordinary shares and 883 stock options that vest in the following 60 days and excludes 9,717 unvested stock options granted July 27, 2022. Excludes 14,600 unvested stock options granted March 30, 2023.
 (10)These shares for Mr. Bailey and Mr. Mellon exclude 713,191 shares owned by SalvaRx Group plc. Mr. Bailey and Mr. Mellon own 36.91% and 35.07% of SalvaRx Group plc, respectively.

 

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

 

(F) DISCLOSURE OF A REGISTRANT’S ACTION TO RECOVER ERRONEOUSLY AWARDED COMPENSATION.

 

Not applicable.

 

 

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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, 2023, the Company had 17,605,748 ordinary shares issued and outstanding and at July 30, 2023, the Company had 17,789,691 ordinary shares issued and oustanding.

 

The following table sets forth persons known by us to be beneficial owners of more than 5% of our ordinary shares as of July 30, 2023. 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(1)  Percentage of Shares(2)
       
Gregory Bailey   3,494,095    19.63%
James Mellon   3,039,004    17.07%

 

(1) The share counts below exclude 713,191 shares of our stock owned by SalvaRx Group plc, in which Mr. Bailey and Mr. Mellon own interests of 36.91% and 35.07%, respectively.

(2) Based on ordinary shares issued and outstanding as of July 30, 2023.

 

There were no changes to the holdings of major shareholders in Fiscal 2023 other than through stock options granted. All shares have the same voting rights. For details on Mr. Bailey and Mr. Mellon’s holdings for the last three years, see the Company’s Annual Report on Form 20-F for the fiscal year ended March 31, 2022, the Company’s Annual Report on Form 20-F for the fiscal year ended March 31, 2021 and the Company’s Annual Report on Form 20-F for the fiscal year ended March 31, 2020.

 

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.

 

Exemption from Insider Report Filing under Canadian Securities Legislation

 

The Company is a reporting issuer under the Securities Acts of each of the province of Ontario and British Columbia in Canada, which would normally require 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) to file insider reports of changes in their ownership of the Company's ordinary shares under National Instrument 55-104 - Insider Reporting Requirements and Exemptions (“NI 55-104”). Under section 4.12 of National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers however, as the Company is deemed to be an SEC Foreign Issuer, the insider reporting requirements of NI 55-104 do not apply provided the insiders comply with the requirements of U.S. federal securities law relating to insider reporting.

 

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. Subject to certain exceptions, 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 of the Exchange Act.

 

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(B) RELATED PARTY TRANSACTIONS

 

SalvaRx Acquisition

 

Four of the Company’s then six directors 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.

 

Payable

 

In January 2020, the then 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 personnel of the Company have also entered into related party transactions with these invested companies. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including directors and senior management of companies.

 

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. Also see the discussion of the Stimunity Convertible Note as described under Item 5 (B) Liquidity and Capital Resources of this Annual Report.

 

(b)iOx. Upon the iOx Share Exchange on July 18, 2022, the non-Portage director resigned from the iOx board leaving two Portage insiders as directors. The CEO of Portage is also the CEO of iOx, and the management team of Portage comprises the management team of iOx. See below for a discussion of the Company’s purchase of the non-controlling interest in iOx through its wholly-owned subsidiary SalvaRx.

 

(c)Saugatuck. One of the three directorships on the board of directors of Saugatuck is controlled by Portage. Additionally, the CEO of Portage is also the CEO of Saugatuck, and the management team of Portage comprises the management team of Saugatuck.

 

(d)Intensity. The CEO of Portage previously served as a part-time officer of Intensity until becoming a consultant in 2023. Additionally, Intensity provided services (primarily rent) to Portage, totaling $69,759, $83,437 and $77,088 for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively, of which $63,624 was unpaid at March 31, 2023.

 

(e)Portage Development Services Inc. PDS provides human resources and other services to each operating subsidiary of Portage through a shared services agreement.

 

(f)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.

 

 

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The following are related party balances and transactions other than those disclosed under Note 21, “Related Party Transactions” to the Company’s consolidated financial statements:

 

Interest expense includes $78,427 interest incurred in the year ended March 31, 2021, on notes issued to members of the Board. 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.

 

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 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.

 

Share Exchange Agreement – iOx

 

On July 18, 2022, the Company and SalvaRx entered into a Share Exchange Agreement with each of the minority shareholders of iOx resulting in the acquisition of the outstanding non-controlling ownership interest (approximately 22%) of iOx, which is developing the iNKT engager platform. As such:

 

·the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary;
·any difference between the amount by which the non-controlling interests is adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the parent; and
·there is no consequential adjustment to the carrying amount of goodwill, and no gain or loss is recognized in profit or loss.

