There currently is a limited public market for our Common Shares. Further, although our Common Shares are currently traded on the OTCQBOTC marketplace (PTGEF) and are also listed and traded on the Canadian Securities Exchange.Exchange (PBT.U). Trading of our Common Shares is currently extremely sporadic. As a result, an investor may find it difficult to sell, or to obtain accurate quotations of the price of our Common Shares. There can be no assurance that a more active trading market for our Common Shares will develop. Accordingly, investors must assume they may have to bear the economic risk of an investment in our Common Shares for an indefinite period of time.
Risks related to penny stocks.
Our Common Shares are subject to regulations prescribed by the SEC relating to “penny stock.” These regulations impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (as defined in Rule 501 of the U.S. Securities Act). These regulations could adversely impact market demand for our shares and adversely impact our trading volume and price.
The issuance of Common Shares upon the exercise of our outstanding warrants and options will dilute the ownership interest of existing shareholders and increase the number of shares eligible for future resale.
The exercise of some or all of our outstanding warrants and options could significantly dilute the ownership interests of our existing shareholders. As of March 31, 2014,2017, we had outstanding warrants to purchase an aggregate of approximately 114 million Common Shares and outstanding options to purchase an aggregate of approximately 520.3 million Common Shares. To the extent the warrants and options are exercised, additional Common Shares will be issued and that issuance will increase the number of shares eligible for resale in the public market. The sale of a significant number of shares by our shareholders, or the perception that such sales could occur, could have a depressive effect on the public market price of our Common Shares.
Our principal shareholders and senior management own a significant percentage of our shares and are able to exert significant control over matters subject to shareholder approval.
As of March 31, 2017, our senior management, board members, holders of 5% or the shares issuable upon exercisemore of the warrants, which will limit your ability to resell them
Your investment return may be reduced if we lose our foreign private issuer status
We are a “foreign private issuer,” as such term is defined in Rule 405 under the U.S. Securities Act, and, therefore, we are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC. In addition, the proxy rules and Section 16 reporting and short-swing profit recapture rules are not applicable to us. If we lose our status as a foreign private issuer by our election or otherwise, we will be subject to additional reporting obligations under the Exchange Act which would increase our SEC compliance costs.
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There is a material risk that we will be treatedclassified as a passive foreign investment company forbeginning in our fiscal year ending March 31, 2018, and our U.S. tax purposes, which could subject United States investors to significantshareholders may suffer adverse tax consequences.
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 treatedclassified as a passive foreign investment company, or PFIC, for U.S. federal income taxationtax purposes. For purposes ifof 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 any taxable year either: (a) 75%connection with the active conduct of a trade or more of its gross income consists of passive income; or (b) 50% or more of the value of the company’s assets is attributable to assets that produce, or are held for the production of, passive income.business. Based on our current income and assets at March 31, 2017 and our anticipated future operations, we believethere is a material risk that we currentlywill be classified as a PFIC for our fiscal year ending March 31, 2018. In addition, we may have been a PFIC in prior years and may 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 common 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.U.S. stockholders ofPFIC. In addition, U.S. tax residents who own an interest in a PFIC are subjectrequired to a disadvantageouscomply 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 regimeconsequences of us being classified as a PFIC if our common shares qualify as "marketable stock" under the PFIC rules and the shareholder is eligible to make, and successfully makes, a “mark-to-market” election. A U.S. tax-resident shareholder could also mitigate some of the adverse U.S. federal income tax consequences by making a “qualified electing fund”, or QEF, election, provided that we provide the information necessary for our U.S. tax-resident shareholders to make such an election, but we are not required to make this information available and have not yet determined whether we can or will do so for our fiscal year ending March 31, 2018 or for any other fiscal year.
U.S. tax-resident shareholders are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to the income derived by the PFIC, the distributions they receive from the PFIC, and the gain,our common shares if any, they derive from the sale or other disposition of their shares in the PFIC. Because PFIC status is a fact-intensive determination made on an annual basis, no assurance canwe should be given that we are not or will not become classified as a PFIC. The PFIC rules are extremely complex. ASee section 10(E) “Taxation-Certain Material U.S. person is encouraged to consult his or her U.S. tax advisor before making an investment in our shares.
U.S. shareholders may not be able to enforce civil liabilities against us
We are a corporation organized under the laws of the British Virgin Islands. Most of our directors and executive officers are non-residents of the United States. Because a substantial portion of their assets and currently allmost 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 2004 (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.
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The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands, as well as 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 are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. 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 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 Forbes Hare, our 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.
(A) HISTORY AND DEVELOPMENT OF THE COMPANY
The Company was originally incorporated in Ontario in 1973. It was inactive until 1985. Between 1986 and 2009 , it was engaged in variety of businesses including development of a new technology for the marine propulsion business, distribution and manufacture of a snack food, emerging technology-based businesses and natural resource involving diamond mining and oil & gas exploration. In 2010, the company acquired an indirect interest in two drilling licenses in Israel, which was disposed of for US$ 5 million under a settlement agreement on June 29, 2012 with our minority partner on this project. During the period, the Company went through several name changes ending with Bontan Corporation Inc. ( Bontan)(Bontan).
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In December 2012, the Company decided to change the focus of its business activities from oil and gas to biotechnology mainly due to the increasing difficulty in getting access to viable oil & gas projects and also due to the potentially more profitable business opportunities which existed in the biotechnology sector. On March 21, 2013, the Company signed a letter of intent with Portage Pharma Ltd, a biotech private limited company formed under the laws of the British Virgin Islands to acquire Portage Pharma Ltd through exchange of shares. The transaction was completed on June 4, 2013 and accounted for as a reverse acquisition.
On July 5, 2013, the Company changed its name to Portage Biotech Inc. and moved its jurisdiction to the British Virgin Islands ( BVI) under a certificate of Continuance issued by the Registrar of Corporate Affairs of BVI.
The Company now continues as a BVI incorporated company with its registered office located at FH Chambers, P.O. Box 4649, Road Town, Tortola, BVI. Its Toronto agent is located at 47 Avenue Road, Suite 200, Toronto, Ontario, M5R 2G3, Canada.
The Company continues to be a reporting issuer with Ontario Securities Commission and US Securities and Exchange Commission and its shares trade on the Quotation Board of the OTC Markets under the trading symbol “PTGEF,” effective August 23, 2013. Prior to this date, it was trading as Bontan Corporation Inc. under the trading symbol “BNTNF”. Effective October 28, 2013, the Company’s shares are also listed for trading in US currency on the Canadian Securities Exchange (formerly, Canadian National Stock Exchange) under the symbol “PBT.U”.
(B) BUSINESS OVERVIEW
Portage develops pharmaceutical & biotech products through to clinical “proof of concept” focussing on unmet clinical needs. Following proof of concept, Portage will look to sell or license the products to large pharmaceutical companies for further development through to commercialization.
Portage seeks products & co-development partners in cancer, infectious disease, neurology and psychiatry with novel targeted therapies, or reformulations that can be patented.
Portage will work with a wide range of partners, in all phases of development. The collaboration may include direct funding or investing human capital/sweat equity from our extensive pool of talented scientists and physicians to value-add by mitigating risks, clinical trial design and regulatory expertise.
Summary of development workat our portfolio companies including our subsidiaries during the year ended March 31, 2017 is primarily carried out through two subsidiaries:
Portage pharmaceuticalsPharmaceuticals Ltd ( PPL)
On June 4, 2013, following the acquisition of Portage Pharma Ltd, the Company’s wholly owned subsidiary, Portage Acquisition Inc. and Portage Pharma Ltd amalgamated. The amalgamated company was named PPL, which has been incorporated in the BVI..
PPL’s focus is in discovering and developing innovative cell permeable peptide (CPP) therapies to normalize gene expression, restore function and improve medical outcomes. Its core technology involves delivering biologically active “cargo” to intracellular and intranuclear targets to normalize cell and tissue function, improve the immunogenicity of vaccines and enable better treatment of intracellular pathogens.
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The CPP platform is protected by two suits of intellectual property:
a.
an exclusive license in non-oncology fields for all patents relating to the use and know how of Antennapedia cell permeable peptide. PPL has also patented in June 2013 proprietary structures in human-derivedon Antennapedia-based cell permeable peptides with demonstrated in vitrofor non-oncology use and in vivo activity and no therapeutic area.
b.
international patents for proprietary human-derived cell penetrating properties of peptides developed by Portage and by Professor Alanna Schepartz of Yale’s Department of Chemistry. These studies will compare the ability of these peptides to cross cell membranes and deliver biologically active cargo to an intracellular target.
In July 2014, PPL has successfully validated athis new proprietary cell permeable peptide platform technology derived from human genes. This proprietary platform technology has been shown to efficiently deliver an active pharmacological agent or cargo into a cell without disrupting the cell membrane.
Since its inception the PPL strategy has been threefold. First was the development, evaluation and selection of our platform cell penetrating peptide (CPP). PPL tested a number of different CPPs and found one that they derived from human genes that was superior to the delivery systemothers tested including the Antennapedia fruit fly molecule PPL licensed from Trojantec and Imperial College in London. PPL selected this human-‐based CPP to be the basis of their CellPorter® platform.
The second leg of PPL strategy was and still is capableexploring the ways it can be used therapeutically. PPL pursued collaborations to bring world-class subject area expertise to some of carrying biologically active cargotheir research questions. For example, PPL collaborated with scientists at Yale to intracellular sitesevaluate its cell penetrating properties, with the Pirbright Institute in the UK to explore its potential for vaccine use, with scientists at the National Eye Institute to evaluate its penetration into eye tissues when given as eye drops, and with a scientist at the University of action,Michigan to investigate blood brain barrier penetration. Through these collaborations PPL management learned that CellPorter® enhances immune reactions to vaccines, did get inside eye tissues, and did penetrate the blood brain barrier. PPL also conducted its own studies that demonstrated CellPorter® can be used to dose peptides systemically by inhalation, and has ongoing work looking at the feasibility of topical skin use and of using CellPorter to deliver nucleotide and peptide cargos that alter genes and regulate gene function.
PPL is always exploring new collaborations with other companies and academic research groups to expand the uses of their platform. From all of this work PPL learned a lot about its technology and initiated their lead project.
The third leg of PPL strategy is developing our lead product, PPL-‐003, for ophthalmic solutions. In this connection, PPL completed work with BioConcept Laboratories on a drug product formulation for PPL-003 Ophthalmic solution that will be used for IND enabling non-clinical studies and phase I and phase IIA clinical studies. BioConcept Laboratories also completed short-term stability testing of PPL-003 ophthalmic solution. PPL decided that it would use chemical synthesis methods for drug substance going forward and discontinue production in recombinant E. coli. Also during June 2017, PPL completed work on a pre-IND meeting briefing document and issued a letter to FDA requesting a pre-IND meeting. PPL also completed a research agreement with the University of Houston for evaluation of PPL-003’s NFkB inhibitory mechanism in corneal epithelial cells.
In addition to advancing the PPL-003 ophthalmic solution project for dry eye disease and other inflammatory eye diseases, PPL has continued to work on other drug products that utilize its proprietary CellPorter® technology including two cancer candidates, PPL-008 and PPL-009. Lastly, PPL also continues work to support its patent applications and develop academic and industry collaborations.
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EYGEN LTD (EyGen)
EyGen was incorporated on September 20, 2016 under the laws of the British Virgin Islands. It is a wholly owned subsidiary of PPL.
Since the final preclinical and clinical development of PPL-003 would be substantially more capital intensive than prior work with the platform, Portage management decided to spin out its lead asset with the aim of independently financing PPL-003 and building a company in ophthalmology. EyGen was created as a new ophthalmic company focused on developing preclinical ophthalmology assets through proof of concept.
EyGen’s lead asset is PPL-003, a potent anti-inflammatory created by PPL and being developed for topical ophthalmic delivery in patients with ocular surface and anterior segment diseases. PPL-003 has favorable pharmaceutical properties simplifying formulation developmentdemonstrated steroid-like efficacy in animal disease models without steroid-like side effects, the profile for systemican ocular anti-inflammatory targeting NFkB that has been an elusive goal for many years.
EyGen has put together a seasoned management team that will develop PPL-003 as a topical eye drop therapy for dry eye disease before exploring other ocular inflammatory diseases. PPL-003 eye drops are well tolerated in animal studies to date and locally administered conjugates which will allow more rapidhave demonstrated efficacy in mouse, rabbit and rat models of dry eye disease and uveitis. EyGen is working with leading experts in the development of drugophthalmic products.
Both PPL has converted its previously filed provisional patent applicationand EyGen are seeking further financing of approximately $2.5 million from external investors for this delivery systemworking capital to an international patent application that includescomplete formulation work for PPL-003 and to perform additional animal studies prior to a variety of structures utilizing cargos that address important areas of medical need.
Biohaven Pharmaceutical Holding Company Limited (Biohaven)
On January 6, 2014, the Company acquired approximately 54% equity in Biohaven, a private corporation incorporated on September 25, 2013 under the laws of the British Virgin Islands for $3.5 million. During the fiscal year 2016, Portage made further investment of $3,501,000 while Biohaven raised additional $4,354,800 from other sources. This reduced our holding in Biohaven to 52.85% as at March 31, 2016 and to 35.16% when Biohaven secured an $80 million payable as $ 1.75financing from third parties. Eventually in May 2017, Biohaven successfully completed an initial public offering to raise approximately $193.7 million upfront and the balancebegan trading on New York Stock Exchange under a symbol “BHVN”. The Company now holds 6,341,500 common shares in three instalments over the next eleven months. Biohaven’s founder shareholders include originators atBiohaven.
Biohaven is a clinical-stage biopharmaceutical company with a portfolio of innovative, late-stage product candidates targeting neurological diseases, including rare disorders. Biohaven has licensed intellectual property from companies and institutions including Bristol-Myers Squibb Company, AstraZeneca AB, Yale University, who discovered the therapeutic potential of glutamate modulation in anxietyCatalent, ALS Biopharma LLC and depression and have track record of successful registrational trials..
Biohaven’s goal is to become a leader in the development of innovative therapies for neurological diseases that have the potential to change current treatment paradigms.
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The key elements of the strategy are:
·
Rapidly advance and commercialize their portfolio of migraine product candidates. In the second half of 2017, they expect to initiate two Phase 3 clinical stage neuroscience compounds targetingtrials with rimegepant for the glutamatergic system. The company obtainedacute treatment of migraine, with topline results expected in the first quarter of 2018.
·
They are also planning a license12-month, long-term safety study of rimegepant to meet FDA requirements for approval. They are designing their Phase 3 development program to support regulatory approval in the United States, as well as to support regulatory filings in Europe and Japan.
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Complete the development and commercialization of their novel glutamate modulator trigriluzole as potentially the first FDA-approved drug treatment for patients suffering from Yale University regarding intellectual propertyataxias. They anticipate receiving topline results of their Phase 2/3 clinical trial of trigriluzole in SCA in the first quarter of 2018
·
and, if positive, submitting an NDA in 2018. They designed their Phase 2/3 clinical trial to support regulatory approval in the United States as well as to support regulatory filings in Europe and Japan.
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Demonstrate bioequivalence and prepare for commercialization of their low-dose, oral disintegrating sublingual product candidate, BHV-0223, for ALS patients. They plan to launch a study to compare the bioequivalence of their sublingually absorbed ODT formulation of riluzole, BHV-0223, to orally delivered riluzole tablets and subsequently submit an NDA in 2018.
·
Advance BHV-5000 into clinical trials to assess its potential to be the first approved treatment for patients suffering from breathing irregularities associated with Rett syndrome. After a confirmatory Phase 1 clinical trial to bridge pharmacokinetics with the prior formulation, they plan to initiate a Phase 2/3 clinical trial in Rett syndrome in 2018.
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Maximize the therapeutic and commercial potential of their existing product candidates by exploring their use for multiple indications. Based on the broad mechanistic potential of the glutamate modulation platform, they believe that their product candidates may have utility in a wide array of conditions. They plan to explore the use of certaintheir product candidates in additional therapeutic indications where glutamate modulating agents in the treatment of neuropsychiatric disorders.
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Actively manage their product portfolio and anxiety disorders. Directly targetingopportunistically enter into strategic collaborations. They plan to retain their worldwide commercialization rights for some of their key product candidates while for other product candidates they will consider partnership opportunities to maximize returns. Leveraging their management team’s deep large pharma relationships and experience will be a key component of this strategy.
The Company has agreed to a six month hold on trading of its Biohaven holding, which will expire in November 2017. Biohaven is now just an investment and is not an integral part of the glutamatergicCompany’s strategy of developing biotech products through clinical “proof of concept”. Further, the value of Biohaven holding, currently, is very significant to the overall assets of the Company which exposes the Company to the risk of becoming an “inadvertent investment company” under the US Investment Company Act of 1940. The management therefore is currently evaluating various options including divesting the Biohaven holding in a manner which will benefit the shareholders of the Company with minimum tax consequences in consultation with the International tax and US securities lawyers. The Company has not yet reached any decision in the matter.
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Sentien Biotechnologies Inc. (“Sentien”)
Portage invested $700,000 in August 2015 to acquire 210,210 series A preferred stock in Sentien, fully convertible into equal number of Sentien’s common shares, representing approximately 6.9% of Sentien’s equity.
Sentien Biotechnologies, Inc. is a privately-owned, clinical-stage company pioneering new approaches to cell therapy. Sentien’s technology harnesses the power of cell therapy with innovative drug delivery systems to treat a wide range of systemic inflammatory diseases. Sentien’s lead product, SBI-101, is designed to allow for controlled, sustained delivery of mesenchymal stromal cell (MSC) secreted factors. This approach immobilizes the MSCs in an extracorporeal device, allowing for doses of therapeutic factors that are unattainable by direct injection.
SBI-101 is the first product application of Sentien’s platform blood-conditioning technology that has the potential to restore balance to the immune system mayafter acute vital organ injury, such as acute kidney injury.
In April 2017, Sentien announced closure of a new $12 million financing by third party Biotech funds and also announced that its investigational new drug (IND) application for its lead product, SBI-101, received clearance from the U.S. Food and Drug Administration. On June 8, 2017, Sentien announced that it opened enrolment in its Phase 1/2 trial of SBI-101 for adult patients with acute kidney injury (AKI).
