Exhibit 99.1
Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended
(Unaudited – Prepared by Management as of November 26, 2024)
(Expressed in U.S. Dollars)
Portage Biotech Inc.
Condensed Consolidated Interim Financial Statements
NOTICE TO READER OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The condensed consolidated interim financial statements of Portage Biotech Inc. are comprised of the condensed consolidated interim statements of financial position as of September 30, 2024 and March 31, 2024, the condensed consolidated interim statements of operations and other comprehensive income (loss) for the three and six months ended September 30, 2024 and 2023 and the condensed consolidated interim statements of changes in shareholders’ equity and the condensed consolidated interim statements of cash flows for the six months ended September 30, 2024 and 2023, and are the responsibility of Portage Biotech Inc.’s management.
The condensed consolidated interim financial statements of Portage Biotech Inc. have been prepared by Portage Biotech Inc.’s management and include the selection of appropriate accounting principles, judgments and estimates necessary to prepare these condensed consolidated interim financial statements in accordance with International Financial Reporting Standards.
| /s/ Andrea Park | /s/ Ian Walters |
| Andrea Park, Chief Financial Officer | Ian Walters, MD, Chairman of the Board and Chief Executive Officer |
| DATE: November 26, 2024 |
| F-1 |
PORTAGE BIOTECH INC.
Condensed Consolidated Interim Statements of Financial Position
(U.S. Dollars in thousands)
(Unaudited – see Notice to Reader dated November 26, 2024)
| Notes | September 30, 2024 | March 31, 2024 | ||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | 14 | $ | $ | |||||||
| Prepaid expenses and other current assets | 5 | |||||||||
| Total current assets | ||||||||||
| Non-current assets | ||||||||||
| Right to use asset | ||||||||||
| Other assets | ||||||||||
| Total non-current assets | ||||||||||
| Total assets | $ | $ | ||||||||
| Liabilities and Equity | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable and accrued liabilities | 7 | $ | $ | |||||||
| Lease liability - current, including interest | ||||||||||
| Other current liabilities | ||||||||||
| Total current liabilities | ||||||||||
| Non-current liabilities | ||||||||||
| Lease liability - non-current | ||||||||||
| Warrant liability | 6 | |||||||||
| Total non-current liabilities | ||||||||||
| Total liabilities | ||||||||||
| Shareholders’ Equity | ||||||||||
| Capital stock | 9 | |||||||||
| Stock option reserve | 10 | |||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total equity attributable to owners of the Company | ||||||||||
| Non-controlling interest | 16 | ( | ) | ( | ) | |||||
| Total equity | ||||||||||
| Total liabilities and equity | $ | $ | ||||||||
| Commitments and Contingent Liabilities (Note 12) | ||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| F-2 |
PORTAGE BIOTECH INC.
Condensed Consolidated Interim Statements of Operations and Other Comprehensive Income (Loss)
(U.S. Dollars in thousands, except per share amounts)
(Unaudited – see Notice to Reader dated November 26, 2024)
| Note | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||
| Expenses | ||||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||||
| General and administrative expenses | ||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Change in fair value of warrant liability | 6 | ( | ) | |||||||||||||||
| Change in fair value of deferred purchase price payable – Tarus and deferred obligation – iOx milestone | ( | ) | ( | ) | ||||||||||||||
| Gain on settlement with Parexel – iOx CRO | 12 | |||||||||||||||||
| Share of loss in associate accounted for using equity method | ( | ) | ( | ) | ||||||||||||||
| Depreciation expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Foreign exchange transaction (loss) gain | ( | ) | ( | ) | ( | ) | ||||||||||||
| Interest income, net | ||||||||||||||||||
| Loss before benefit for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax benefit (expense) | 8 | ( | ) | |||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||
| Net unrealized (loss) gain on investments | ( | ) | ||||||||||||||||
| Total comprehensive loss for period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net loss attributable to: | ||||||||||||||||||
| Owners of the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Non-controlling interest | 16 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Comprehensive loss attributable to: | ||||||||||||||||||
| Owners of the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Non-controlling interest | 16 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
| Total comprehensive loss for period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Loss per share | 11 | |||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||||
| Weighted average shares outstanding | 11 | |||||||||||||||||
| Basic and diluted | ||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| F-3 |
PORTAGE BIOTECH INC.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
For the Six Months Ended September 30, 2024 and 2023
(Unaudited – see Notice to Reader dated November 26, 2024)
| Accumulated | Equity | |||||||||||||||||||||||||||||||
| Number | Stock | Other | Attributable | Non- | ||||||||||||||||||||||||||||
| of | Capital | Option | Comprehensive | (Accumulated | to Owners | Controlling | Total | |||||||||||||||||||||||||
| Shares | Stock | Reserve | Loss | Deficit) | of Company | Interest | Equity | |||||||||||||||||||||||||
| In 000’ | In 000’$ | In 000’$ | In 000’$ | In 000’$ | In 000’$ | In 000’$ | In 000’$ | |||||||||||||||||||||||||
| Balance, April 1, 2024 (Pre-Split) | ||||||||||||||||||||||||||||||||
| Balance, April 1, 2024 (After 1-for-20 reverse stock split) | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Share-based compensation expense | – | |||||||||||||||||||||||||||||||
| Pre-Funded warrants exercised | ||||||||||||||||||||||||||||||||
| Additional round up shares issued for fractional shares in connection with 1-for-20 reverse stock split | ||||||||||||||||||||||||||||||||
| Shares issued for accrued bonuses | ||||||||||||||||||||||||||||||||
| Shares issued for restricted stock units, net | ||||||||||||||||||||||||||||||||
| Net loss for period | – | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance, April 1, 2023 (Pre-Split) | ||||||||||||||||||||||||||||||||
| Balance, April 1, 2023 (After 1-for-20 reverse stock split) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
| Share-based compensation expense | – | |||||||||||||||||||||||||||||||
| Shares issued under ATM | ||||||||||||||||||||||||||||||||
| Share issuance costs | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Shares issued or accrued for services | ||||||||||||||||||||||||||||||||
| Net unrealized gain on investments | – | |||||||||||||||||||||||||||||||
| Net loss for period | – | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| F-4 |
PORTAGE BIOTECH INC.