 

The Company now owns the worldwide rights to its small molecule iNKT engagers, including lead programs PORT-2 and PORT-3. Under the terms of the Share Exchange Agreement, each Seller sold to the Company, and the Company acquired from each Seller, legal and beneficial ownership of the number of iOx shares held by each Seller, free and clear of any share encumbrances, in exchange for the issuance in an aggregate of 1,070,000 Portage ordinary shares to be allocated among the Sellers based upon their relative ownership. As a result of the Share Exchange Agreement, the Company owns 100% of the issued and outstanding shares of iOx through its wholly-owned subsidiary, SalvaRx.

 

As additional consideration for the sale of the iOx shares to the Company under the Share Exchange Agreement, the Sellers shall have the contingent right to receive additional shares (“Earnout Shares”) from the Company having an aggregate value equal to $25 million calculated at the Per Share Earnout Price, as defined in the Share Exchange Agreement, upon the achievement of certain milestones defined as the dosing of the first patient in a Phase 3 clinical trial for either PORT-2 (IMM60 iNKT cell activator/engager) or PORT-3 (PLGA-nanoparticle formulation of IMM60 combined with a NY-ESO-1 peptide vaccine). The Company shall have the option, in its sole and absolute discretion, to settle the Earnout Shares in cash.

 

 

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Employment Agreements

 

For a description of compensation arrangements and employment agreements between the Company and its members of senior management as well as director compensation arrangements, see Part I Item 6.B “Compensation” of this Annual Report.

 

(C) INTERESTS OF EXPERTS AND COUNSEL

 

Not applicable.

 

ITEM 8 – FINANCIAL INFORMATION

 

(A) CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

 

Financial Statements

 

Information regarding our financial statements is contained under Item 18 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, 2023, to the date of this report.

 

ITEM 9 – THE OFFER AND LISTING

 

(A) OFFER AND LISTING DETAILS

 

The Company’s shares have been listed for trading on Nasdaq on the Nasdaq Capital Market under the symbol “PRTG” since February 25, 2021.

 

 

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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$
2023*   11.95    N/A    2.60    N/A 
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 

 

* 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  Nasdaq
Quarter ended:  US$  US$
30-Jun-23*   3.87    2.73 
31-Mar-23*   7.20    2.60 
31-Dec-22*   7.53    4.42 
30-Sep-22*   10.12    5.89 
30-Jun-22*   11.95    5.16 
31-Mar-22*   12.00    6.57 
31-Dec-21*   23.74    10.73 
30-Sept-21*   22.40    13.65 
30-Jun-21*   42.81    20.96 

 

* 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 each of the most recent six months:

 

   High  Low
   Nasdaq  Nasdaq
Month  US$  US$
July 2023 (through July 30, 2023)   3.68    2.76 
June 2023   3.87    3.20 
May 2023   3.66    2.73 
April 2023   3.52    2.95 
March 2023   3.70    2.60 
February 2023   5.06    3.60 

 

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(B) PLAN OF DISTRIBUION

 

Not applicable.

 

(C) MARKETS

 

The Company's ordinary shares currently trade in one place. The Company’s shares have been listed for trading on Nasdaq on the Nasdaq Capital Market under the symbol “PRTG” since February 25, 2021. 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 ordinary 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.

 

(J) ANNUAL REPORT TO SECURITY HOLDERS

 

If we are required to provide an annual report to security holders in response to the requirements of Form 6-K, we will submit the annual report to security holders in electronic format in accordance with the EDGAR Filer Manual.

 

(B) MEMORANDUM AND ARTICLES OF ASSOCIATION

 

General

 

Portage Biotech Inc. amended its Memorandum of Association and Articles of Association (“M&A”) on September 20, 2022 and filed an updated version thereof with the Registrar of Companies in the British Virgin Islands on September 20, 2022.

 

Pursuant to our M&A, 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 M&A 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 M&A.

 

The directors may decide whether a meeting of the shareholders will be held as a Physical Meeting, a Virtual Meeting or a Hybrid Meeting as those terms are defined in the M&A.

 

Subject to our M&A, 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 M&A 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 M&A. Shareholders are entitled to have our affairs conducted in accordance with the BVI Act and the M&A.

 

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 M&A, 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 M&A. There are no pre-emption rights applicable to the issuance of new shares by us under either British Virgin Islands law generally or our M&A more specifically.