The multi-center trial is a randomized, controlled Phase 1/2 study in patients with AKI receiving CRRT. The primary objective of the trial is to more effective treatmentsevaluate the safety and tolerability of SBI-101 in patients with AKI. Endpoints for moodefficacy and anxiety disorders that failpharmacodynamic responses to respondSBI-101 therapy will also be evaluated. Patient recruitment is expected to continue into 2018, with an estimated enrolment of 24 patients.
(C) ORGANIZATIONAL STRUCTURE
The current monoamine based therapies.
1.
Two operating subsidiaries:
a.
Portage Pharmaceuticals Ltd., a wholly owned subsidiary incorporated in the British Virgin Island.
b.
EyGen ltd., a wholly owned subsidiary of Portage Pharmaceutical Ltd. Incorporated in the British Virgin Islands.
2
One service company, Portage Services Ltd.,(PSL) which was a wholly owned subsidiary incorporated in Ontario, Canada under the name 1843343 Ontario Inc. and changed its name to the present name on July 11, 2013. PSL actsCanada. Portage Services Ltd. Acts as a localan agent for thePortage and is primarily engaged in handling all corporate and regulatory services.
3.
An investment in Biohaven Pharmaceutical Holding Company as per the requirementsLtd., Biohaven used to be a subsidiary of Portage until September 30, 2016. Portage’s investment in Biohaven is now less than 20% of the Ontario Securities Commission. PSL maintains an officeequity of Biohaven and is held as available for sale. The management is currently evaluating various options to divest this investment as soon as it is available for free trading.
4.
An investment in Toronto, Canada and looks after all corporate, financials and regulatory matters.
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We have developed a comprehensive website – www.portagebiotech.com which provide informationsix members on our people, activities and other corporate details.
PPL/EyGen management consisted of DR.Dr. Bruce Littman as CEO, , Dr. Frank Marcoux as Chief Scientific Officer (CSO) and Mr. Kam Shah as CFO. The PPL management reports to the PPL Board of directors comprising Dr. Doogan as Chairman, Dr. Bailey, Mr. Shah, Dr. Littman and DR.Dr. Marcoux. PPL also created a scientific advisory board (SAB) consisting of Dr.Drs. Sankar Ghosh, DR. Michael Caplan and DR. Burt Adelman. In addition, PPL has seven consultants comprising scientists and researchers.
A brief biodata of the key people in our organization is provided below:
Declan Doogan M.D. –- Director and CEO
Dr. Doogan has served as a director of Portage since June 2013. Dr. Doogan is a director in Biohaven Pharmaceutical Holding Company Ltd., a director of Portage Pharmaceuticals Limited since July 2013, and a director of Sosei Group Corporation since June 2007. Dr. Doogan has over30 years of industry experience in both major pharma and biotech. He was the Senior Vice-President and Head of Worldwide Development at Pfizer. He has held a number of executive positions in Pfizer in the US, the UK and Japan. Since leaving Pfizer in 2007, he has been engaged in executive roles in small pharma. Dr. Doogan was chief medical officer and acting CEO of Amarin (AMRN: NASDAQ). He has also been Chief Medical Officer for Prometheus Laboratories, a molecular diagnostics company in San Diego. Dr. Doogan holds a number of board appointments, principally in pharma companies, and has also held professorship at Harvard School of Public Health, Glasgow University Medical School and Kitasato University (Tokyo). Dr. Doogan received his medical degree from Glasgow University in 1975. He is a Fellow of the Royal College of Physicians and the Faculty of Pharmaceutical Medicine and holds a Doctorate of Science at the University of Kent in the UK.
Kam Shah CA, CPA (CANADA), CPA (US), CGMA (US) –CFO-CFO and Director
Kam Shah is a senior finance executive with over 25 years of financial and management experience across a range of industries and companies with significant operating scale and complexity. Kam is a Certified Public Accountant and Chartered Global Management Accountant of the American Institute of CPAs and a Chartered Professional Accountant of the Canadian Institute of CPAs. He has experience in all aspects of corporate finance, including audits, SEC/OSC reporting, forecasting, and business plan development. Kam is also a director and the Chief Financial Officer of SalvaRx Group plc a publicly listed group of companies trading on alternative investment market of London Stock Exchange and engaged in biotechnology. Gregory Bailey M.D. - Chairman Greg Bailey, |
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Jim Mellon - Director
Jim Mellon is an investor with interests in several industries. After leaving Oxford University, where he studied PPE, he worked in Asia and the United States in two fund management companies, GT and Thornton, before establishing his own business in 1991. This now has two components: a listed fund management company, Charlemagne Capital Limited and an Asian investment group, Regent Pacific Group Limited. In addition, Jim is a controlling shareholder and a director of Manx Financial Group, an Isle of Man based bank and a controlling shareholder of Webis Holdings plc. He is also a co-founder of Uramin and Red Dragon Resources, both mining groups. Burnbrae, his private company, is a substantial landlord in Germany and in the Isle of Man, and it owns outright the hotel chain, Sleepwell Hotels Limited. Jim is the co-chairman of FastForward Innovations Limited and a director of SalvaRx Group plc.. trading on alternative investment market of London Stock Exchange and engaged in biotechnology. His book ‘Cracking the Code’, which was published in 2012, focused on investment opportunities in the life sciences sector. Jim is an honorary fellow of Oriel College, Oxford University
Steven Mintz - director
Steven Mintz is a senior financial consultant qualified as CA since 1992 and received BA (Economics and accounting) from University of Toronto in 1989.He obtained Trustee in Bankruptcy license in 1995 and Practiced public accounting at a large accounting firm between 1989 to 1992. He has been president of St. Germain Capital Corp., and CFO of Minkids Group, a family investment and holding company and director in various other companies.
Dr Ian Walters - Director
Ian Walters, M.D., M.B.A., is the Entrepreneur in Residence at Mediqventures and is part-time CMO of Intensity Therapeutics, Inc. Over his 19 year career, he has demonstrated both leadership and expertise in drug development, including the advancement of multiple cancer compounds from research stages through approval. Ian specialises in the evaluation, prioritisation, 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 between 2007 and 2014, 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.
Bruce H. Littman, MD - CEO
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Former Pfizer VP Global Translational Medicine
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Over 30 years’ pharmaceutical company and academic research experience
Frank W. Marcoux, Ph.D.
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Former Pfizer VP Quantitative and Innovative Medicine WW Development and former VP Biology Discipline WW Discovery
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Over 25 years’ pharmaceutical company and academic research
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(D) PROPERTY PLANTS AND EQUIPMENT
Our subsidiary, Portage Services Ltd., currently leases office space at 47 Avenue Road, Suite 200, and Toronto, Ontario, Canada for approximately $2,300 per month. The leased area is approximately 950 square feet. Our current lease agreement is a month to month arrangement.
None.
(A) OPERATING RESULTS
The following discussion should be read in conjunction with the Audited Financial Statements of the Company and notes thereto for the year ended March 31, 2017 contained elsewhere in this report.
Operating results
Year ended March 31, | 2017 | 2016 | 2015 |
| In 000’ $ | ||
Operating expenses | 36,044 | 9,195 | 4,341 |
Gain on restating retained interest in associate at fair value | (49,864) | - | - |
Share of losses in associate | 14,461 |
|
|
Net loss | 641 | 9,195 | 4,341 |
Unrealized gain on investment, available for sale | 24,547 |
|
|
Total comprehensive (profit) loss for year | (23,906) | 9,195 | 4,341 |
Non-controlling interest | 16,940 | 3,489 | 1,223 |
Net (profit) loss attributable to owners | (40,846) | 5,706 | 3,118 |
| (23,906) | 9,195 | 4,341 |
(Retained earnings) deficit | (14,981) | 14,618 | 9,453 |
Overview
Our subsidiaries, PPL and EyGen are in pre-clinical stage. We commenced our operations in June 2013 after acquiring Bontan Corporation Inc. through a reverse acquisition. We devoted substantially all our efforts in identifying and developing our product candidates including acquisition of operations
Year ended March 31,2014 | May 23, 2012 to March 31, 2013 | ||
| in 000' US $ | in 000' US $ | ||
| Expenses | (6,627) | (29) | |
| (6,627) | (29) | ||
| Non-controlling interests | (322) | - | |
| Net loss attributable to shareholders | (6,305) | (29) | |
| Deficit at end of year | (6,334) | (29) |
We invested approximately $7 million in Biohaven which was our subsidiary until September 30, 2016. However, effective February 15, 2017, we concluded that we lost control and organizational changessignificant influence over Biohaven and de-consolidated it as at September 30, 2016 and discontinued its accounting on an equity basis on February 15, 2017. Since then, we are holding our investment in Biohaven at fair value as an investment available for sale.
Our other portfolio companies also included Sentien wherein we invested $ 700,000.
Details of these companies are explained above under item 4 (B) - business overview.
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We do not have any approved products and (C) of this report. Three other operational matters consisted of reverse acquisition transaction, changehave never generated any revenue from product sales. We have funded our operations from funds raised through various private placements.
We anticipate that our expenses will increase substantially in the functionalfuture as we:
·
pursue our ongoing planned pre-clinical and reporting currencyclinical development at PPL and EyGen, seek further new investment opportunities to expand our pipeline.
·
hire additional personnel, particularly in our research and development, clinical supply and quality control groups;
·
Add operational, financial and management information systems and related finance and compliance personnel and
·
Operate as a public company
We believe the eventual divestment of our equity investment in Biohaven. These are further elaborated below:
Expenses
The overall analysis of the expenses is as follows: ((in 000’$)
Year ended March 31, | 2017 | 2016 | 2015 |
| In 000’ $ | ||
Research and development | 32,450 | 4,577 | 2,929 |
Consulting fees | 1,923 | 4,014 | 1,072 |
Professional fees | 634 | 501 | 224 |
Other costs | 1,037 | 103 | 116 |
| 36,044 | 9,195 | 4,341 |
Research & development
These costs comprised the following:
Year ended March 31, | 2017 | 2016 | 2015 |
| In 000’ $ | ||
Licence fee at Biohaven | 21,297 | - |
|
Development expenditure at Biohaven | 10,080 | 3,675 | 2,000 |
Patent registration | 60 | 78 | 37 |
Consulting fee | 677 | 359 | 466 |
Other outside services | 336 | 465 | 426 |
| 32,450 | 4,577 | 2,929 |
Fiscal year 2017
As discussed earlier, Biohaven financials were consolidated for the period from April 1, 2016 to September 30, 2016 since it was considered a subsidiary of Portage.
Biohaven is a clinical-stage biopharmaceutical company with a portfolio of innovative, late-stage product candidates targeting neurological diseases, including rare disorders. Biohaven product candidates are small molecules based on two distinct mechanistic platforms-calcitonin gene-related peptide, or CGRP, receptor antagonists and glutamate modulators.
21
During the six months to September 30, 2016, approximately $21.1 million of the licence fee related to payments in 000’$)
| Year ended March 31, 2014 | May 23, 2012 to March 31, 2013 | |
| Acquisition related costs | 3,839 | - |
| Consulting fees | 1,162 | - |
| Research & development | $ 1,136 | $ 27 |
| Professional fees | 336 | - |
| Other costs | 154 | 2 |
| $ 6,627 | $ 29 |
Other development expenditure related costs
Consulting fee relates to cash fee charged by the CEO, CSO and others at PPL and EyGen of approximately $382,000 and value of PPL options issued to CEO and CSO vested during the year of approximately $11,000. PPL also incurred third party costs includeof approximately $ 3.8 million paid to a company336,000 for various pre-clinical trials as compensation for financial advisory services rendered in connection the acquisition of Portage Pharma Ltd., detailedmore fully described under Overview section 4(B) of this report. This consists
Section 4(B) also describes in greater details development activities carried out at PPL, EyGen and Biohaven.
Fiscal year 2016:
Biohaven has signed a Master Service Agreement on January 31, 2014, as subsequently amended in April 2014, with Biohaven Pharmaceuticals Inc., a private Delaware incorporated research and development company (“BPI”). BPI is owned by non-controlling shareholders of issuanceBiohaven and is engaged by Biohaven to conduct, on behalf of Biohaven, research and development services Under the agreement, Biohaven was charged $500,000 each quarter by BPI. Biohaven also contracted other parties for trial samples and testing. During the year, Biohaven had significant activities resulting in submission of three INDs, clinical phase one testing for BHV-223 and other related activities as more fully described in section 4(B) of this report.
Consulting fee relates to cash fee charged by the CEO, CSO and others at PPL of approximately 9.8 million common shares$306,000 and value of PPL options issued to CEO and CSO vested during the Company on June 4, 2013year of approximately $53,000. PPL also incurred third party costs of approximately $ 465,000 for various pre-clinical trials.
Fiscal year 2015:
Consulting fee includes cash fee of $ 328,921 to CEO, CSO and various other consultants and value of options granted to CEO and CSO to acquire up to 7% equity interest in PPL valued at $0.39 being$ 136,632.
Biohaven was charged $ 2 million by BPI under the quoted market price of the common shares on the date of their issuance.
Other outside services costs were incurred by PPL and relates to various independent consultant for due diligence on Biohaven, detailed under Overview section of this report and other potential investment targets.
Consulting fees
Fees include cash fee, shares and options issued to key management, directors and others as detailed in Note 1113 to the consolidated financial statements for the year ended March 31, 2014.
| Year ended March 31, 2014 | May 23, 2012 to March 31, 2013 | |
| in 000$ | ||
| licenses fee | 26 | |
| patent registration (a) | 29 | |
| Consulting fee ( c) | 365 | 27 |
| fee paid by Biohaven under a service contract (b) | 500 | |
| Other outside services - lab tseting, peptide production etc. | 215 | |
| $ 1,135 | $ 27 | |
Fiscal 2016 consulting fee includes cash fee of $204,000, shares and options granted to Portage directors and management of $554,078 and options granted by Biohaven to its Board, management and other consultants of $3,256,182. CFO took in cash fee while chairman accepted shares and CEO accepted options in lieu of their fees.
During the fiscal year 2015, CFO took in cash fee while chairman accepted shares and CEO accepted options in lieu of their fees. In addition, directors and other consultants were granted options. Further, Biohaven granted options to their management and board members to acquire equity interest in their capital, value of which based on Black-Scholes model was expensed to consulting fee.
Professional fees
Professional fees include $137,480 at Portage comprising audit fee of approximately $72,000 and the balance was the legal fee. Biohaven legal fee for the six months to September 30, 206 included in the British Virgin Islands, jurisdictional changes, initiationsprofessional fee was $496,510. Portage legal fee included approximately $46,000 fee charged by a litigation lawyer in launching a claim against a supplier by PPL which successfully resulted in settlement under which PPL will receive total of $120,000 as more fully explained in note 4 to the audited consolidated financials for the fiscal year 2017 included in this report.
Professional fee for fiscal 2016 consists of $34,182 at Portage and $467,091 at Biohaven. Portage fee comprised legal fee of $22,141 relating to various corporate and regulatory legal services and audit fee accrual for the year of $40,000 which was offset by reversal of previous year’s over accrual of $27,959 resulting in net cost of $12,071 plus other services by the auditors of $1,387. Biohaven fee consists entirely of legal fees, which were mainly incurred in providing corporate services including preparation and review of various documents relatingcontracts and option agreements and also providing secretarial services.
Professional fees for fiscal 2015 consisted of accrual for audit and related services fee of approximately $67,000 and legal fees of approximately $157,000, of which $137,000 of legal fees were incurred at Biohaven and balance was towards corporate and regulatory matters.
Changes in Investment in Biohaven during the year
In January 2014, the Company invested $ 3.5 M in Biohaven and acquired 54% equity interest in Biohaven. The balance of the equity was held by the Biohaven founders and there were no third-party investors. Portage, thus, held controlling interest in Biohaven and therefore consolidated its financials as subsidiary as at March 31, 2014 and 2015. In February 2016, a third party and Portage made further investments, which brought Portage’s equity down to acquisitons52.85% - Biohaven financials were still consolidated as at March 31, 2016.
During the fiscal year 2017, Biohaven continued to raise significant equity funding from third parties and service contracts,all options and warrants issued by Biohaven became “in-money”. The Company’s equity and its relative control and influence in Biohaven therefore reduced gradually, which required three different accounting treatments under the requirements of the IFRS as follows:
a.
Existence of significant control - Biohaven considered a subsidiary until September 30, 2016
While the Company’s shareholding in Biohaven was 48.45% as at September 30, 2016, management considered other factors including the representation on the board and concluded that it still had control and therefore consolidated Biohaven results and financial position as a subsidiary for the period from April 1, 2016 to go throughSeptember 30, 2016.
23
b.
Loss of control but existence of significant influence - Biohaven considered an associate
In October 2016, Biohaven secured an $80 million equity funding commitment from third party investors. The first tranche of the financing, in the amount of $40 million, closed in October 2016, after which the Company’s ownership in Biohaven declined to 35.16% of Biohaven’s outstanding capital stock. The second tranche of the financing, in the amount of $40 million, closed in February 2017. Thus, with the presence of more significant third-party investment and potential future changes to the board structure, it was considered most likely that the Company’s substantive position was moving away from control to significant influence. The Company therefore concluded that Biohaven ceased to be its subsidiary effective October 1, 2016 and recognized it as a disposal of the subsidiary and a new investment in associate as per IFRS 10 and IAS 28.
As an associate, Company’s investment in Biohaven was accounted for on an equity basis until February 15, 2017. The equity basis accounting involved taking that portion of Biohaven net income or loss proportionate to the Company’s equity interest in Biohaven for the period from October 1, 2016 to February 15, 2017.
c.
Loss of significant influence - Biohaven investment considered an investment, available for sale On February 15, 2017, several amendmentsfactors led the Company to conclude that it no longer had significant influence over Biohaven. These factors included:
·
Portage was no longer able to financially support Biohaven and extensive negotiationsBiohaven began preparation for an initial public offering and general regulatory services.
·
Resignation of one of the Company’s directors from the Board of Biohaven and appointment by Biohaven of two independent directors.
·
The Company had no direct participation or influence over the management of Biohaven.
·
Biohaven’s actions clearly indicated their intention to be an independent company.
The Company began to consider its investment in Biohaven as “available-for-sale” effective February 15, 2017 and was stated at a fair value as at March 31, 2017 based on the price of the last available third-party financing by Biohaven.