Condensed Consolidated Interim Statements of Cash Flows
For the Six Months Ended September 30, 2024 and 2023
(U.S. Dollars in thousands)
(Unaudited – see Notice to Reader dated November 26, 2024)
| Six Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments for non-cash items: | ||||||||
| Share-based compensation expense | ||||||||
| Change in fair value of warrant liability | ( | ) | ||||||
| Gain on settlement with Parexel – iOx CRO | ( | ) | ||||||
| Change in fair value of deferred purchase price payable – Tarus and deferred obligation – iOx milestone | ||||||||
| Decrease in deferred tax liability | ( | ) | ||||||
| Share of loss in associate | ||||||||
| Fair value of shares issued for services | ||||||||
| Depreciation | ||||||||
| Changes in operating working capital: | ||||||||
| Prepaid expenses and other receivables | ||||||||
| Other assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Other | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from the exercise of Pre-Funded Warrants | ||||||||
| Proceeds from shares issued under ATM and Committed Purchase Agreement | ||||||||
| Share issuance costs | ( | ) | ||||||
| Repayment of lease liability | ( | ) | ( | ) | ||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Decrease in cash and cash equivalents during the period | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of the period | ||||||||
| Cash and cash equivalents at end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Right to use asset acquired | $ | $ | ||||||
| Lease liability incurred | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| F-5 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 1. NATURE OF OPERATIONS
Portage Biotech Inc. (the “Company” or “Portage”) is incorporated in the British Virgin Islands (“BVI”) with its registered office located at Clarence Thomas Building, P.O. Box 4649, Road Town, Tortola, BVI. Its USA agent, Portage Development Services Inc. (“PDS”), is located at 59 Wilton Road, Westport, CT, 06880, USA.
The Company is a foreign private issuer under the Securities and Exchange Commission (the “SEC”) rules. It is also a reporting issuer under the securities legislation of the provinces of Ontario and British Columbia. Its ordinary shares were listed on the Canadian Securities Exchange (“CSE”) under the symbol “PBT.U”. On February 25, 2021, the ordinary shares of the Company began trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “PRTG”. As the principal market for the Company’s ordinary shares is Nasdaq, the Company voluntarily delisted from the CSE on April 23, 2021.
Portage is a clinical-stage immuno-oncology company advancing treatments the Company believes will be first-in class therapies that target known checkpoint resistance pathways to improve long-term treatment response and quality of life in patients with invasive cancers. Portage’s access to next-generation technologies coupled with a deep understanding of biological mechanisms enables the identification of clinical therapies and product development strategies that accelerate these medicines through the translational pipeline. After a review of the Company’s future funding needs for clinical development of its programs as well as the current capital raising market for biotechnology companies, the Company made the decision to discontinue the Company sponsored trial for the invariant natural killer T-cell (“iNKT”) program and pause further patient accrual to the Company sponsored adenosine trial for both PORT-6 and PORT-7. The Company is exploring strategic alternatives, which may include finding a partner for one or more of its assets, a sale of the company, a merger, restructurings, both in and out of court, a company wind down, further financing efforts or other strategic action.
Reverse Stock Split
The Company’s Board of Directors (the “Board”) approved a reverse stock split of its ordinary shares at a ratio of 1-for-20. Beginning with the opening of trading on August 15, 2024, the Company’s ordinary shares began trading on Nasdaq on a split-adjusted basis under the existing trading symbol “PRTG”.