 

Modification of rights

 

As permitted by British Virgin Islands law, and our M&A, we may vary the rights attached to our ordinary shares.

 

Transfer of shares

 

Subject to any applicable restrictions set forth in our M&A, 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 a form prescribed by the Designated Stock Exchange or by means of a Relevant System (as defined in our M&A) 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.

 

 

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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 M&A, 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 M&A, 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 M&A, 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 seven directors at March 31, 2023. Our M&A 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 M&A, 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 M&A, elect another person in his or her stead. Subject to our M&A, 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 does not at any time exceed the maximum number fixed by or in accordance with our M&A (if any).

 

 

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Our M&A 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 a majority of the directors are present or represented. 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 M&A 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 M&A 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) M&A; (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 M&A, 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 M&A, a director of the 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, which 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 subscriber 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 2020, 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 memorandum and 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 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 M&A 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 M&A 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 two fiscal years immediately preceding the filing of this report that are not otherwise disclosed in this Annual Report (including the Exhibits).

 

(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 ordinary 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 ordinary shares of the Company, and all holders of ordinary shares 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.

 

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 of the ownership and disposition of our ordinary shares. 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. The United States Internal Revenue Service (“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 ownership or disposition 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 non-United States 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, non-United States and United States federal estate and gift tax consequences of the ownership and disposition of our ordinary shares. In addition, this summary does not take into account any special United States federal income tax rules that may apply to a particular holder of our ordinary shares, including, without limitation, the following:

 

a dealer in securities;
   
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 ordinary 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 ordinary 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.

 

Distributions

 

In general, subject to the PFIC rules discussed below, the gross amount of any distribution received by a U.S. Holder with respect to our ordinary shares will be included in the gross income of the U.S. Holder as a dividend to the extent attributable to our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. Unless we maintain calculations of our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect that distributions will generally be treated as a dividend for U.S. federal income tax purposes. Any dividends from us will not be eligible for the dividends-received deduction generally allowed to corporations in respect of dividends received from U.S. corporations. For U.S. foreign tax credit purposes, dividends received on our ordinary shares by a U.S. Holder will generally be treated as income from sources outside the United States and will generally constitute “passive category income.” A portion of such dividends, however, will be treated as U.S. source income, subject to certain exceptions, in proportion to our U.S. source earnings and profits if U.S. persons collectively own, directly or indirectly, 50% or more of the voting power or value of our ordinary shares.

 

U.S. Holders that are individuals and certain other non-corporate U.S. Holders will be subject to tax on dividend income from a “qualified foreign corporation” at preferential rates of taxation provided that certain holding period and other requirements are met. For this purpose, a foreign corporation (other than a corporation that is classified as a PFIC (as discussed below) for the taxable year in which the dividend is paid or the preceding taxable year) will generally be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program, or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. Our ordinary are listed on Nasdaq, which is an established securities market in the United States, and are expected to be readily tradable. Thus, we expect that dividends paid on its ordinary shares will meet the conditions above required for the preferential tax rates, provided we are not a PFIC in the year such dividend is paid or the preceding taxable year.

 

 

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Sale, Exchange or Other Taxable Disposition 

 

Subject to the PFIC rules discussed below, upon a sale, exchange or other taxable disposition of our ordinary shares, a U.S. Holder will generally recognize a capital gain or loss equal to the difference between the amount realized on such sale, exchange or other taxable disposition and the adjusted tax basis of such ordinary shares. As discussed above, a U.S. Holder’s initial tax basis in our ordinary shares will generally equal the fair market value on the distribution date of such shares. Such gain or loss will be a long-term capital gain or loss if our ordinary shares have been held for more than one year and will be a short-term gain or loss if the holding period is equal to or less than one year. Such gain or loss will generally be considered U.S. source gain or loss for U.S. foreign tax credit purposes. Long-term capital gains of certain non-corporate U.S. Holders are eligible for reduced rates of taxation. For both corporate and non-corporate U.S. Holders, limitations apply to the deductibility of capital losses.

 

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. We believe that we were a PFIC in the fiscal year ended in 2018 and that we were a PFIC for the fiscal year ended March 31, 2023. We may have been a PFIC in other years and we may be a PFIC in the future.

 

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. However, 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 prior fiscal years for those U.S. Holders 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, 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 ownership and disposition of our ordinary shares, the consequences 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 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.

 

If you meet one of tests above, you generally will be subject to tax in respect of any gain effectively connected with your conduct of a trade or business in the United States 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 may be subject to United States information reporting rules. In addition, U.S. Holders may be subject to United States federal backup withholding tax. U.S. Holders 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.