The accounting effects of the above changes are as follows:
| $ | $ |
Fair value of retained investment in former subsidiary, at 48.45% of the fair value of Biohaven based on the price of the last financing by Biohaven prior to September 30, 2016 |
| 48,826,747 |
Add: The carrying amount of former subsidiary: |
|
|
Biohaven Liabilities net of assets and goodwill consolidated at September 30, 2016 |
|
|
Net of non-controlling interest at September 30, 2016 |
| 1,036,794 |
Net gain on restating interest in associate at fair value charged to income statement |
| 49,863,541 |
Carrying value of investment in Biohaven at October 1, 2016 |
| 48,826,747 |
Equity accounting between October 1, 2016 to February 15, 2017 |
|
|
Share of net loss of Biohaven for October 2016 at 48.45% being the average equity holding in Biohaven | (4,485,764) |
|
Share of net loss of Biohaven for the period from November 1, 2016 to February 15, 2017 at 35.16% being the average equity holding in Biohaven | (9,975,441) | (14,461,205) |
Net carrying value of investment in Biohaven as at February 15, 2017 |
| 34,365,542 |
Gain on revaluation of Investment in Biohaven at fair value at March 31, 2017 charged to accumulated other comprehensive income |
| 24,546,993 |
Investment, available for sale at fair value at March 31, 2017 |
| 58,912,535 |
The Company currently holds 6,341,500 common shares in Biohaven. The Company is a party to a “lock-up” agreement which will prevent it from selling or otherwise disposing Biohaven shares until 180 days after the date of the final prospectus filed by Biohaven with SEC. The effective date of registration form S-1 was May 3, 2017.
The management believe that investment in Biohaven is likely to expose the Corporation to be considered an inadvertent investment company under the definition of investment company in the US Investment Company Act of 1940 and may subject the corporation to a number of onerous requirements and restrictions. The Board of Directors is currently consulting with US securities counsel and other experts to determine the best way to avoid being considered an investment company. This may involve either disposing this investment or distribute to the shareholders as dividend or a combination of any of these alternatives.
The investment in Biohaven is therefore reclassified as current assets.
(B) Liquidity andLIQUIDITY AND CAPITAL RESOURCES
Working Capital Resources
As at March 31, 2014,2017, the Company had a net working capital of approximately $2.1$ 59 million compared to a working capital of approximately $470,000$4.6 million as at March 31, 2013. The2016. Significant increase in working capital is largely due to cashrevaluing our investment in Biohaven at fair value at March 31, 2017 and re-classifying it as current assets as explained earlier.
As at March 31, 2016, the Company had a net working capital of approximately $ 34.6 million received on acquisition accounted forcompared to a working capital of approximately $1.1 million as reverse acquisitionat March 31, 2015. Significant increase is due to approximately $10.6 million raised by Portage and Biohaven during the year through private placements.
25
As at March 31, 2015, the Company had a net working capital of approximately $ 1.1 million compared to a working capital of approximately $2.1 million as explained under Overview sectionat March 31, 2014. Decrease was due to full year’s operating expenses at PPL and Biohaven which were partly offset by additional capital of this report.
Operating cash flow
During the fiscal year 2014,2017, operating activities required a net cash outflow of approximately $1.9$1.3 million, which was met from cash on hand and additional cash raised through debt financing at PPL.
During the fiscal year 2016, operating activities required a net cash outflow of approximately $5.8 million, of which approximately $4.5 million was spent on research and development activities. Cash required was met from cash on hand and additional cash raised through equity financing.
During the fiscal year 2015, operating activities required a net cash outflow of approximately $ 2.6 million, which primarily includeincluded research and development costs of approximately $ 1.1$2.2 million incurred by its operating subsidiaries – PPL and Biohaven. The balance comprised mainly legal costs and consulting.
The Company is in pre-clinical stage and is required to performsupport further research and development at its subsidiaries –PPL and also fulfilEyGen are looking for partner for further development of its financial obligationPPL-003 as explained under section 4(B) of $ 1,750,000 to Its subsidiary, Biohaven to retain its 54% equity in Biohaven. this report.
The Company has not yet determined whether costs incurred and to be incurred are economically recoverable. The Company's continuing operations are dependent upon any one of:
1.
the existence of economically recoverable medical or industrial solutions;
2.
the ability of the Company to obtain the necessary financing to complete the research; or
3.
future profitable production from, or proceeds from the disposition of intellectual property.
4.
Potential cash flow that may be expected from any future divestment of Biohaven investment discussed further elsewhere in this report.
Although there are no assurances that management's plan will be realized, management believes the Company will be able to secure the necessary financing to continue operations into the future.
Investing cash flows
There was no investing activity during the fiscal year 207. However, The Company de-consolidated Biohaven due to loss of control as at September 30, 2016. As a result, Biohaven cash on hand of approximately $3.4 carried from prior period was considered as investing cash outflow.
There were two significant investments during the consolidated financial statementsfiscal year 2016:
As part of the Company’s commitment to expand its drug development pipeline, the Company acquired in August 2015, 210,210 Series A preferred stock in Sentien Biotechnologies Inc., a Medford, MA based private company (“Sentien”) for $ 700,000 in cash. The cash was met from additional cash raised through equity financing. The preferred stock is fully convertible into equal number of common shares. The Company’s holdings represent less than 20% of the equity of Sentien. Sentien is planning Phase 1 study of its lead product, a cell-containing dialysis device for the year ended March 31, 2014 includestreatment of Acute Kidney Injury.
Further, in August 2015, Biohaven acquired worldwide intellectual property rights to a going concern note which reflects needportfolio of over 300 prodrugs, classified as New Molecular Entities, including IP rights to all future therapeutic indications. Biohaven paid cash of $ 1,000,000 plus issued 100 shares valued at $ 2,800 per share and two warrants for further financing to continue our planned research and development work and operating needsa total of all our subsidiaries.
There were no investing activities in the reporting periods.
Financing cash flows
During the fiscal year ended March 31,2017, PPL raised $200,000 by issuance of loan notes carrying 7% interest coupon and warrants convertible into common shares of PPL. Note 7 to the audited consolidated financials for the fiscal 2017 provides further details on these loan notes.
During the fiscal year 2016, Portage raised approximately $6.2 million through various private equity placements. Details of these private placements are given in Note 8 to the consolidated financial statements for the fiscal year. Biohaven also raised approximately $4.4 million from third parties through private placement of its shares.
During the fiscal year 2015, the Company raised $ 300,000 through issuance of convertible promissory notes in July 2014. All the notes were converted in September 2014 into common shares. In October 2014, the Company hadraised additional $ 2 million through a net cash inflownon-brokered private placement offerings of approximately $3.820 million from its financing activities.
(C) RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
From May 23, 2012 to date, , the Company through its operating subsidiaries is engaged in clinical and pre-clinical studies as detailed under Item 4 (B) business overview of this report. Research and development expenses analysis and details are provided under Item 5 (A) of this report. All research and development expenses are expensed as they are incurred.
PPL’s CPP platform is protected by Trojantec for non-oncology products, treatments or medications.
| suits of intellectual property - (a) |
(D) TREND INFORMATION
There are no other trends, commitments, events or uncertainties presently known to management that are reasonably expected to have a material effect on the Company’s business, financial condition or results of operation other than as disclosed elsewhere in this report (Refer to the heading entitled “Risk Factors”).
27
(E) OFF-BALANCE SHEET ARRANGEMENTS
At March 31, 2014,2017, and 2013,2016, the Company did not have any off balance sheet arrangements, including any relationships with unconsolidated entities or financial partnership to enhance perceived liquidity.
(F) CONTRACTUAL OBLIGATIONS
None.
(G) SAFE HARBOUR
Not applicable.
(A) DIRECTORS AND SENIOR MANAGEMENT
The following sets forth the names and province or state and country of residence of our directors and executive officers, the offices held by them in the Corporation, their current principal occupations, all as of July 24, 2014,27, 2017, the date of this report, their principal occupations during the last five years and the month and year in which they became directors or officers. The term of each director expires on the date of our next annual meeting.
Name, Province/State and Country of Residence and Present Position with Portage (1) | Date became Director/Officer | Principal Occupation Last five years |
Dr. Gregory Bailey (2) London, UK Chairman of the Board of Director | June 4, 2013 | See |
Dr. Declan Doogan Stonington, CT, USA Chief Executive Officer and Director | June 4, 2013 | See |
Mr. Jim Mellon (2) (3) Isle of Man Director | June 4, 2013 | See |
Mr. Kam Shah (2) Ontario, Canada Director and Chief Financial Officer | January 3, 1999 | See section 4 |
Dr. Ian Walters (2) (3) Connecticut, USA | August 1, 2016 | See section 4 (C ) of this report |
Mr. Steven Mintz (2) (3) Ontario, Canada Director | April 6, 2016 | See section 4 (C ) of this report |
(1)
Neither age nor date of birth of directors or executive officers is required to be reported in our directorshome country nor otherwise publicly disclosed.
28
(2)
Member of the Audit and executive officers:
(3)
Independent directors
Family Relationships
There are no family relationships between the directors and executive officers.
Other Relationships
There are no arrangements or understandings between any major shareholder, customer, supplier or others, pursuant to which any of the above-named persons were selected as directors or members of senior management except that as per the terms of the Share Exchange Agreement with Portage Pharma Ltd dated May 21, 2013. Board of Director of Portage will nominate Mr. Kam Shah as director for at least three years and Mr. Shah will be employed as CFO for the term of two years and in a mutually acceptable capacity for the third year.
(B) COMPENSATION
The compensation payable to directors and officers of the Company and its subsidiary is summarized below:
1. General
The Company does not compensate directors for acting solely as directors. Except as described below, the Company does not have any arrangements pursuant to which directors are remunerated by the Company or its subsidiary for their services in their capacity as directors, other than options to purchase shares of the Company which may be granted to the Company’s directors from time to time and the reimbursement of direct expenses.
The Company does not have any pension plans.
2. Statement of Executive Compensation
The following table and accompanying notes set forth all compensation paid by the Company to its directors, senior management and key consultants for the fiscal years ended March 31, 2014, 2013. Since2017, 2016 and 2015:
| Annual compensation | Long term compensation |
| ||||||
Name & principal position | Year | Fee (3) | Bonus | Other | Securities under options/SARs granted (1) & (4) | Shares or units subject to resale restriction | LTIP payout (2) | Other | Total compensation |
Steven Mintz |
|
|
|
|
|
|
|
|
|
Independent director | 2017 |
|
|
| $ 55,934 |
|
|
| $ 55,934 |
and audit committee | 2016 |
|
|
|
|
|
|
|
|
member | 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ian Walters |
|
|
|
|
|
|
|
|
|
Independent director | 2017 |
|
|
| $ 55,934 |
|
|
| $ 55,934 |
and audit committee | 2016 |
|
|
|
|
|
|
|
|
member | 2015 |
|
|
|
|
|
|
|
|
Notes:
1.
“SAR” means stock appreciation rights. The Company never issued any SARs
2.
“LTIP” means long term incentive plan. The Company does not have any such Plan.
3.
a.
Fee for fiscal 2017 includes 3 million shares issued to Dr. Bailey for a valuation of $540,000, 2.6 million shares issued to Dr. Doogan for a value of $468,000, 650,000 shares issued to Mr. Mellon for a value of $117,000 and 1 million shares issued to Mr. Shah for a value of $180,000.
b.
Fee for fiscal 2016 includes 1 million shares to Dr. Bailey valued at $100,000,
c.
2015 fee includes 1.5 million shares to Dr. Bailey valued at $ 120,000.
4.
a.
For fiscal 2017, Mr. Mintz and Dr. Walters were issued 633,597 options each as joining bonus. These options can be exercised to convert into equal number of common shares of the acquisitionCompany at an exercise price of Portage Pharma Ltd has been accounted as reverse acquisition as explained earlier$0.15 per share, are valid for five years and will vest in this report, detailsequal number over four years from October 11, 2017. In addition, they were issued 175,000 options each for their services during the prior period relatedfiscal year 2017. These options are valid for five years, vesting in equal installments over two years from January 1, 2017 and are convertible into equal number of common shares of the Company at an exercise price of $0.15 per share.
b.
For the fiscal year 2016: Dr. Bailey was issued 1,750,000 options, Dr. Doogan was issued 2.6 million options, Mr. Shah was issued 600,000 options and Mr. Mellon was issued 500,000 options. These options are valid for five years, convertible into equal number of shares at an exercise price of $0.15/share and will vest in 24 equal instalments over the two years.
c.
For fiscal 2015, total of 4.4 million options were issued to Portage pharma Ltd which was incorporatedfour directors- 1 million to Dr. Bailey, 2.5 million to Dr. Doogan, 500,000 to Mr. Shah and 400,000 to Mr. Mellon. These options are valid for five years and convertible into equal number of shares, exercisable at $0.10 per share and vesting in equal monthly instalments over two years. The options were registered with US Securities and Exchange commission on May 23, 2012
| ANNUAL COMPENSATION | LONG-TERM COMPENSATION | ||||||||
| Awards | Payouts | ||||||||
| Name and principal position | Year | Fee (3) | Bonus | Other annual compensation(6) | Securities under options/SARs Granted (1) & (4) | Shares or units subject to resale restrictions (4) | LTIP (2) payouts | all other compensation (5) | Total compensation |
| ($) | ($) | ($) | $ | ($) | ($) | ($) | ($) | ||
| Declan Doogan | |||||||||
| CEO | 2014 | 135,743 | 270,000 | 405,743 | |||||
| CEO | 2013 | - | - | - | - | ||||
| Kam Shah | |||||||||
| CFO | 2014 | 253,458 | 67,871 | - | 321,329 | ||||
| Gregory Bailey | |||||||||
| Chairman/Business development | 2014 | 135,743 | 270,000 | 405,743 | |||||
| Chairman/business development | 2013 | - | - | - | |||||
| James Mellon | |||||||||
| Independent director | 2014 | - | 54,297 | 54,297 | |||||
Long Term Incentive Plan (LTIP) Awards
The Company does not have a LTIP, pursuant to which cash or non-cash compensation intended to serve as an incentive for performance (whereby performance is measured by reference to financial performance or the price of the Company’s securities) was paid or distributed to the Named Executive Officers during the most recently completed financial year.
Defined Benefit or Actuarial Plan Disclosure
There is no pension plan or retirement benefit plan that has been instituted by the Company and none are proposed at this time.
Indebtedness of Directors, Executive Officers and Senior Officers
None.
Directors’ and Officers’ Liability Insurance
The Company has purchased, at its expense, directorsdirectors’ and officersofficers’ liability insurance policy to provide insurance against possible liabilities incurred by them in their capacity as directors and officers of the Company.
(C) BOARD PRACTICES
Directors may be appointed at any time in accordance with the by-laws of the Company and then re-elected annually by the shareholders of the Company. Directors receive no compensation for serving as such, other than stock option and reimbursement of direct expenses. Officers are elected annually by the Board of Directors of the Company and serve at the discretion of the Board of Directors.
The Company has not set aside or accrued any amount for retirement or similar benefits to the directors.
Mandate of the Board
The Board has adopted a mandate,mandate; in which it has explicitly assumed responsibility for the stewardship of Portage. In carrying out its mandate the Board holds at least one meeting every alternate month. The frequency of meetings, as well as the nature of the matters dealt with, will vary from year to year depending on the state of our business and the opportunities or risks, which we face from time to time. The Board held a total of 1210 meetings (2016: 11 meetings), mostly by way of conference calls, during our financial year ended March 31, 2014. To2017. Apart from these meetings, directors also held technical meetings with management of subsidiaries on a monthly basis to assist in the discharge of its responsibilities, the Board has designated one standing committee: anAn Audit and Compensation Committee effective June 27, 2013.as more particularly discussed below.
Audit and Compensation Committee (“ACC”)
The members of the ACC consist of all independent directors - Jim Mellon, Greg BaileySteven Mintz and Kam Shah. JimIan Walters. Mr. Mellon is an insider and Greg Bailey are theMr. Mintz and Dr. Walters being independent directors and Kam Shah is an executive director.as required under the new rules of the Ontario Securities Commission. Jim Mellon is the chairman of the Committee. The ACC was approved in the board meeting on June 27, 2013.
Two new Charters were adopted on June 27, 2013 –- Charter of the ACC relating to compensation matters and Charter of the ACC relating to Audit matters. These Charters are included in the Exhibits to this report.
The ACC relating to audit matters is charged with overseeing the Company's accounting and financial reporting policies, practices and internal controls. The committee reviews significant financial and accounting issues and the services performed by and the reports of our independent auditors and makes recommendations to our Board of Directors with respect to these and related matters.
31
Audit Committee charter assists the Board in fulfilling its responsibilities for our accounting and financial reporting practices by:
·
reviewing the quarterly and annual consolidated financial statements and management discussion and analyses;
·
meeting at least annually with our external auditor;
·
reviewing the adequacy of the system of internal controls in consultation with the chief executive and financial officer;
·
reviewing any relevant accounting and financial matters including reviewing our public disclosure of information extracted or derived from our financial statements;
·
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal controls or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
·
pre-approving all non-audit services and recommending the appointment of external auditors;
·
reviewing and approving our hiring policies regarding personnel of our present and former external auditor: and
·
reviewing and approving all employee and consultants contracts, bonuses and other compensation matters
ACC Charter relating to compensation matters will monitor incentive and equity based compensation plans for the executives based on their periodic performance evaluation.
Corporate Governance Committee
The Company does not have a separate corporate governance committee. The management in conjunction with the ACC has developed and updated corporate governance practices and policies, code of ethics and corporate disclosure policy which form part of our internal control over financial reporting manual. The goal is to provide a mechanism that can assist in our operations, including but not limited to, the monitoring of the implementation of policies, strategies and programs and the development, continuing assessment and execution of the Company’s strategic plan.
(D) EMPLOYEES
The Company presently has no employee. It uses the services of consultants from time to time.
(E) SHARE OWNERSHIP
The Company usually creates two Plans, Consultants Stock Compensation Plan anda Stock Option Plan.
As at July 24, 2014,27, 2017, the date of this report, the Company had one active Consultants Stock Compensation Plan and twoone active Stock Option Plans.Plan. Details of these Plans and movements therein during the fiscal 20142017 are given in Notes 6(e)8(c) and 7(b)9(b) respectively to the consolidated financial statements for the fiscal 2014.2017. As of the date of this report, there were 4,061,6671,561,667 common shares registered under the Consultants Stock Compensation Plan and not yet allotted,allotted.
On December 19, 2013 and 5,010,000 outstandingMarch 17, 2015, the Company registered with US Securities and Exchange Commission, options under 2013 Option Plan, under which maximum number of options issuable at any time shall not exceed 10% of issued and outstanding common shares of the Stock Option Plans.
32
The objective of these stock plans is to provide for and encourage ownership of our common shares by our directors, officers, consultants and employees 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 common shares. The Plans are designed to be competitive with the benefit programs of other companies in the
The following table sets forth the share ownership of our executive officers and directors as at July 24, 2014:
Common Shares Beneficially Owned | Options and Warrants Exercisable for Common Shares | |||||||||
| Name | Number | Percentage * | Number | Exercise price - in US$ | Expiry date(s) | |||||
| Kam Shah | 2,359,131 | 1.31% | 200,000 | O | 0.35 | 18-Aug-15 | ||||
| 500,000 | O | 0.20 | 12-Dec-18 | |||||||
| Declan Doogan | 27,711,068 | 15.33% | 22,908,149 | W | 0.29 | 06- June- 15 | ||||
| 1,000,000 | O | 0.20 | 12-Dec-18 | |||||||
| Greg Bailey | 27,711,068 | 15.33% | 22,908,149 | W | 0.29 | 06- June- 15 | ||||
| 1,000,000 | O | 0.20 | 12-Dec-18 | |||||||
| James Mellon | 26,211,068 | 14.50% | 22,908,149 | 0.29 | 06- June- 15 | |||||
| 400,000 | O | 0.20 | 12-Dec-18 | |||||||
Name | Common shares beneficially owned | Options exercisable for equal number of common shares | |||
| number | Percentage * | number | Exercise price | Expiry date |
Kam Shah | 3,092,131 | 1% | 500,000 | $0.20 | Dec. 12, 2018 |
|
|
| 500,000 | $0.10 | March 17, 2020 |
|
|
| 600,000 | $0.15 | Dec. 7, 2020 |
|
|
|
|
|
|
Declan Doogan | 30,911,068 | 12% | 1,000,000 | $0.20 | Dec. 12, 2018 |
|
|
| 2,500,000 | $0.10 | March 17, 2020 |
|
|
| 2,600,000 | $0.15 | Dec. 7, 2020 |
|
|
|
|
|
|
Gregory Bailey | 63,287,110 | 24% | 510,411 | $0.15 | Dec. 7, 2020 |
|
|
|
|
|
|
Jim Mellon | 44,508,688 | 17% | 400,000 | $0.20 | Dec. 12, 2018 |
|
|
| 400,000 | $0.10 | March 17, 2020 |
|
|
| 500,000 | $0.15 | Dec. 7, 2020 |
|
|
|
|
|
|
Steven Mintz | 2,053,625 | 1% | 633,597 | $0.15 | Oct. 10, 2021 |
|
|
| 175000 | $0.15 | Dec. 19, 2021 |
|
|
|
|
|
|
Ian Walters | 320000 | 0% | 633,597 | $0.15 | Oct. 10, 2021 |
|
|
| 175000 | $0.15 | Dec. 19, 2021 |
All shares and options held by the above persons carry same rights as the other holders of the Common shares of the Company.
(A) MAJOR SHAREHOLDERS
The Company's securities are recorded on the books of its transfer agent in registered form. The majority of such shares are, however, registered in the name of intermediaries such as brokerage houses and clearing-houses on behalf of their respective clients. The Company does not have knowledge of all the beneficial owners thereof.
33
As at July 24, 2014,2017, Intermediaries like CDS & Co, Toronto, Canada and Cede & Co of New York, USA held approximately 44%44.03% of the issued and outstanding common shares of the company on behalf of several beneficial shareholders whose individual holdings details were not available.
At July 24, 2014,2017, the Company had 180,775,790263,928,483 shares of common stock outstanding, which, as per the details provided by the Transfer Agents, were held by 95118 record holders excluding the beneficial shareholders held through the intermediaries.
The following table sets forth persons known by us to be beneficial owners of more than 5% of our common shares as of July 24, 2014.2017. 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 of this prospectus are deemed to be outstanding and beneficially owned by the person holding the option and warrant. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
Name of Beneficial Owner | No. of Shares | Percentage of Shares* |
Declan Doogan | 36,686,068(1) | 14% |
Greg Bailey | 63,733,720 (2) | 23% |
James Mellon | 45,746,188 (3) | 17% |
* based on 271,387,593 shares including 7,459,110 shares issuable on exercise of vested options to the three individuals. |
|
|
(1)
Includes 5,775,000 shares issuable upon exercise of vested options
(2)
Includes 446,610 shares issuable upon exercise of vested options
(3)
Includes 1,237,500 shares issuable upon exercise of vested options.
The Company is a publicly owned BVI corporation, the shares of which are owned by Canadian residents, US residents, and residents of other countries. 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.
Insider Reports under Canadian Securities Legislation
Since the Company is a reporting issuer under the Securities Acts of each of the province of Ontario in Canada, certain "insiders" of the Company (including its directors, certain executive officers, and persons who directly or indirectly beneficially own, control or direct more than 10% of its common shares) are generally required to file insider reports of changes in their ownership of the Company's common shares five days following the trade under National Instrument 55-104 - Insider Reporting Requirements and Exemptions, as adopted by the Canadian Securities Administrators. Insider reports must be filed electronically five days following the date of the trade at www.sedi.ca. The public is able to access these reports at www.sedi.ca.
The U.S. rules governing the ownership threshold above which shareholder ownership must be disclosed are more stringent than those discussed above. 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 5 per cent of a class of an equity security registered under Section 12 of the Exchange Act. In general, such persons must file, within 10 days after such acquisition, a report of beneficial ownership with the 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.
34
(B) RELATED PARTY TRANSACTIONS
All related part transactions occurred with related partieskey management personnel. Key management personnel are incurred inthose persons having authority and responsibility for planning, directing and controlling the normal courseactivities of businessthe Company. The Board of Directors, Chairman, Chief Executive Officer and Chief Financial Officer are measured at the exchange amount, which is the amount of consideration established and agreed to between the related parties. key management personnel.
Related party transactions and balances have been listed below, unless they have been disclosed elsewhere in note 14 to the audited consolidated financial statements for the fiscal year ended March 31, 2014.
(C) INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
(A) CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
Financial Statements
Information regarding our financial statements is contained under Item18 of this Annual Report.
Legal Proceedings
The Company has no pending legal claims as of today.
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 Common 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 Common Shares will participate equally in the dividends, and, in the event of liquidation, in the net assets, of the Company.
(B) SIGNIFICANT CHANGES
Subsequent events have been evaluated through July 24, 2014,27, 2017, the date of this report. There were no major events which could have any bearing onThese are described in note 18 to the audited consolidated financial statementsfinancials for the eyar ended March 31, 2014.
(A) OFFER AND LISTING DETAILS
The following tables set forth the reported high and low sale prices for our common shares as quoted on OTC Quotation Board.
35
The following table outlines the annual high and low market prices for the five most recent fiscal years:
Fiscal year ended March 31 2014 | High (US$) 0.42 | Low (US$) 0.06 |
| 2013 | 0.16 | 0.01 |
| 2012 | 0.18 | 0.02 |
2011 2010 | 0.40 0.45 | 0.07 0.06 |
Fiscal year ended March 31, | High | Low | ||
| OTC | CSE | OTC | CSE |
| In US$ | |||
2017 | 0.25 | 0.22 | 0.10 | 0.12 |
2016 | 0.31 | 0.32 | 0.08 | 0.08 |
2015 | 0.18 | 0.24 | 0.07 | 0.08 |
2014 | 0.42 | 0.22 | 0.06 | 0.13 |
2013 | 0.16 | n/a | 0.01 | n/a |
The following table outlines the high and low market prices for each fiscal financial quarter for the two most recent fiscal periods and any subsequent period:
| Fiscal Quarter ended | High | Low |
| In US$ | In US$ | |
| June 30, 2014 | 0.12 | 0.09 |
| March 31, 2014 | 0.23 | 0.08 |
| December 31, 2013 | 0.30 | 0.16 |
| September 30, 2013 | 0.38 | 0.22 |
| June 30, 2013 | 0.42 | 0.15 |
| March 31, 2013 | 0.16 | 0.07 |
| December 31, 2012 | 0.11 | 0.04 |
| September 31, 2012 | 0.06 | 0.01 |
| June 30, 2012 | 0.04 | 0.02 |
Fiscal quarter ended | High | Low | ||
| OTC | CSE | OTC | CSE |
| In US$ | |||
30-Jun-17 | 0.41 | 0.40 | 0.18 | 0.12 |
31-Mar-17 | 0.25 | 0.22 | 0.13 | 0.13 |
31-Dec-16 | 0.15 | 0.15 | 0.12 | 0.12 |
30-Sep-16 | 0.14 | 0.13 | 0.11 | 0.10 |
30-Jun-16 | 0.17 | 0.16 | 0.10 | 0.10 |
31-Mar-16 | 0.14 | 0.14 | 0.08 | 0.09 |
31-Dec-15 | 0.19 | 0.16 | 0.08 | 0.10 |
30-Sep-15 | 0.26 | 0.26 | 0.15 | 0.15 |
30-Jun-15 | 0.31 | 0.32 | 0.08 | 0.08 |
The following table outlines the high and low market prices for each of the most recent six months:
| Month | High | Low |
| In US$ | In US$ | |
| June 2014 | 0.11 | 0.09 |
| May 2014 | 0.11 | 0.09 |
| April 2014 | 0.12 | 0.09 |
| March 2014 | 0.17 | 0.06 |
| February 2014 | 0.19 | 0.13 |
| January 2014 | 0.24 | 0.13 |
Month | High | Low | ||
2017 | OTC | CSE | OTC | CSE |
| In US$ | |||
June | 0.41 | 0.40 | 0.30 | 0.30 |
May | 0.38 | 0.38 | 0.34 | 0.32 |
April | 0.30 | 0.32 | 0.18 | 0.18 |
March | 0.22 | 0.22 | 0.16 | 0.15 |
February | 0.25 | 0.24 | 0.16 | 0.16 |
January | 0.17 | 0.16 | 0.13 | 0.13 |
(B) PLAN OF DISTRIBUTION
Not applicable.
(C) MARKETS
The Company’s common shares currently trade in two places
On OTC Quotation Board under the trading symbol “PTGEF”. The shares have been traded on OTCQB since 2000.
36
(D) SELLING SHAREHOLDERS
Not applicable.
(E) DILUTION
Not applicable.
(F) EXPENSES OF THE ISSUE
Not applicable.
(A) SHARE CAPITAL
This Form 20F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.
(B) MEMORANDUM AND ARTICLES OF ASSOCIATION
General
Effective July 5, 2013, The Company moved its jurisdiction from Ontario to British Virgin Islands. ourOur affairs are therefore governed by the provisions of our memorandum of association and articles of association, as adopted on becoming a BVI corporation, and by the provisions of applicable British Virgin Islands law.
On July 6, 2017, the shareholders in the annual and special meeting, approved the replacement by way of amendment and restatement of the existing Memorandum and Articles of Association of the Company with amended and restated memorandum and articles of association. Most of the changes are minor and will not affect shareholders or the day to day administration of the Company.The amended and restated Memorandum and Articles of Association will take effect on the date of filing with the BVI Registry of Corporate Affairs, which was July 25, 2017.
Pursuant to our Memorandum and Articles of Association, we are authorized to issue aan unlimited number of ordinary shares of no par value of which 180,775,790 shares are issued and outstanding.
The following are summaries of material terms and provisions of our Memorandum and Articles of Association and the BVI Act, insofar as they relate to the material terms ofapplicable 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 exhibitsexhibit 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, we may not increase the required percentage to call a meeting above 10%.
37
Subject to our Memorandum and Articles of Association, a meeting of shareholders of the company will be called by not less than twenty onetwenty-one days' written 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 may be called by shorter notice than that mentioned above, but, subject to our articles of association, it will be deemed to have been duly called if shareholders holding at least 90% of the total voting rights on all the matters to be considered at the meeting have waived notice of the meeting and, for this purpose, the presence of a shareholder at the meeting shall constitute a waiver in relation to all the shares which that shareholder holds.
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. Shareholders.
Rights attaching to shares
Voting rights
Holders of our ordinary shares have identical rights, including dividend and liquidation rights, provided that, except as otherwise expressly provided in our Amended Memorandum and Articles of Association or required by applicable law, on any matter that is submitted to a vote of our shareholders, holders of our ordinary shares are entitled to one vote per ordinary share.
Under the BVI Act, the ordinary shares are deemed to be issued when the name of the shareholder is entered in our register of members. Our register of members is maintained by our transfer agent, Equity Transfer Services Inc., 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 the company 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.
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.
38
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 corporation, our Memorandum and Articles of Association. Shareholders are entitled to have our affairs conducted in accordance with the BVI Act and the Memorandum and Articles of Association.
There are common law rights for the protection of shareholders that may be invoked, largely dependent on English company law, since the common law of the British Virgin Islands is limited. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company's affairs by the majority or the board of directors. However, every shareholder is entitled to have the affairs of the company conducted properly according to British Virgin Islands law and the constituent documents of the company. As such, if those who control the company have persistently disregarded the requirements of company law or the provisions of the company's Memorandum and Articles of Association, then the courts may grant relief.
Generally, the
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, save to the extent that they are expressly provided for in the Memorandum and Articles of Association) that investors may expect to find in relation to a public company are not provided for under British Virgin Islands law. There are no pre-emption rights applicable to the issuance of new shares under either British Virgin Islands law or our Amended Memorandum and Articles of Association.
Liquidation rights
As permitted by British Virgin Islands law and our Memorandum and Articles of Association, we may be voluntarily liquidated under Part XII of the BVI Act if we have no liabilities or we are able to pay our debts as they fall due and the value of our assets equals or exceeds our liabilities by resolution of directors and resolution of shareholders.
Modification of rights
As permitted by British Virgin Islands law, and our Memorandum and Articles of Association, we may vary the rights attached to our ordinary shares only with the consent in writing of or by a resolution passed at a meeting by the holders of not less than 50% of the issued shares of a particular class of shares.
39
Transfer of shares
Subject to any applicable restrictions set forth in our Memorandum and Articles of Association, any of our shareholders may transfer all or any of his or her shares by a written instrument of transfer in the usual or common form or in any other form which our directors may approve.
Our board of directors may, in its absolute discretion, resolve to refuse or delay the registration of any transfer of any share for reasons that shall be specified in the Resolution of Directors. If our directorscan only refuse or delay the registration of a transfer they shall, as soon as practicable, send to each of shares if the transferor and the transferee noticehas failed to pay an amount due in respect of such refusal or delay in the agreed form.
Changes in authorized ordinary shares
By resolution of our shareholders or 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; (iii) cancel any ordinary shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person; or (iv) create new classes of shares with preferences to be determined by the board of directors at the time of authorization, although any such new classes of shares may only be created with prior shareholder approval.
Share repurchase
As permitted by the BVI Act and our Memorandum and Articles of Association, shares may be repurchased, redeemed or otherwise acquired by us.
Dividends
Subject to the BVI Act and our Memorandum and Articles of Association, our directors may, by resolution, authorize a distribution to shareholders at such time and of such an amount as they think fit, if they are satisfied, on reasonable grounds, that, immediately after the distribution, we will satisfy the 'solvency test'. A company will satisfy the solvency test if (i) the value of the company's assets exceeds its liabilities; and (ii) the company is able to pay its debts as they fall due. Where a distribution is made to a shareholder at a time when the company did not, immediately after the distribution, satisfy the solvency test, it may be recovered by the company from the shareholder unless (i) the shareholder received the distribution in good faith and without knowledge of the company's failure to satisfy the solvency test; (ii) the shareholder has altered his position in reliance on the validity of the distribution; and (iii) it would be unfair to require repayment in full or at all.
Board of directors
We are managed by a board of directors which currently consists of fourfive directors.
Our shareholders may, pursuant to our Memorandum and Articles of Association, at any time remove any director before the expiration of his or her period of office forwith or without cause, and may, pursuant to our Memorandum and Articles of Association, elect another person in his or her stead. Subject to our Memorandum and Articles of Association, the directors will have power at any time and from time to time to appoint any person to be a director, either as an addition to the existing directors or to fill a vacancy as long as the total number of directors (exclusive of alternate directors) does not at any time exceed the maximum number fixed by or in accordance with our Amended Memorandum and Articles of Association (if any). and one third time the number of directors to have been elected at the last annual meeting of shareholders.
There are no share ownership qualifications for directors.
Meetings of our board of directors may be convened at any time deemed necessary by any of our directors.
Unless the quorum has been otherwise fixed by the board, a meeting of our board of directors will be competent to make lawful and binding decisions if at least one half of the directors are present or represented. unlessUnless there are only two directors, in which case, the quorum shall be two. At any meeting of our directors, each director, whether by his or her presence or by his or her alternate, is entitled to one vote.
Questions arising at a meeting of our board of directors are required to be decided by simple majority votes of the directors present or represented at the meeting. In the case of a tie vote, the chairman of the meeting shall not have a second or deciding vote. Our board of directors may also pass unanimous written resolutions without a meeting.
The remuneration to be paid to the directors shall be such remuneration as the directors or shareholders shall determine.determine through a resolution. Under our Memorandum and Articles of Association, the independent directors shall also be entitled to reimbursement of out-of-pocket expenses in connection with the performance of their duties as director.
Issuance of additional ordinary shares
Our Memorandum and Articles of Association authorize our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our Memorandum and Articles of Association authorize our board of directors from time to time to issue ordinary shares to the extent permitted by the BVI Act.