 

 

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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 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 61 Wilton Road, Westport, Connecticut 06880.

 

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.

 

 

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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 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, Liquidity Risk and Foreign Currency Risk.

 

Credit Risk

 

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

 

Cash and cash equivalents. Cash and cash equivalents comprise cash on hand and amounts invested in underlying Treasury and money market funds that are readily convertible to a known amount of cash with three months or less from date of acquisition and are subject to an insignificant risk of change in value. As of March 31, 2023 and 2022, cash equivalents was comprised of a money market account with maturities less than 90 days from the date of purchase. Cash and cash equivalents are held with major international financial institutions and therefore the risk of loss is minimal.

 

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.

 

 

 82 

 

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

 

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

 

Foreign Currency Risk

 

While the Company operates in various jurisdictions, substantially all of the Company’s transactions are denominated in the U.S. Dollar, except the deferred tax liability in the U.K. settleable in British pound sterling and the Stimunity Convertible Note receivable settleable in euros.

 

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 CEO and the 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.

 

 

 83 

 

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 Securities Exchange Act of 1934, as amended). The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and the Company’s 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 the 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, 2023. 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. 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, 2023.

 

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

 

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

 

·Management lacks the number of skilled persons that it requires given the complexity of the reporting requirements that it has to make, which more specifically include the staff and expertise to (i) properly segregate duties and perform oversight of work performed and to perform compensating controls over the finance and accounting functions, (ii) establish and perform fair value estimates or subsequently monitor fluctuations in fair value estimates, and (iii) 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 R&D assets, share-based payments, carrying amounts of goodwill and intangible assets and business combination accounting.

 

 

 84 

 

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 to 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, is an audit committee financial expert and is “independent” 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, without charge, by writing to our corporate office at c/o Portage Development Services Inc., Ian Walters, 61 Wilton Road, Westport, Connecticut 06880.

 

During the most recently completed fiscal year, we 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 our independent auditing firm of the Company for the last two fiscal periods ended:

 

March 31,  2023  2022
       
Audit fee  $292,075   $196,780 
Audit-related fees  $   $ 
Other services  $109,160   $30,900 

 

Included in audit fees are $157,075 and $67,800 with respect to the three quarterly reviews performed in fiscal 2023 and fiscal 2022, respectively. We also incurred fees of $74,160 and $30,900 with respect to work performed on our comfort letter and registration statement in fiscal 2023 and fiscal 2022, respectively, and $35,000 in fiscal 2023 with respect to a review of the financial statements of an acquired company. We did not have any engagement with the independent accounting firm of the Company during the fiscal years ended March 31, 2023 and 2022 with respect to professional services for tax compliance, tax advice or tax planning or for any audit-related services.

 

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

 

 

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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 2023.

 

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.

 

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.

 

 

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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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 87 

 

PORTAGE BIOTECH INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE YEARS ENDED MARCH 31, 2023, 2022 AND 2021

 

(U.S. Dollars in thousands)

 

 

TABLE OF CONTENTS

 

Report 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-8

 

 

 

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, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

Explanatory Paragraph – Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

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

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the 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 provide 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.

 

Fair Value of In-Process Research & Development Assets Acquired in the Acquisition of Tarus Therapeutics, Inc.

 

Critical Audit Matter Description

 

As discussed in Note 10 to the consolidated financial statements, the Company completed the acquisition of the stock of Tarus Therapeutics, Inc. The Company accounted for this transaction under the acquisition method as prescribed by IFRS 3 Business Combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including in-process research & development assets of $28.2 million.

 

Auditing the fair value of the in-process research & development assets as of the acquisition date was complex and highly judgmental due to the significant measurement uncertainty, particularly due to the sensitivity of the estimates 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 independent appraisal of the fair value of the in-process research & development assets acquired in the acquisition of Tarus Therapeutics, Inc. that was used by management to determine their fair values and assessed the qualifications of the specialist.

 

 F-1 

 

To test the fair values of the in-process research & development assets, our audit procedures included:

 

We 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 assess the range of potential fluctuations that would materially impact the fair value of the in-process research & development assets;
-Assessed the reasonableness of the probability of success of current research & development projects;
-Assessed the reasonableness of the expected timing to realization of revenue;
-Assessed the reasonableness of the market penetration after commercialization; and
-Developed an independent expectation for comparison to management’s estimated revenue, costs of revenue and administrative expenses

 

Impairment of In-Process Research & Development Assets

 

Critical Audit Matter Description