Changes in authorized shares
We are authorized to issue unlimited number of ordinary shares without par value, which will be subject to the same provisions with reference to the payment of calls, liens, transfers, transmissions, forfeitures and otherwise as the shares in issue. We may by resolution:
·
consolidate and divide all or any of our unissued authorized shares into shares of a larger amount than our existing shares;
·
sub-divide our existing ordinary shares, or any of them into shares of smaller amount than is fixed by our memorandum of association, subject nevertheless to the provisions of the BVI Act;
·
cancel any ordinary shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person; or
·
create new classes of shares with preferences to be determined by the board of directors at the time of authorization, although any such new classes of shares may only be created with prior shareholder approval.
41
Inspection of books and records
Under British Virgin Islands law holders of our ordinary shares will be entitled, on giving written notice to us, to inspect and make copies or take extracts of our: (a) Memorandum and Articles of Association; (b) register of shareholders; (c) register of directors; and (d) minutes of meetings and resolutions of shareholders and those classes of shareholders of which he is a shareholder.
Subject to our Memorandum and Articles of Association, our board of directors may, if they are satisfied that it would be contrary to our interest to allow a shareholder to inspect any document, or part of a document as referenced above, refuse to permit the shareholder to inspect the document or limit the inspection of the document, including limiting the making of copies or the taking of extracts from the records. Where our directors exercise their powers in these circumstances, they shall notify the shareholder as soon as reasonably practicable.
Differences in corporate law
We are now incorporated under, and are governed by, the laws of the British Virgin Islands. The flexibility available under British Virgin Islands law has enabled us to adopt the memorandum and articles of association that will provide shareholders with rights that do not vary in any material respect from those they enjoyed under the Ontario Companies laws.
Conflicts of interest
Pursuant to the BVI Act and the company's memorandum and articles of association, a director of a company who has an interest in a transaction and who has declared such interest to the other directors, may:
·
vote on a matter relating to the transaction;
·
attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum; and
·
sign a document on behalf of the company, or do any other thing in his capacity as a director, that relates to the transaction.
Anti-money laundering laws
In order to comply with legislation or regulations aimed at the prevention of money laundering we are required to adopt and maintain anti-money laundering procedures, and may require subscribers to provide evidence to verify their identity. Where permitted, and subject to certain conditions, we may also delegate the maintenance of our anti-money laundering procedures (including the acquisition of due diligence information) to a suitable person.
We reserve the right to request such information as is necessary to verify the identity of a subscriber. 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 1997 (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.
42
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.
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.
Interested directors
The BVI Act provides that a director shall, after becoming aware that he is interested in a transaction entered into or to be entered into by the company, disclose that interest to the board of directors of the company. The failure of a director to disclose that interest does not affect the validity of a transaction entered into by the director or the company, so long as the director's interest was disclosed to the board prior to the company's entry into the transaction or was not required to be disclosed (for example where the transaction is between the company and the director himself or is otherwise in the ordinary course of business and on the usual terms and conditions). As permitted by British Virgin Islands law and our Memorandum and Articles of Association, a director interested in a particular transaction may vote on it, attend meetings at which it is considered, and sign documents on our behalf which relate to the transaction.
Voting rights and quorum requirements
Under British Virgin Islands law, the voting rights of shareholders are regulated by the company's Memorandum and Articles of Association and, in certain circumstances, the BVI Act. The articles of association will govern matters such as quorum for the transaction of business, rights of shares, and majority votes required to approve any action or resolution at a meeting of the shareholders or board of directors. Unless the articles of association otherwise provide, the requisite majority is usually a simple majority of votes cast.
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 two thirds (2/3) or more of the votes of the shares entitled to vote thereon which were present
43
Shareholders not otherwise entitled to vote on the merger or consolidation may still acquire the right to vote if the plan or merger or consolidation contains any provision which, if proposed as an amendment to the memorandum of amended association and articles of association, would entitle them to vote as a class or series on the proposed amendment. In any event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to vote at the meeting or consent to the written resolution to approve the plan of merger or consolidation.
Shareholder suits
We are not aware of any reported class action or derivative action having been brought against the company in a British Virgin Islands court.
Under the BVI Act, if a company or a director of a company engages in, or proposes to engage in, conduct that contravenes the BVI Act or the memorandum of association or articles of the company, the BVI Court may, on the application of a shareholder or a director of the company, make an order directing the company or director to comply with, or restraining the company or director from engaging in that conduct.
In addition, under the BVI Act, the BVI Court may, on the application of a shareholder of a company, grant leave to that shareholder to bring proceedings in the name and on behalf of that company or to intervene in proceedings to which the company is a party for the purpose of continuing, defending or discontinuing the proceedings on behalf of the company. In determining whether to grant leave for such derivative actions, the Court must take into account certain matters, including whether the shareholder is acting in good faith, whether the derivative action is in the interests of the company taking account of the views of the company's directors on commercial matters and whether an alternative remedy to the derivative claim is available.
A shareholder of a company may bring an action against the company for breach of a duty owed by the company to him as a shareholder. The BVI Act also includes provisions for actions based on oppression, and for representative actions where the interests of the claimant are substantially the same as those of other shareholders.
Corporate governance
British Virgin Islands laws do not restrict transactions with 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.
Indemnification
British Virgin Islands law does not limit the extent to which a company's 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 articles of association provide for the indemnification of our directors against all losses or liabilities incurred or sustained by him or her 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.
44
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 articles of association do not provide for a staggered board.
(C) MATERIAL CONTRACTS
The Company had no material contract, other than contracts entered into in the ordinary course of business, to which we or any of our subsidiaries is a party, for the year immediately preceding the filing of this report.
(D) EXCHANGE CONTROLS
There is no income or other tax of the British Virgin Islands imposed by withholding or otherwise on any payment to be made by us.
We are free to acquire, hold and sell foreign currency and securities without restriction. There is no exchange control legislation under British Virgin Islands law and accordingly there are no exchange control regulations imposed under British Virgin Islands law that would prevent us from paying dividends to shareholders in United States Dollars or any other currencies, and all such dividends may be freely transferred out of the British Virgin Islands, clear of any income or other tax of the British Virgin Islands imposed by withholding or otherwise without the necessity of obtaining any consent of any government or authority of the British Virgin Islands.
(E) TAXATION
British Virgin Islands Tax Consequences
Under the law of the British Virgin Islands as currently in effect, a holder of shares of the Company who is not a resident of the British Virgin Islands is not liable for British Virgin Islands income tax on dividends paid with respect to the shares of the Company, and all holders of securities of the Company are not liable to the British Virgin Islands for income tax on gains realized on the sale or disposal of such securities. The British Virgin Islands does not impose a withholding tax on dividends paid by a company incorporated or re-registered under the BCA.
There are no capital gains, gift or inheritance taxes levied by the British Virgin Islands on companies incorporated or re-registered under the BCA. In addition, securities of companies incorporated or re-registered under the BCA 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
45
U.S. Federal Income Tax Consequences
The following discussion sets forthbelow is for general information only and is not, and should not be interpreted to be, tax advice to any holder of our common shares. Each holder or a prospective holder of our common shares is urged to consult his, her or its own tax advisor.
General
This section is a general summary of the material United States federal income tax consequences to U.S. Holders, as defined below, of the ownership and disposition of our common shares as of the date of this report. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, the applicable Treasury regulations promulgated and proposed thereunder, judicial decisions and current administrative rulings and practice, all of which are subject to change, possibly on a retroactive basis. The summary applies to you only if you hold our common shares as a capital asset within the meaning of Section 1221 of the Code. In addition, this summary generally addresses certain U.S. federal income tax consequences to U.S. Holders (as defined below)if we were to be classified as a PFIC. The United States Internal Revenue Service, or the IRS, may challenge the tax consequences described below, and we have not requested, nor will we request, a ruling from the IRS or an opinion of owning, andcounsel with respect to the United States federal income tax consequences of acquiring, holding or disposing of our ordinary shares as of the date hereof.common shares. This discussion issummary does not purport to be a complete analysis or listingcomprehensive description of all of the possible tax consequences and does not address all tax considerations that may be relevant to investorsthe ownership of our common shares. In particular, the discussion below does not cover tax consequences that depend upon your particular tax circumstances nor does it cover any state, local or foreign law, or the possible application of the United States federal estate or gift tax. You are urged to consult your own tax advisors regarding the application of the United States federal income tax laws to your particular situation as well as any state, local, foreign and United States federal estate and gift tax consequences of the ownership and disposition of the common shares. In addition, this summary does not take into account any special United States federal income tax rules that apply to a particular U.S. or non-U.S. holder of our common shares, including, without limitation, the following:
·
a dealer in lightsecurities or currencies;
·
a trader in securities that elects to use a mark-to-market method of their particular circumstances. This summary applies only to U.S. Holdersaccounting for its securities holdings;
·
a financial institution or a bank;
·
an insurance company;
·
a tax-exempt organization;
·
a person that hold Class A ordinaryholds our common shares in a hedging transaction or as capital assetspart of a straddle or a conversion transaction;
·
a person whose functional currency for U.S.United States federal income tax purposes (generally, property held for investment), and it doesis not describe all of the U.S. federal income tax consequencesdollar;
·
a person liable for alternative minimum tax;
·
a person that may be relevantowns, or is treated as owning, 10% or more, by voting power or value, of our common shares;
·
certain former U.S. citizens and residents who have expatriated; or
·
a person who receives our shares pursuant to the exercise of employee stock options or otherwise as compensation.
46
U.S. Holders subject to special rules, such as:
For purposes of this summary,the discussion below, you are a "U.S. Holder" is“U.S. Holder” if you are a beneficial owner of ordinaryour common shares who is,or which is:
·
an individual United States citizen or resident alien of the United States (as specifically defined for U.S.United States federal income tax purposes:
| purposes); · a corporation, or |
·
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 the ordinaryour common shares, the tax treatment of a partner in such partnershipwill generally will depend upon the status of the partner and upon the activities of the partnership. Prospective investors whoIf you are partners ina partner of a partnership holding our common shares, you should consult theiryour tax advisers as to the particular U.S. federal income tax consequences of owning and disposing of Class A ordinary shares in their particular circumstances.
Passive foreign investment company" or considerations (PFIC)
Under the Code, we will be a PFIC for U.S. federal income tax purposes.. Further, this summary does not addressany taxable year in which, after the U.S. federal estate and gift, state, local or non-U.S. tax consequences to U.S. Holdersapplication of owning, and disposing of Class A ordinary shares. Prospective investors should consult their own tax advisors regarding the U.S. federal, state and local, as well as non-U.S. income and other tax consequences of owning and disposing of Class A ordinary shares in their particular circumstances.
If we will not be consideredare a PFIC for any taxable year.
47
If we are a PFIC for any taxable year during which a U.S. Holder held ordinaryholds our common shares, the U.S. Holder may be subject to adverse tax consequences. Generally, gain recognized by a U.S. Holder upon a disposition (including, under certain circumstances, a pledge) of ordinaryour common shares by the U.S. Holder would be allocated ratably over the U.S. Holder's holding period for such common 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 an interest charge would be imposedincreased by an additional tax equal to interest on the resulting tax attributabledeemed deferred with respect to the allocated amount.each such other taxable year. Further, to the extent that any distribution received by a U.S. Holder on ordinaryour common shares exceeds 125% of the average of the annual distributions on such common 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 as gain, described immediately above. Certain elections may be available that would result in alternative treatments (such as mark-to-market treatment) of ordinary shares. We do not intendabove with respect to provide information necessary for U.S. Holders to make qualified electing fund elections if, contrary to our expectation,gain on disposition.
If we are classifieda PFIC for any fiscal year during which any of our non-U.S. subsidiaries is also a PFIC, a U.S. Holder of our common shares during such year will be treated as owning a PFIC.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 determine whether any of these electionsour subsidiaries. Alternatively, if we are a PFIC and if our common 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 common shares would be available and if so, what the consequencestreated as "regularly traded" in any calendar year in which more than a de minimis quantity of the alternative treatmentscommon shares are traded on a qualified exchange on at least 15 days during each calendar quarter. NASDAQ is a qualified exchange for this purpose. Additionally, because a mark-to-market election cannot be made for equity interests in any lower-tier PFIC that we may own, a U.S. Holder that makes a mark-to-market election with respect to us may continue to be subject to the PFIC rules with respect to any indirect investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. If a U.S. Holder makes the mark-to-market election, the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of the common 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 common 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 common shares will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition of our common 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 common 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 common shares while we are determined to be a PFIC, theprovided 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, tax treatment for a QEF election is effective only if we make available certain required information.
48
U.S. Holders described inshould be aware, however, that we are not required to make this paragraph would apply to indirect distributionsinformation available and gains deemed tohave not yet determined whether we can or will do so for our fiscal year ending March 31, 2018 or for any other fiscal year. The QEF election is made on a shareholder-by-shareholder basis and generally may be realized byrevoked 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 of any of our subsidiaries that also may be determined to be PFICs.
If a U.S. Holder owns ordinaryour common shares during any year in which the Company iswe 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 the Company,us, generally with the U.S. Holder'sHolder’s federal income tax return for that year. If the Company were classified aswe are a PFIC for a given taxable year, then holdersyou should consult theiryour tax advisersadvisor concerning theiryour annual filing requirements.
The U.S. federal income tax rules relating to PFICs are complex. U.S. Holders should consult their tax advisers regarding whether we are a PFIC and the potential application of the PFIC rules.
Non-U.S. Holders
If you are not a U.S. Holder, you are a “Non-U.S. Holder.”
Distributions on Our Common Shares
You generally will not be subject to U.S. federal income tax, including withholding tax, on distributions made on our common 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 itsbe subject to U.S. federal income and gainstax on a net income basis in respect of its investmentincome from our common shares, such distributions are attributable to a permanent establishment that you maintain in the ordinary shares.
If you meet the two tests above, you generally will be subject to tax in respect of such dividends and proceedsin 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 Common 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 common 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 common shares, such gain is attributable to a permanent establishment maintained by you in the United States), or
·
you are an individual Non-U.S. Holder and are present in the United States for at least 183 days in the taxable year of the sale or other disposition, and certain other conditions exist.
You will be subject to tax in respect of any gain effectively connected with your conduct of a trade or business in the United States generally in the same manner as a U.S. Holder, as described above. Effectively connected gains realized by a non-U.S. corporation may also, under certain circumstances, be subject to an additional “branch profits tax” at a rate of 30 percent or such lower rate as may be specified by an applicable income tax treaty.
Backup Withholding and Information Reporting
Payments, including dividends and proceeds of sales, in respect of our common shares that are made withinin the United States or through certain U.S.-relatedby a United States related financial intermediaries generally areintermediary will be subject to United States information reporting andrules. In addition, such payments may be subject to United States federal backup withholding tax. You will not be subject to backup withholding unless (1) the U.S. Holder isprovided that:
·
you are a corporation or other exempt recipient, or (2) in the case of backup withholding, the U.S. Holder provides a
·
you provide your correct United States federal taxpayer identification number and certifiescertify, under penalties of perjury, that it isyou are not subject to backup withholding.
Amounts withheld under the backup withholding from a payment to a U.S. Holder willrules may be allowed as a creditcredited against a U.S. Holder's U.S.your United States federal income tax, liability and you may entitle such holder toobtain a refund provided thatof any excess amounts withheld under the required information isbackup withholding rules by filing the appropriate claim for refund with the IRS in a timely furnished to the United States Internal Revenue Service.
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.
50
(H) DOCUMENTS ON DISPLAY
We are currently subject to the informational requirements of the Exchange Act applicable to foreign private issuers. We fulfill these requirements by filing annual, quarterly and current reports and other information with the SEC, which you can access using the means described above. As a foreign private issuer, we are exempt from the rules under the Exchange Act relating to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the Securities and Exchange Commission as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we are required to file with the Securities and
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 47 Avenue Road, Suite 200, Toronto, Ontario, Canada, M5R 2G3.
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
A summary of the Company’s risk exposures as it relates to financial instruments are reflected below:
a) Fair value of financial instruments
The Company’s financial assets and liabilities are comprised of cash, amounts receivable, prepaid expenses, and accounts payable and accrued liabilities.
51
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.
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.
The Company’s financial instruments are exposed to certain financial risks: credit risk and liquidity risk.
b) Credit risk other price risk and market risk.
Credit risk is the risk of loss associated with a counter-party’s inability to fulfill its payment obligations. The credit risk is attributable to various financial instruments, as noted below. The credit risk is limited to the carrying value amount carried on the statement of financial position.
a.
Cash- Cash is held with a major international financial institution in Canada and a major law firm in the USA and therefore the risk of loss is minimal.
b.
Other receivable - The Company is not exposed to major credit risk attributable to customers. A significant portion of this amount is prepaid to BPI under a master service agreement.
c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due.
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company’s reputation. The Company holds sufficient cash to satisfy obligations under accounts payable and accruals.
The Company ismonitors its liquidity position regularly to assess whether it has the funds necessary to take care of its operating needs and needs for investing in pre-clinical stage and is requirednew projects. The Company believes that it will require further funding to perform further research andfinance the committed drug development and also fulfilwork apart from meeting its financial obligation of $ 1,750,000 to Its subsidiary, Biohaven to retain its 54% equity in Biohaven.operational needs for the foreseeable future. However, the exact need for additional cash cannot be reasonably ascertained at this stage. The Company has not yet determined whether costs incurredalready initiated actions to secure further funds through equity financing at its subsidiary level and to be incurred are economically recoverable. The Company's continuing operations are dependent upon any one of:
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
Not applicable.
None.
None
Disclosure Controls and Procedures
The Company’s disclosure controls and procedures, (asas such term is defined in Rules 13a-15(e)13(a)-13(e) and 15(d)-15(e) of the Exchange Act) asAct are designed to provide reasonable assurance that all relevant information is communicated to senior management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of March 31, 2014 covered byour management, including our CEO and CFO. Based on this annual report. Our management hasevaluation these officers concluded that our disclosure controls and procedures as of the end of the Year ended March 31, 2014period covered by this Annual Report on Form 20-F, our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
The management of the Company, including the CEO and CFO, is responsible for establishing and maintaining adequate internal controlcontrols over financial reporting as such term is(as defined in RulesRule 13a-15(f) and 15d-15(f) under the Exchange Act. OurAct). The Company’s internal control over financial reporting is a processsystem was designed to provide reasonable assurance to the Company’s management and the board of directors regarding the reliability of financial reporting and the preparation and fair presentation of consolidatedpublished financial statements for external purposes in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), and interpretations of the International Financial Reporting Interpretations Committee.IFRS. Internal control over financial reporting includes those policies and procedures that (1) that:
1.
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of a company’sthe assets (2) of the Company;
2.
provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles,IFRS, and that a company’s receipts and expenditures of the Company are being made only in accordance with authorizations of a company’s management and directors of the Company; and (3)
3.
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’sthe Company’s assets that could have a material effect on the consolidated financial statements.
All internal control over financial reportingsystems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation, andpresentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projectionsProjections 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 andor procedures may deteriorate.
Under the supervision and with the participation of our management, including our CEO, CFO and Chairman, we conducted an evaluation of the effectivenessdesign and operation of internal control over financial reporting as of March 31, 2017, based on the framework set forth in Internal Control —– Integrated Framework,(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission , or COSO. Based on this evaluation, management concluded that internal control over financial reporting was effective as of March 31, 2014 based on criteria in Internal Control — Integrated Framework (1992) issued by the COSO.
The CEO has instituted a system of disclosure controls for the Company to ensure proper and complete disclosure of material information. The limited number of consultants and direct involvement of the CEO and CFO facilitates access to real time information about developments in the business for drafting disclosure documents. All documents are circulated to the board of directors and audit committee according to the disclosure time-lines.
However, we have no accounting support staff to ensure segregation of duties and CFO handles all accounting, banking and treasury functions under direct supervision from the chairman and CEO. Based on this evaluation, management concluded that the Company’s ICFR was not effective as at March 31, 2016 due to the following material weakness:
Due to the limited number of staff with an appropriate level of technical accounting knowledge, experience and training and the inability to attract outside expert advice on a cost effective basis, there is a risk of material misstatements related to the accounting and reporting for complex transactions. This control deficiency creates a reasonable possibility that a material misstatement of the annual financial statements would not have been prevented or detected in a timely manner.
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
Changes in Internal Controls
There have been no changes in the Company's internal controls identified in connection with the evaluation described in the preceding paragraph that occurred during the period here was a lackcovered by this Annual Report on Form 20-F which have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.
54
No remediation activities have been undertaken to date in fiscal 2017. Due to resource constraints and the present stage of segregationthe Company’s development the Company does not have sufficient size and scale to warrant the hiring of duties since Chief executive and financial officer handled accounting records and was also a sole signatoryadditional staff to bank accounts. However, effective June 4, 2013, we appointed a new CEO and segregated management functions between the CEO and CFO. Further, we also introduced dual signatories to all our bank accounts and independent review of bank reconciliations and other related controls. Our audit committee – now known as audit and compensation committee - now comprise three members two of whom are independent.
The Board of Directors has determined that Mr. James MellonSteven Mintz, who is an independent director, is an audit committee financial expert as such term is defined in Rule 10A-3(b)(1) under the Exchange Act .
We have adopted a Code of Ethics, which applies to all employees, consultants, officers and directors. A copy of our current code of ethics iswas included in the exhibits to thisthe fiscal 2014 annual report .
A copy of our Code of Ethics can be obtained by writing to our corporate office at 47 Avenue Road, Suite 200, Toronto, ON M5R 2G3 attention: Chief Financial Officer.
During the most recently completed fiscal year, the Company has neither: (a) amended its Code of Ethics; nor (b) granted any waiver (including any implicit waiver) form any provision of its Code of Ethics.
ITEM 16 (C) PRINCIPAL ACCOUNTANT’S FEES AND SERVICES
The following outlines the expenditures for accounting fees for the last two fiscal periods ended:
| March 31, | 2014 | 2013 |
| Audit fee | $45,000 | - |
| Other services | 2,413 | - |
March 31, | 2017 | 2016 |
|
|
|
Audit fee | $64,000 | 42,779 |
Other services | -- | 1,387 |
Under our existing policies, the audit committee must approve all audit and non-audit related services provided by the auditors.
Not applicable.
We did not, nor did any affiliated purchaser, purchase any of our equity securities during the fiscal year 2013.
Not applicable.
Our securities are listed on the OTC QB and on Canadian Securities Exchange. There are no significant ways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of that exchange except for proxy delivery requirements. 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 Act. The Company solicits proxies in accordance with applicable rules and regulations in British Virgin Islands and requirements of Ontario Securities Commission and applicable CSE rules.
Refer to Item 18 - Financial Statements
See the Financial Statements and Exhibits listed in Item 19 hereof and filed as part of this Annual Report.
(a) Financial Statements
Description of Document | Page No. |
Cover Sheet | |
Index | F1 |
Report of Independent Registered Public Accounting Firm | F2-3 |
Consolidated Statements of Financial Position | F4 |
Consolidated Statements of Operations and Comprehensive Loss | F5 |
Consolidated Statement of Shareholders Equity | F6 |
Consolidated Statements of Cash Flows | F7 |
Notes to Consolidated Financial Statements | |
F8-29 |
(b) Exhibits
The following documents are filed as part of this Annual Report on Form 20-F
1.1 | Certificate of Continuance - Incorporated herein by reference to Exhibit 3.1 to Form 6-K filed on August 1, 2013. |
1.2 | Memorandum and Articles of |
4(c) (iv).1 | 2017 Consultant stock compensation plan - |
4(c) (iv) | 2011 Consultant stock compensation plan - Incorporated herein by reference to Form S-8 filed on April 21, 2011. |
4(c) (iv) | 2013 Stock option plan - Incorporated herein by reference to Form S-8 filed on December 19, 2013. |
4(c) (iv).4 | 2013 option plan - Incorporated herein by reference to Form S-8 filed on March 17, 2015. |
11.1 | Charter of audit and compensation committee regarding compensation matters - Incorporated herein by reference to Form F-20 filed on July 17, 2014. |
11.2 | Charter of audit and compensation committee regarding audit matters - Incorporated herein by reference to Form F-20 filed on July 17, 2014. |
11.3 | Code of conduct - Incorporated herein by reference to Form F-20 filed on July 17, 2014. |
12.1 | Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended. |
12.2 | Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended. |
13.1 | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
13.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
The Company hereby certifies that it meets all of the requirements for filing on Form 20-F and it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
DATED at Toronto, Ontario, Canada, this 25th27h day of July, 2014
PORTAGE BIOTECH INC.
Per: /s//s/ Declan Doogan
Title: Chief Executive Officer
Per: /s//s/ Kam Shah
Title: Chief Financial Officer
Portage Biotech Inc.
Consolidated Financial Statements
For the Years Ended March 31, 2017 and 2016
(US Dollars)
Portage Biotech Inc.
Consolidated Financial Statements
For the Years Ended March 31, 2017 and 2016
(US Dollars)
Index | pages |
Independent Auditor’s Report of Registered Public Accounting Firm | 2-3 |
Consolidated Statements of Financial Position | 4 |
Consolidated Statements of Operations and Comprehensive Loss | 5 |
Consolidated Statements of Changes in Shareholders’ Equity | 6 |
Consolidated Statements of Cash Flows | 7 |
Notes to Consolidated Financial Statements | 8-26 |
Schwartz Levitsky Feldman llp CHARTERED ACCOUNTANTS LICENSED PUBLIC ACCOUNTANTS TORONTO • MONTREAL |
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INDEPENDENT AUDITOR’S REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Portage Biotech Inc.
We have audited the accompanying consolidated financial statements of Portage Biotech Inc., which comprise the consolidated statements of financial position as at March 31, 2017 and March 31, 2016, and the consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity and cash flows for the years ended March 31, 2017, 2016 and 2015 and a summary of significant accounting policies and other explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Portage Biotech Inc. as at March 31, 2017 and March 31, 2016, and its financial performance and its cash flows for the years ended March 31, 2017, 2016 and 2015 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ SCHWARTZ LEVITSKY FELDMAN LLP
July 27, 2017 Chartered Accountants | |
Toronto, Ontario | Licensed Public Accountants |
2300 Yonge Street, Suite 1500, Box 2434 Toronto, Ontario M4P 1E4 Tel: 416 785 5353 Fax: 416 785 5663 |
F-3
Portage Biotech Inc.
Consolidated Statements of Financial Position
(US Dollars)
As at March 31, |
| 2017 | 2016 |
Assets |
|
|
|
Current |
|
|
|
Cash |
| $159,377 | $4,688,929 |
Prepaid expenses and other receivable | 4 | 64,141 | 203,940 |
Investment, available for sale | 6 | 58,912,535 | - |
|
| $59,136,053 | $4,892,869 |
Long-term assets |
|
|
|
Long term portion of other receivable | 4 | 67,500 |
|
Investment | 5 | 700,000 | 700,000 |
Intangible assets |
| - | 4,035,973 |
Goodwill |
| - | 3,000,000 |
Total assets |
| $59,903,553 | $12,628,842 |
Liabilities and Shareholders' equity |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued liabilities |
| 109,061 | 299,740 |
|
| $109,061 | $299,740 |
|
|
|
|
Non-current liabilities |
|
|
|
Unsecured notes payable | 7 | 180,815 | - |
Warrant liability | 7 | 19,550 | - |
|
| 200,365 | - |
Total liabilities |
| $309,426 | $ 299,740 |
|
|
|
|
Shareholders' Equity |
|
|
|
Capital stock | 8 | 18,360,197 | 17,055,197 |
Stock option reserve | 9 | 1,705,465 | 5,075,853 |
Warrants | 10 | - | 2,755,973 |
Accumulated other comprehensive loss | 6 | 24,546,993 |
|
Retained earnings (deficit) |
| 14,981,472 | (14,617,652) |
Total Shareholders' equity |
| $59,594,127 | $10,269,371 |
Non-controlling interests |
| $ - | $2,059,731 |
Total equity |
| 59,594,127 | 12,329,102 |
Total liabilities and Shareholders' equity |
| $59,903,553 | $12,628,842 |
Commitments and Contingent Liabilities (Note 12)
Related Party Transactions (Note 14)
On behalf of the Board | ”Kam Shah” Director | “Declan Doogan” Director |
(signed) | (signed) |
The accompanying notes are an integral part of these consolidated financial statements.
Portage Biotech Inc.
Consolidated Statements of Operations and Comprehensive Loss
(US Dollars)
Year ended March 31, | Note | 2017 | 2016 | 2015 |
|
|
|
|
|
Expenses |
|
|
|
|
Research and development |
| 32,449,945 | 4,577,136 | 2,928,639 |
Consulting fees | 13,14(ii) | 1,922,735 | 4,014,260 | 1,072,700 |
Professional fees |
| 633,990 | 501,273 | 224,033 |
Other operating costs | 14(i) | 484,519 | 95,336 | 91,686 |
Bank charges and interest |
| 552,422 | 7,384 | 20,036 |
Impairment of office furniture and equipment |
| - | - | 4,122 |
|
| 36,043,611 | 9,195,389 | 4,341,216 |
Gain on investment at date of loss of control of subsidiary | 6 | (49,863,542) | - | - |
Share of losses in associate | 6 | 14,461,205 |
| - |
|
|
|
|
|
Net loss |
| $(641,274) | $(9,195,389) | $(4,341,216) |
Other comprehensive income |
|
|
|
|
Unrealized gain on Investment, available for sale |
| (24,546,993) | $ - | $ - |
Total comprehensive Profit (loss) for year |
| $23,905,719 | $(9,195,389) | $(4,341,216) |
Net profit (loss) attributable to: |
|
|
|
|
Owners of the Company |
| 16,298,662 | (5,706,189) | (3,118,431) |
Non-controlling interest |
| (16,939,936) | (3,489,200) | (1,222,785) |
|
| $(641,274) | $(9,195,389) | $(4,341,216) |
Net comprehensive Profit (loss) attributable to: |
|
|
|
|
Owners of the Company |
| 40,845,655 | (5,706,189) | (3,118,431) |
Non-controlling interest |
| (16,939,936) | (3,489,200) | (1,222,785) |
|
| $23,905,719 | $(9,195,389) | $(4,341,216) |
Basic and diluted earnings (loss) per share |
|
|
|
|
Basic | 11 | $0.06 | $(0.02) | $(0.02) |
Diluted | 11 | $0.06 | $(0.02) | $(0.02) |
The accompanying notes are an integral part of these consolidated financial statements.
Portage Biotech Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Year ended March 31, 2017
(US Dollars)
| Number of Shares | Capital Stock | Stock Option Reserve | Warrants | Accumulated other comprehensive income | Retained earnings (accumulated Deficit) | Non- controlling interest | Total Equity |
Balance, April 1, 2014 | 180,775,790 | $7,256,715 | $ 362,440 | $1,108,402 | $ - | $(6,334,433) | $2,678,317 | $5,071,441 |
Options vested |
|
| 238,221 |
|
|
|
| 238,221 |
Options of subsidiary vested |
|
| 711,858 |
|
|
|
| 711,858 |
Conversion of debts and coupons | 3,500,001 | 315,000 |
|
|
|
|
| 315,000 |
Issued under private placement | 20,000,000 | 2,000,000 |
|
|
|
|
| 2,000,000 |
Commitment fee settled in shares | 1,000,000 | 100,000 |
|
|
|
|
| 100,000 |
Private placement underwriting costs | - | (100,000) |
|
|
|
|
| (100,000) |
Value of shares issued as compensation | 1,500,000 | 120,000 |
|
|
|
|
| 120,000 |
Net loss for year |
|
|
|
|
| (3,118,431) | (1,222,785) | (4,341,216) |
Balance, March 31, 2015 | 206,775,791 | $9,691,715 | $1,312,519 | $1,108,402 | $ - | $(9,452,864) | $1,455,532 | $4,115,304 |
Issued under private placement | 43,488,670 | 6,155,080 |
|
|
|
| - | 6,155,080 |
Private placement finder’s fee |
| (307,754) |
|
|
|
|
| (307,754) |
Finder’s fee settled in shares | 2,174,433 | 307,754 |
|
|
|
|
| 307,754 |
Value of shares issued as compensation | 1,000,000 | 100,000 |
|
|
|
|
| 100,000 |
shares and warrants issued by Biohaven to acquire intangible assets |
|
|
| $2,755,973 |
|
| 280,000 | 3,035,973 |
Options vested |
|
| 3,763,334 |
|
|
|
| 3,763,334 |
Transfer of carrying cost on expiration of warrants |
| 1,108,402 |
| (1,108,402) |
|
|
| - |
Shares issued |
|
|
|
|
| 541,401 | 3,813,399 | 4,354,800 |
Net loss for year |
|
|
|
|
| (5,706,189) | (3,489,200) | (9,195,389) |
Balance, March 31, 2016 | 253,438,894 | $17,055,197 | $5,075,853 | $2,755,973 | $ - | (14,617,652) | $2,059,731 | $12,329,102 |
Options vested |
|
| 403,794 |
|
|
|
| 403,794 |
Value of shares issued as compensation | 7,250,000 | 1,305,000 |
|
|
|
|
| 1,305,000 |
unrealized gain on investment, available for sale |
|
|
|
| 24,546,993 |
|
| 24,546,993 |
Loss of control of subsidiary | - | - | (3,774,182) | (2,755,973) |
| 13,300,462 | 14,880,205 | 21,650,512 |
Net income (loss) for year |
|
|
|
|
| 16,298,662 | (16,939,936) | (641,274) |
Balance, March 31, 2017 | 260,688,894 | $18,360,197 | $1,705,465 | $ - | $24,546,993 | $14,981,472 | $ - | $59,594,127 |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Portage Biotech Inc.
Consolidated Statements of Cash Flows
(US Dollars)
For the year ended March 31, | 2017 | 2016 | 2015 |
Cash flows from operating activities |
|
|
|
Net loss for year | $(641,274) | $(9,195,389) | $(4,341,216) |
Adjustments for non-cash items: |
|
|
|
Value of shares and options expensed as consulting fee | 1,696,927 | 3,810,260 | 876,221 |
Increase in warrant liability charged to interest | 365 | - |
|
Impairment of office furniture and equipment | - | - | 4,122 |
Gain on investment at date of loss of control of subsidiary | (49,863,542) | - |
|
Share of losses in associate | 14,461,205 |
|
|
Value of options expensed as research and development | 11,867 | 53,074 | 136,632 |
Subsidiary’s expenses to date of deconsolidation | 33,064,238 |
|
|
Interest settled in shares | - | - | 15,000 |
Net change in working capital components |
|
|
|
Prepaid expenses and other receivable | 139,799 | (186,365) | 209,658 |
Accounts payable and accrued liabilities | (190,679) | (320,820) | 485,814 |
| (1,321,094) | (5,839,240) | (2,613,769) |
Cash flows into investing activities |
|
|
|
Acquisition of intangible by Biohaven | - | (1,000,000) | - |
Disposal of cash on deconsolidation | (3,408,458) |
|
|
Investment | - | (700,000) | - |
| (3,408,458) | (1,700,000) | - |
Cash flows from financing activities |
|
|
|
Shares issued under private placement | - | 6,155,080 | 2,300,000 |
Unsecured notes payable | 200,000 | - |
|
Shares issued by a subsidiary | - | 4,354,800 |
|
| $200,000 | $10,509,880 | 2,300,000 |
(Decrease) Increase in cash during year | (4,529,552) | 2,970,640 | (313,769) |
Cash at beginning of year | 4,688,929 | 1,718,289 | 2,032,058 |
Cash at end of year | $159,377 | $4,688,929 | 1,718,289 |
Supplemental disclosures |
|
|
|
Non-cash investing activities |
|
|
|
Shares and warrants issued by subsidiary towards acquisition of intangible assets | - | (3,035,973) | - |
| - | (3,035,973) | - |
Non-cash financing activities |
|
|
|
Shares issued in settlement of finders’ fees |
| (307,754) | - |
|
| (307,754) | - |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Portage Biotech Inc.
Notes to Consolidated Financial Statements
(US Dollars)
March 31, 2016 and 2015
1. NATURE OF OPERATIONS AND GOING CONCERN
Portage Biotech Inc. (“the Company”) is incorporated in the British Virgin Islands (“BVI”) with its registered office located at FH Chambers, P.O. Box 4649, Road Town, Tortola, BVI. Its Toronto agent, Portage Services Ltd., is located at 47 Avenue Road, Suite 200, Toronto, Ontario, M5R 2G3, Canada.
The Company is a reporting issuer with the Ontario Securities Commission and US Securities and Exchange Commission and its shares trade on the OTC Markets under the trading symbol “PTGEF,” and are also listed for trading in US currency on the Canadian Securities Exchange under the symbol “PBT.U”.
The Company is engaged in researching and developing pharmaceutical and biotech products through to clinical “proof of concept” with an initial focus on unmet clinical needs. Following proof of concept, the Company will look to sell or license the products to large pharmaceutical companies for further development and commercialization.
On October 18, 2016, a significant ownership dilution of the Company’s investment in a subsidiary, Biohaven, occurred following the introduction of two major third party investors who agreed to finance Biohaven’s future research and development activities in exchange for shares. As a result, the Company reassessed its ability to control Biohaven and concluded that it had lost control of the subsidiary. On February 17, 2017, following the resignation of one of the Company’s representatives on Biohaven’s Board, the Company further concluded it was unable to exert significant influence over Biohaven. See Notes 2(b) and 6.
The Company’s subsidiaries are in the pre-clinical stage, and as such no revenue has been generated from their operations. The Company has negative cash flows from operating activities of approximately $5 million during the year ended March 31, 2017.
Management has secured sufficient financing which it believes will enable it to meet its operating commitments. However, it will require additional resources to continue into clinical trials and/or for additional acquisitions. The Company has subsequent to the balance sheet date secured further financing (note18) and also believes that it can also raise necessary financing by divesting some of its existing investment in the securities of a publicly traded entity once they are free of trading restrictions. The Company believes that these available resources will be sufficient to meet its cash requirements for its operational, portfolio expansion through strategic acquisitions and research and development activities.
2. BASIS OF PRESENTATION
(a) Statement of Compliance and Basis of presentation
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), and interpretations of the International Financial Reporting Interpretations Committee.
F-8
2. BASIS OF PRESENTATION (cont’d)
These consolidated financial statements have been prepared on a historical cost basis except for items disclosed herein at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
The Company has only one material operating segment.
These consolidated financial statements were approved and authorized for issue by the Audit Committee and Board of Directors on July 27, 2017.
(b) Consolidation
The consolidated financial statements include the accounts of the Company and,
a.
Portage Services Ltd., a wholly owned subsidiary incorporated in Ontario on January 31, 2011.
b.
Portage Pharmaceuticals Ltd. (“PPL”) a wholly owned subsidiary resulting from a merger on July 23, 2013 and is incorporated under the laws of the British Virgin Islands, as a BVI business company.
c.
EyGen Limited, (“EyGen”)which is a wholly owned subsidiary of PPL, was incorporated on September 20, 2016 under the laws of the BVI.
d.
Biohaven Pharmaceutical Holding Company Limited (“Biohaven”), a private corporation incorporated in BVI on September 25, 2013. Biohaven financials were consolidated for the period from April 1, 2016 to September 30, 2016 and continued to be accounted on an equity basis until February 15, 2017. However, on February 15, 2017, the Company lost significant influence and as a result accounted for its investment in Biohaven at a fair value as explained in Note 6.
All inter-company balances and transactions have been eliminated on consolidation.
(c) Functional and presentation currency
The Company’s functional and presentation currency is US Dollar.
(d) Use of Estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Significant areas where estimation uncertainty and critical judgments are applied include valuation of financial instruments, research and development costs, fair value used for acquisition, assessment of impairment in goodwill and other intangible assets and measurement of share- based compensation, in the current and prior years.
F-9
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, which have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
Financial instruments
Financial assets
All financial assets are initially recorded at fair value and are designated upon inception into one of the following four categories: held-to-maturity, available-for-sale, loans and receivables or at fair value through profit or loss (“FVTPL”).
Financial assets classified as FVTPL are measured at fair value with unrealized gains and losses recognized through earnings. The Company’s cash is classified as FVTPL.
Financial assets classified as loans and receivables are measured at amortized cost using the effective interest method. The Company’s advances and other receivables are classified as loans and receivables, investment is classified as available for sale.
Transactions costs associated with FVTPL financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.
Financial liabilities
All financial liabilities are initially recorded at fair value and designated upon inception as FVTPL or other financial liabilities.
Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest method. The Company’s trade and other payables are classified as other financial liabilities.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Warrant liability and note payable
The loan notes issued by PPL and EyGen have warrants attached to them which are convertible into common shares of PPL and EyGen respectively. Accordingly, at inception the warrant part is treated as an embedded derivative and recorded at fair value as a financial liability and the face value of the Loan note as a whole less the value of the warrant is recorded as a note payable.
At subsequent balance sheet dates the fair value of the warrant is remeasured with movements in the fair value being recorded in the income statement. The loan element is recorded at amortized cost and is subject to a notional interest charge in each reporting period which is recorded in the income statement.
F-10
3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Impairment of financial assets
The Company assesses at each date of the statement of financial position whether a financial asset is impaired.
If there is objective evidence that an impairment loss on assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is then reduced by the amount of the impairment. The amount of the loss is recognized in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed to the extent that the carrying value of the asset does not exceed what the amortized cost would have been had the impairment not been recognized. Any subsequent reversal of an impairment loss is reversed through profit or loss.
Foreign currency translation
The functional and presentation currency of the Company and its subsidiaries (note 2(c)) is the US dollar. Monetary assets and liabilities are translated at exchange rates in effect at the balance sheet date. Non-monetary assets are translated at exchange rates in effect when they were acquired. Revenue and expenses are translated at the approximate average rate of exchange for the period. Foreign currency differences arising on retranslation are recognised in profit or loss.
Share-based payments
The Company accounts for share-based payments granted to directors, officers, employees and consultants using the Black-Scholes option-pricing model to determine the fair value of the plan at the grant date. Share-based payments to employees, officers and directors are recorded and reflected as an expense over the vesting period with a corresponding amount reflected in stock option reserve. On exercise, the associated amounts previously recorded in the stock option reserve are transferred to the common share capital.
The quoted market price of the Company’s shares on the date of issuance under any share- based plan is considered as fair value of the shares issued.
Share-based payments to non-employees are recognized and measured at the date the services are received based on the fair value of the services received unless if the fair value of the services cannot be reliably measured in which case it is based on the fair value of equity instruments issued using the Black-Scholes option pricing model.
Accounting for equity units
When the Company issues Units under a private placement comprising of common shares and warrants, the Company follows the relative fair value method of accounting for warrants attached to and issued with common shares of the Company. Under this method, the fair value of warrants issued is estimated using a Black-Scholes option pricing model which is added to fair value of the common shares determined using the stock price at the date of issuance and the percentage relative to the fair values determined. The fair value of the common shares and the warrants are proportionately adjusted to the net proceeds received.
F-11
3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Loss per Share
Basic loss per share is calculated by dividing net loss (the numerator) by the weighted average number of common shares outstanding (the denominator) during the period. Diluted loss per share reflects the dilution that would occur if outstanding stock options and share purchase warrants were exercised or converted into common shares using the treasury stock method and are calculated by dividing net loss applicable to common shares by the sum of the weighted average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued.
The inclusion of the Company’s stock options and share purchase warrants in the computation of diluted loss per share would have an anti-dilutive effect on loss per share and are therefore excluded from the computation. Consequently, there is no difference between basic loss per share and diluted loss per share.
Investment
The investment is comprised of shares of a private company that have been acquired through a private placement. The investment is initially recorded at fair value. Following acquisition, the Company evaluates whether control or significant influence is exerted by the Company over the affairs of the investee company. Based on the evaluation, the Company accounts for the investment using either the consolidation, equity accounting or fair value method. The Company evaluates the investment each reporting period for evidence of impairment and adjusts the carrying value accordingly (see notes 1 and 6).
Research and Development Expenses
(i)
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. No development costs have been capitalized to date.
Research and development expenses include all direct and indirect operating expenses supporting the products in development.
(ii)
Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized in profit or loss as incurred.
F-12
3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(iii)
Clinical trial expenses:
Clinical trial expenses are a component of the Company’s research and development costs. These expenses include fees paid to contract research organizations, clinical sites, and other organizations who conduct development activities on the Company’s behalf. The amount of clinical trial expenses recognized in a period related to clinical agreements are based on estimates of the work performed using an accrual basis of accounting. These estimates incorporate factors such as patient enrolment, services provided, contractual terms, and prior experience with similar contracts
Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.
Contingent liability:
A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not within the control of the Corporation; or a present obligation that arises from past events (and therefore exists), but is not recognized because it is not probable that a transfer or use of assets, provision of services or any other transfer of economic benefits will be required to settle the obligation; or the amount of the obligation cannot be estimated reliably.
Determination of fair value
A number of the Company’s accounting policies and disclosures required the determination of fair value, both for financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
The fair value of prepaid expenses and receivable and accounts payable and accruals are equivalent to their carrying amounts due to the short term nature of these items.
Income Tax
The Company is a British Virgin Island corporation. The Government of British Virgin Islands does not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon the Company or its security holders. The British Virgin Islands is not party to any double taxation treaties.
F-13
3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
New standards and interpretations not yet adopted
Standards issued but not yet effective up to the date of issuance of the Company‘s consolidated financial statements are listed below. This listing is of standards and interpretations issued which the Company reasonably expects to be applicable at a future date. The Company intends to adopt those standards when they become effective.
IAS 7 - Statement of Cash Flows
In February 2016, IASB published amendments of limited scope to IAS 7 - Statement of Cash Flows to require that companies provide information concerning changes in their financing liabilities. The amendments will apply prospectively to fiscal years beginning on or after January 1, 2017. Earlier application is permitted. These standards will have no material impact on the Company’s financial statements.
IFRS 9 ‐ Financial Instruments
The IASB intends to replace IAS 39, Financial Instruments: Recognition and Measurements, with IFRS 9, Financial Instruments. IFRS 9 will be published in six phases, of which the first phase has been published.
For financial assets, IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, and replaces the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used. For financial liabilities, the approach to the fair value option may require different accounting for changes to the fair value of a financial liability as a result of changes to an entity’s own credit risk.
IFRS 9 (2014) is effective for the Company for annual periods beginning on April 1, 2018, but is available for early adoption. The Company has yet to assess the full impact of IFRS 9.
IAS 12 - Income Taxes
In January 2016, IASB published amendments to IAS 12 - Income Taxes on the accounting of deferred tax assets relating to unrealized losses. Essentially, these amendments aim to clarify when a deferred tax asset should be recognized regarding an unrealized loss. These amendments will apply to the financial statements of fiscal years beginning on or after January 1, 2017. These amendments will have no impact on the Company’s financial statements.
F-14
3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
IFRS 15, Revenue from Contracts with Customers
IFRS 15, issued by the IASB in May 2014, is applicable to all revenue contracts and provides a model for the recognition and measurement of gains or losses from sales of some non-financial assets. The core principle is that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. IFRS 15 is effective for annual periods beginning on or after January 1, 2018, and is to be applied retrospectively, with earlier adoption permitted. Entities will transition following either a full or modified retrospective approach. The Company does not believe that the above standard will have any impact on its financial statements.
IFRS 16, Leases
In January 2016, the IASB issued IFRS 16 which requires lessees to recognize assets and liabilities for most leases. Lessees will have a single accounting model for all leases, with certain exemptions. The new standard is effective January 1, 2019, with limited early application permitted. The new standard permits lessees to use either a full retrospective or a modified retrospective approach on transition for leases existing at the date of transition, with options to use certain transition reliefs. The Company does not believe that the above standard will have any impact on its financial statements.
IFRS 2, Share-based payments
In June 2016, the IASB issued amendments to IFRS 2 to clarify the classification and measurement of share-based payment transactions. The IFRS 2 is effective for annual periods beginning on or after January 1, 2018. The Company does not believe that the above standard will have any impact on its financial statements.
IFRIC 22, Foreign currency transactions and advance consideration
In December 2016, IFRIC issued an amendment to IFRIC 22 clarifying the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. IFRIC 22 is effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted. The Company does not believe that the above standard will have any impact on its financial statements.
4. PREPAID EXPENSES AND OTHER RECEIVABLE
| 2017 | 2016 |
Prepaid expenses | 47,693 | 199,157 |
Other receivable (i) | 16,448 | 4,783 |
| $64,141 | $203,940 |
(i)
The Company’s wholly-owned subsidiary, PPL agreed to a settlement on October 19, 2016 with a supplier in respect of a claim made by PPL against the said supplier. As per the terms of this agreement, supplier agreed to pay a total of $ 120,000 to PPL, of which $41,250 was received during the year ended March 31, 2017 and balance payable in seven annual instalments of $ 11,250 starting from January 3, 2018.
Accordingly, $11,250 was classified as prepaid expenses and other receivable under current assets and the balance of $67,500 classified as long term assets.
5. INVESTMENT
In August 2015, the Company acquired 210,210 Series A preferred stock in Sentien Biotechnologies Inc., a Medford, MA based private company (“Sentien”) for $ 700,000 in cash. The preferred stock is fully convertible into equal number of common shares. The Company’s holdings represent 6.9% of the equity of Sentien on a fully diluted basis. The Company has determined that it has no significant control or influence over the affairs of Sentien and has therefore accounted for this investment at cost since these shares do not have a quoted price in an active market and the fair value cannot be reliably measured. Sentien raised $12 million in April 2017 and commenced its Phase /12 clinical trial in June 2017 of its lead product SBI-101, a cell-containing dialysis device for the treatment of Acute Kidney Injury.
As at March 31, 2017, the Company has determined that there was no evidence of any impairment in the value of this investment and as a result no adjustment was considered necessary in its carrying value.
6. INVESTMENT, AVAILABLE FOR SALE
The Company held 52.85% of the issued outstanding shares of Biohaven as at March 31, 2016 and through a majority representation on Biohaven’s Board, exercised control over the subsidiary. Accordingly, Biohaven was consolidated in accordance with IFRS 10. In May, June and July 2016, Biohaven raised additional financing in which the Company did not participate. This equity raise resulted in the Company’s ownership interest being diluted to 48.45%. While the Company’s shareholding in Biohaven was below 50%, management considered other factors including the representation on the board and concluded that it still had control and therefore consolidated Biohaven results and financial position as a subsidiary for the period from April 1, 2016 to September 30, 2016.
In October 2016, Biohaven secured an $80 million equity funding commitment from third party investors. The first tranche of the financing, in the amount of $40 million, closed in October 2016, after which the Company’s ownership in Biohaven declined to 35.16% of Biohaven’s outstanding capital stock. The second tranche of the financing, in the amount of $40 million, closed in February 2017. Thus, with the presence of more significant third-party investment and potential future changes to the board structure, it was considered most likely that the Company’s substantive position was moving away from control to significant influence. The Company therefore concluded that Biohaven ceased to be its subsidiary effective October 1, 2016 and recognized it as a disposal of the subsidiary and investment in associate as per IFRS 10 and IAS 28.
As an associate, Company’s investment in Biohaven was accounted for on an equity basis until February 15, 2017. The equity basis accounting involved taking that portion of Biohaven net income or loss proportionate to the Company’s equity interest in Biohaven for the period from October 1, 2016 to February 15, 2017. Total loss of Biohaven for the period from October 1, 2016 to February 15, 2017 as per Biohaven’s financial statements for the said period, prepared in accordance with IFRS, as adjusted by the Company for the equity accounting purposes, was $37,712,760.
On February 15, 2017, several factors led the Company to conclude that it no longer had significant influence over Biohaven.
Therefore the Company accounted for its investment in Biohaven as a financial asset classified as “available-for-sale” effective February 15, 2017 and stated at a fair value as at March 31, 2017 based on the price of the last available third-party financing by Biohaven.
6. INVESTMENT, AVAILABLE FOR SALE (cont’d)
The accounting effects of the above changes included in these consolidated financial statements are as follows:
| $ | $ |
Fair value of retained investment in former subsidiary, at 48.45% of the fair value of Biohaven based on the price of the last financing by Biohaven prior to September 30, 2016 |
| 48,826,747 |
Add: The carrying amount of former subsidiary: |
|
|
Biohaven Liabilities net of assets and goodwill consolidated at September 30, 2016 |
|
|
Net of non-controlling interest at September 30, 2016 |
| 1,036,794 |
Net gain on restating interest in associate at fair value charged to income statement |
| 49,863,541 |
Carrying value of investment in Biohaven at October 1, 2016 |
| 48,826,747 |
Equity accounting between October 1, 2016 to February 15, 2017 |
|
|
Share of net loss of Biohaven for October 2016 at 48.45% being the average equity holding in Biohaven | (4,485,764) |
|
Share of net loss of Biohaven for the period from November 1, 2016 to February 15, 2017 at 35.16% being the average equity holding in Biohaven | (9,975,441) | (14,461,205) |
Net carrying value of investment in Biohaven as at February 15, 2017 |
| 34,365,542 |
Gain on revaluation of Investment in Biohaven at fair value at March 31, 2017 charged to accumulated other comprehensive income |
| 24,546,993 |
Investment, available for sale at fair value at March 31, 2017 |
| 58,912,535 |
Since the Company is currently considering divesting this investment by way of disposal or distribution as dividend once its lock up period expires in November 2017, it is classified as current as assets.
7. UNSECURED NOTES PAYABLE
Effective March 7, 2017, the Company completed a private placement of unsecured notes in the aggregate principal amount of $200,000 (the “March 2017 notes”). The notes bear interest at a rate of 7% per annum, payable annually on each anniversary date. The notes were not redeemable by the Company prior to maturity. The notes holders were granted a warrant to subscribe for $7,500 new ordinary shares for every $10,000 of note held, provided that certain qualifying event occurs within the three anniversary years of issuance. The exercise price of the warrant will be based on the price of equity shares determined by the qualifying event and the year in which it takes place. Given that there was an obligation to issue a variable number of shares, the warrant was classified as a financial liability. Accordingly, $180,450 of the face value was ascribed to the note payable component and $19,550 fair value was ascribed to the warrant. The value of note payable component was further increased by $365 to $180,815 as at March 31, 2017 representing the difference between the notional interest at 11% and actual interest at 7% being charged to interest expense.
Fair value was determined by reference to market transactions and similar debt instruments without warrants. The Company did not incur financing costs in connection with this placement of notes.
8. CAPITAL STOCK
(a) Authorized: Unlimited number of common shares
(b) Issued
| As at March 31, | |||
| 2017 | 2016 | ||
| Common |
| Common |
|
| Shares | Amount | Shares | Amount |
Balance, beginning of year | 253,438,894 | $17,055,197 | 206,775,791 | $9,691,715 |
Expired warrants | - | - |
| 1,108,402 |
Issued under private placement (i) | - | - | 43,488,670 | 6,155,080 |
Finder/Commitment fee settled in shares (i) | - | - | 2,174,433 | 307,754 |
Finders fee/Underwriting costs | - | - |
| (307,754) |
Shares issued as compensation ( ii) | 7,250,000 | 1,305,000 | 1,000,000 | 100,000 |
Balance, end of year | 260,688,894 | $18,360,197 | 253,438,894 | $17,055,197 |
(i)
On March 21, 2017, four of the directors were issued 7,250,000 shares under the 2017 Consultants Stock Compensation Plan in lieu of cash fee for services provided. The shares were valued at $1,305,000 based on the market price of the Company’s common shares prevailing on the dates of their issuance. Since the shares were issued without any conditions of forfeiture or cancellation, the entire value was expensed during the year ended March 31, 2017 as consulting fee (note 13).
(ii).a.
On June 24, 2015, the Company completed a private placement comprising non-brokered offering of 36,822,003 restricted common shares at a price of US$0.14 per share for gross proceeds of $5,155,080 to accredited investors. Two directors subscribed approximately 11.4 million shares at a total cost of $1.6 million. The private placement was done in two tranches. First tranche closed on June 15, 2015 and second one closed on June 24, 2015. MediqVentures Ltd., a private corporation owned by two of the directors of the Company and/or its nominees received 5% of the gross proceeds or $257,754 as finder’s fee as per the terms of the consulting agreement with them. The fee was settled by issuance of 1,841,100 restricted common shares valued at US$ 0.14 per common shares.
(ii)b.
On March 31, 2016, the Company completed another private placement comprising non-brokered offering of 6,666,667 restricted common shares at a price of US$ 0.15 per share for gross proceeds of $ 1 million to accredited investors. Two directors of the Company subscribed for all the 6,666,667 million issued shares for $1 million. MediqVentures Ltd., a private corporation owned by two of the directors of the Company and/or its nominees received 5% of the gross proceeds or $50,000 as finder’s fee as per the terms of the consulting agreement with them. The fee was settled by issuance of 333,333 restricted common shares valued at US$ 0.15 per common shares.
(iii)
On February 25, 2016, the Chairman was issued 1,000,000 shares under the 2011 Consultants Compensation Plan in lieu of cash fee for services provided. The shares were valued at $100,000 based on the market price of the Company’s common shares prevailing on the dates of their issuance. Since the shares were issued without any conditions of forfeiture or cancellation, the entire value was expensed during the year ended March 31, 2016 as consulting fee (note 13).
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8. CAPITAL STOCK (Contd.)
(c) As at March 31, 2016, the Company had the following active Consultant Stock Compensation Plan:
| Date of registration* | Registered shares under Plan | Issued to March 31, 2016 | As at April 1, 2016 | Issued | Cancelled | Balance at March 31, 2017 |
2011 Plan | 11-Apr-11 | 6,000,000 | (3,438,333) | 2,561,667 | (1,000,000) | - | 1,561,667 |
2017 Plan | 21-Mar-17 | 7,250,000 | - | 7,250,000 | (7,250,000) |
| - |
|
| 13,250,000 | (4,438,333) | 8,811,667 | (7,250,000) | - | 1,561,667 |
* Registered with the Securities and Exchange Commission of the United States of America (SEC) as required under the Securities Act of 1933.
As at March 31, 2016, the Company had the following active Consultant Stock Compensation Plan:
| Date of registration* | Registered shares under Plan | Issued to March 31, 2015 | As at April 1, 2015 | Issued | Cancelled | Balance at March 31, 2015 |
2011 Plan | 11-Apr-11 | 6,000,000 | (3,438,333) | 2,561,667 | (1,000,000) | - | 1,561,667 |
(d) As required under listing requirements by Canadian Securities Exchange, the Company signed, on October 25, 2013, an escrow agreement with TMX Equity Transfer Services to escrow 88,444,293 of its common shares and 68,724,447 of its warrants issued to four insiders. The escrowed shares and warrants were to be released in agreed tranches over the period of three years. As at March 31, 2017, nil common shares (as at March 31, 2016: 26,533,294 common shares) were still under escrow. All warrants expired in June 2015 and were cancelled.
9. STOCK OPTION RESERVE
(a) The movements during the year were:
| Year ended March 31, | |
| 2017 | 2016 |
|
|
|
Balance, beginning of year | $5,075,853 | $1,312,519 |
Options vested during the year ((i) to (iv)) | 391,927 | 454,078 |
Options to acquire equity in PPL granted to PPL management and vested (v) | 11,867 | 53,074 |
Options to acquire equity in Biohaven granted to Biohaven consultants and directors | - | 3,256,182 |
Options granted by former subsidiary reversed on loss of control | (3,774,182) | - |
Balance, end of year | $1,705,465 | $5,075,853 |
i.
On October 11, 2016, The Board of Directors of the Company approved and issued total of 1,267,194 options to the two independent directors as joining bonus under the 2013 Option Plan. These options are valid for five years and are convertible into equal number of common shares of the Company at an exercise price of $0.15 per common share. These Options will vest in four equal annual instalments starting from October 11, 2017.
F-19
9. STOCK OPTION RESERVE (Contd.)
The fair value of these options has been estimated using a Black-Scholes option pricing
model with the following assumptions:
Risk free interest rate | 1% |
Expected dividend | Nil |
Expected volatility | 65.83% |
Expected life | 1825 days |
Market price on the date of grant | US$0.13 |
The fair value of the options as per the Black-Scholes option pricing model amounted to $85,183. None of the options was vested on March 31, 2017. The value of the options will be accounted upon vesting of the related options as per the accounting policy.
(ii)
On December 19, 2016, The Board of Directors of the Company approved and issued total of 2,300,000 options to five consultants including 350,000 Options to the two independent directors for services provided under the 2013 Option Plan. These options are valid for five years and are convertible into equal number of common shares of the Company at an exercise price of $0.15 per common share. These Options vested in equal monthly instalments over the two years starting from January 1, 2017.
The fair value of these options has been estimated using a Black-Scholes option pricing model with the following assumptions:
Risk free interest rate | 1% |
Expected dividend | Nil |
Expected volatility | 67.42% |
Expected life | 1826 days |
Market price on the private placement | US$0.14 |
The fair value of the options as per the Black-Scholes option pricing model amounted to $175,352. The value of the options vested during the year ended March 31, 2017 of $62,988 was expensed and charged to the stock option reserve.
(iii)
On December 7, 2015 the Board of Directors of the Company approved and on January 21, 2016, issued total of 7,050,000 options to 8 consultants including 5,450,000 options to the four directors under 2013 Option Plan. These options are valid till December 7, 2020 and are convertible into equal number of common shares of the Company at an exercise price of $0.15 per common share. The Options were registered with the US Securities and Exchange Commission on March 17, 2015 and will vest in 24 equal instalments over the next two years effective January 1, 2016.
The fair value of the options as per the Black-Scholes option pricing model amounted to $509,499. Using the graded vesting method, the value of the options vested as at March 31, 2017 of $276,779 (March 31, 2016 was $187,408) was expensed and charged to the stock option reserve.
(iv).
The fair value of 5.3 million options granted on March 17, 2015 and vested during the year ended March 31, 2017 of $52,160 (March 31, 2016 of $266,670) was expensed and charged to the stock option reserve.
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9. STOCK OPTION RESERVE (Contd.)
(v)
On March 1, 2015 and April 1, 2015, PPL granted options to its CEO and CSO respectively, to acquire additional 3% equity interest in PPL for an exercise price of $74,996 vesting over two years in equal quarterly instalments and expiring in five years under new Option Agreements dated the dates of the grants. (note 9(vii))
The fair value of the options as per the Black-Scholes option pricing model amounted to $64,941. Using the graded vesting method, the value of the options vested as at March 31, 2017 was $11,867 (March 31, 2016 was $53,074), which was included in research and development costs.
(vi)a.
The fair value of the options granted by Biohaven on November 26, 2014 and vested during the year ended March 31, 2017 of $nil (March 31, 2016 - $269,819) was expensed as consulting fee.
(vi).b
The fair value of the options granted by Biohaven on October 23, 2015 and vested during the year ended March 31, 2017 of $nil (March 31, 2016 of $2,986,363) was expensed as consulting fee.
(b) The following is a summary of all active Stock Option Plans:
Stock Option Plan | As at March31, 2017 | As at March 31, 2016 | ||
Plan | 2013 Option Plan | 2005 Option Plan | 2013 Option Plan | Total |
Date of Registration | Dec 19, 2013 and March 17, 2015 | Dec 5, 2005 | Dec 19, 2013 and March 17, 2015 |
|
Registered * | 26,068,889 | 1,000,000 | 20,167,579 | 21,167,579 |
Issued to beginning of year | 16,750,000 | 1,000,000 | 9,750,000 | 10,750,000 |
Outstanding, beginning of year | 16,750,000 | 560,000 | 9,700,000 | 10,260,000 |
Issued | 3,567,194 | - | 7,050,000 | 7,050,000 |
Exercised | - | - | - | - |
Expired |
| (560,000) |
| (560,000) |
Outstanding, end of year | 20,317,194 | - | 16,750,000 | 16,750,000 |
|
|
|
|
|
Options fully vested | 14,489,583 | - | 7,931,246 | 7,931,246 |
Options not yet vested | 5,827,611 |
| 8,818,754 | 8,818,754 |
| 20,317,194 | - | 16,750,000 | 16,750,000 |
* The maximum number of common shares for issuance at any time pursuant to this Plan shall not exceed 10% of the issued and outstanding shares. Based on this, total available options for issuance as at March 31, 2017 was 26,068,889.
* Registered with the Securities and Exchange Commission of the United States of America (SEC) as required under the Securities Act of 1933. On March 17, 2015, the Company filed form S-8 with SEC registering an additional 15,717,579 options under 2013 Stock Option Plan.
F-21
9. STOCK OPTION RESERVE (Contd.)
(c) The weighted average exercise price of the outstanding stock options was US$0.15 as at March 31, 2017 (US$0.15 as at March 31, 2016) and weighted average remaining contractual life was approximately 3.25 years as at March 31, 2017.(approximately 3.95 years as at March 31, 2016).
The options can be exercised at any time after vesting within the exercise period in accordance with the applicable option agreement. The exercise price was more than the market price on the date of the grants for all options outstanding as at March 31, 2017 and March 31, 2016.
10. WARRANTS
(i)
The movements during the year were as follows:
| Year ended March 31, | |||||
| 2017 | 2016 | ||||
| # of warrants | Weighted average exercise price | Fair value | # of warrants | Weighted average exercise price | Fair value |
Issued and outstanding, beginning of year | 1,200 | $2,800 | 2,755,973 | 87,906,420 | $0.30 | 1,108,402 |
Exercised | - | - | - | - | - |
|
Expired | - | - | - | (87,906,420) | (0.30) | (1,108,402) |
Warrants issued by Biohaven to acquire intangible assets |
|
|
| 1,200 | 2,800 | 2,755,973 |
Reversed on loss of control of Biohaven | (1,200) | (2,800) | (2,755,973) |
|
|
|
Issued and outstanding, end of year | - | $ - | $ - | 1,200 | $2,800 | $2,755,973 |
11. EARNINGS (LOSS) PER SHARE
Year ended March 31, | 2017 | 2016 | 2015 |
Numerator |
|
|
|
Net profit(loss) attributable to owners of the Company | $16,298,662 | $(5,706,189) | $(3,118,431) |
Denominator |
|
|
|
Weighted average number of shares - Basic | 254,043,061 | 239,745,044 | 193,442,457 |
Diluted effect of average number of options | 18,150,264 | - | - |
Weighted average number of shares - Diluted | 272,193,325 | 239,745,044 | 193,442,457 |
Basic earnings (loss) per share | $0.06 | $(0.02) | $(0.02) |
Diluted earnings (loss) per share | $0.06 | $(0.02) | $(0.02) |
Inclusion of the options in the computation of diluted loss per share would have an anti-dilutive effect on the loss per share and are therefore excluded from the computation. Consequently, there is no difference between loss per share and diluted loss per share for the years ended March 31, 2016 and 2015.
12. COMMITMENTS AND CONTINGENT LIABILITIES
(a)
Under the terms of the License Agreement dated January 25, 2013, PPL is required to reimburse to the Licensor, Trojan Technologies Limited, 50% of all maintenance costs of the US Patent # 7,968,512 and to pay royalties of 3% on Net Receipts from sales of the Licensed Product and 5% on Net Receipts from third parties in respect of development or other exploitation of Licensed Intellectual Property and/or Licensed Products up to a maximum of $ 30 million.
(b)
PPL has extended consulting contracts with its Chief Executive Officer and Chief Scientific Officer expiring on March 31, 2018 and carrying a total monthly commitment of $22,667. Early termination without cause would require a lump sum compensation of $ 75,000 to be paid to the two consultants.
13. CONSULTING FEE
| Year ended March 31, | |||
| 2017 | 2016 | 2015 | |
Cash fee | $225,808 | $204,000 | $196,479 | |
Shares and Options issued to management and directors | 1,571,851 | 466,262 | 277,226 | |
Options issued to others | 125,076 | 87,816 | 80,995 | |
Biohaven options granted to the Company's directors | - | 1,018,692 | 174,825 | |
Biohaven options granted to Biohaven consultants and management |
| 2,237,490 | 343,175 | |
| $1,922,735 | $4,014,260 | $1,072,700 | |
14. RELATED PARTY TRANSACTIONS
All related part transactions occurred with key management personnel. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company. The Board of Directors, Chairman, Chief Executive Officer and Chief Financial Officer are key management personnel.
Related party transactions have been listed below, unless they have been disclosed elsewhere in the consolidated financial statements.
(i)
Business expenses of $3,491 (2016: $2,701, 2015: 6,145) were reimbursed to directors of the Company.
(ii)
Consulting fees include cash fee paid to key management for services of $ 180,000 (2016: $180,000, 2015: $180,000). Refer to notes 8(i), 9(a) and 13 for shares and options issued to key management in lieu of fees.
15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company’s financial instruments recognized in the balance sheet consist of the following:
| March 31, 2017 | March 31, 2016 | ||
| Carrying value | Fair value | Carrying value | Fair value |
Financial assets |
|
|
|
|
Cash (level 1) | 159,377 | 159,377 | 4,688,929 | 4,688,929 |
Advances and other receivable (level 2) | 131,641 | 131,641 | 203,940 | 203,940 |
Investment (level 3) | 700,000 | 700,000 | 700,000 | 700,000 |
Investment, available for sale (level 3) | 35,365,542 | 58,912,535 | - | - |
Financial liabilities |
|
| - | - |
Accounts payable and accrued liabilities (level 2) | 109,061 | 109,061 | 299,740 | 299,740 |
Unsecured notes payable (Level 2) | 200,000 | 180,815 | - | - |
Fair value estimates are made at a specific point in time, based on relevant market information and information about financial instruments. These estimates are subject to and involve uncertainties and matters of significant judgment, therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
A summary of the Company’s risk exposures as it relates to financial instruments are reflected below:
a) Fair value of financial instruments
The Company’s financial assets and liabilities are comprised of cash, advances and receivable and, accounts payable and accrued liabilities.
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. Investment is 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.
The Company’s financial instruments are exposed to certain financial risks: credit risk and liquidity risk.
b) Credit risk
Credit risk is the risk of loss associated with a counter-party’s inability to fulfill its payment obligations. The credit risk is attributable to various financial instruments, as noted below. The credit risk is limited to the carrying value amount carried on the statement of financial position.
F-24
15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Contd.)
a.
Cash - Cash is held with major international financial institutions in Canada and therefore the risk of loss is minimal.
b.
Other receivable - The Company is exposed to credit risk attributable to customers since a significant portion of this amount represents the amount agreed on a settlement of a claim by PPL (Note 4) payable over the next seven years. The debtor has so far been diligent in paying the amounts on due dates and PPL management will be monitoring the account on a regular basis.
c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due.
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company’s reputation. The Company holds sufficient cash to satisfy obligations under accounts payable and accruals.
The Company monitors its liquidity position regularly to assess whether it has the funds necessary to take care of its operating needs and needs for investing in new projects. The Company believes that it will require further funding to finance the committed drug development work apart from meeting its operational needs for the foreseeable future. However, the exact need for additional cash cannot be reasonably ascertained at this stage. The Company has already initiated actions to secure further funds through equity financing at its subsidiary level and potential partnership arrangement.
The above liquidity risk has been mitigated by the fact that the Company has investments that can be disposed of, the proceeds of which can be utilized to meet its cash flow requirements for the next twelve months.
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.
16. CAPITAL DISCLOSURES
The Company considers the items included in Shareholders’ Equity as capital. The Company had payables of approximately $ 0.1 million as at March 31, 2017 (approximately $ 0.3 million as at March 31, 2016) and current assets, mostly in cash, of approximately $0.2 million (approximately $4.9 million as at March 31, 2016). The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue new business opportunities and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash.
F-25
16. CAPITAL DISCLOSURES…(Contd)
As at March 31, 2017, the shareholders’ equity was approximately $ 59.6 million (approximately $ 10.2 million as at March 31, 2016), $0.2 million ($ 4.7 million as at March 31, 2016) of it was held in the form of cash. In addition, as at March 31, 2017, the Company holds equity investment in Biohaven whose common shares have, subsequent to the balance sheet date, began trading on New York Stock Exchange. The Biohaven common shares held by the Company are currently under trading restrictions until November 2017. However, after the expiry of the trading restriction, the Company may decide to generate required cash through disposal of some of its Biohaven shares in the open market.
The Company is not subject to any externally imposed capital requirements and does not presently utilize any quantitative measures to monitor its capital. There have been no changes to the Company’s approach to capital management during the years ended March 31, 2017 and March 31, 2016.
17. EVENTS AFTER THE BALANCE SHEET DATE
(i)
In May 2017, Biohaven closed an initial public offering of 11,385,000 common shares at $17 per share for aggregate gross proceeds of approximately $193.5 million.
(ii)
On June 14, 2017, a director of the Company exercised 3,239,589 of his options for $485,938.
F-26