The reverse stock split was implemented to increase the per share trading price of the Company’s ordinary shares for the purpose of ensuring a share price high enough to comply with the minimum $1.00 bid price requirement for continued listing on Nasdaq. The Company received notice from Nasdaq on August 30, 2024 informing the Company that it had regained compliance with the minimum $1.00 bid price requirement for continued listing on Nasdaq.
As a result of the reverse stock split, every twenty (20) pre-split ordinary shares were converted into one (1) post-split ordinary share. Any fractional shares resulting from the reverse stock split were rounded up to the nearest whole post-split ordinary share. The reverse stock split affected all shareholders uniformly and did not alter any shareholder’s percentage interest in the Company’s ordinary shares, except for adjustments that may result from the treatment of fractional shares. All outstanding options and warrants entitling their holders to purchase the Company’s ordinary shares were adjusted as a result of the reverse stock split, in accordance with the terms of each such security. In addition, the number of ordinary shares reserved for future issuance pursuant to the Company’s equity incentive plans were also appropriately adjusted. The number of authorized ordinary shares was not proportionately reduced because the Company has an unlimited number of authorized ordinary shares available for issuance, as permitted under the laws of the British Virgin Islands.
All share and per share information included in the condensed consolidated interim financial statements have been retroactively adjusted to reflect the impact of the reverse stock split as if the stock split occurred at the beginning of the periods presented. The shares of ordinary shares authorized remained at an unlimited number of ordinary shares without par value.
| F-6 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 2. GOING CONCERN
As of September 30, 2024, the Company had cash and cash
equivalents of approximately $
The Company’s cash and cash equivalents balance is decreasing, and the Company did not generate positive cash flows from operations for the six months ended September 30, 2024 and fiscal year ended March 31, 2024 (“Fiscal 2024”).
In late Fiscal 2024, because of continued liquidity constraints, the Company made the decision to discontinue further clinical development of its iNKT sponsored trial and pause further patient accrual to its sponsored adenosine program for both PORT-6 and PORT-7. The Company is exploring strategic alternatives, which may include finding a partner for one or more of its assets, a sale of our company, a merger, restructurings, both in and out of court, company wind down, further financing efforts or other strategic action. These factors raise significant doubt about the Company’s ability to continue as a going concern within one year after the date of the condensed consolidated interim statement of financial position.
The Company has incurred significant operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. The losses result primarily from its conduct of research and development activities. As previously discussed, the Company has discontinued its iNKT sponsored trial and paused further patient accrual to the Company sponsored adenosine program in order to preserve cash resources. Additionally, during the fourth quarter of Fiscal 2024, the Company sold its shares in Intensity on Nasdaq.
The Company historically has funded its operations principally from proceeds from issuances of equity and debt securities. The Company will require significant additional capital to make the investments it needs to execute its longer-term business plan, beyond the potential proceeds that could be reasonably generated from its “at-the-market” (“ATM”) program and Committed Purchase Agreement (as defined below) with Lincoln Park Capital Fund, LLC (“Lincoln”) given the Company’s current trading volume on Nasdaq. The Company’s ability to successfully raise sufficient funds through the sale of debt or equity securities when needed is subject to many risks and uncertainties and, future equity issuances would result in dilution to existing shareholders and any future debt securities may contain covenants that limit the Company's operations or ability to enter into certain transactions. See Note 9, “Capital Stock and Reserves,” for a further discussion.
There can be no assurance that the Company’s evaluation
of strategic alternatives will result in any agreements or transactions, or that, if completed, any agreements or transactions will be
successful or on attractive terms. Any potential transaction would be dependent on a number of factors that may be beyond the Company’s
control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction
with the Company and the availability of financing to the Company or third parties in a potential transaction with the Company on reasonable
terms. The process of reviewing strategic alternatives may require the Company to incur additional costs and expenses. It could negatively
impact the Company’s ability to attract, retain and motivate key employees, and expose the Company to potential litigation in connection
with this process or any resulting transaction. If the Company is unable to effectively manage the process, the Company’s financial
condition and results of operations could be adversely affected. In addition, any strategic alternative that may be pursued and completed
ultimately may not deliver the anticipated benefits or enhance shareholder value. There can be no guarantee that the process of evaluating
strategic alternatives will result in the Company entering into or completing a potential transaction within the anticipated timing or
at all. There is no set timetable for this evaluation and the Company does not intend to disclose developments with respect to this evaluation
unless and until the Company determines that further disclosure is appropriate or legally required. As of November 25, 2024, the Company
had approximately $
| F-7 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 3. BASIS OF PRESENTATION
Statement of Compliance and Basis of Presentation
These condensed consolidated interim financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), International Accounting Standards (“IAS”) 34 Interim Financial Reporting and interpretations of the International Financial Reporting Interpretations Committee. These condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Company for the year ended March 31, 2024.
These condensed consolidated interim financial statements have been prepared on an historical cost basis except for items disclosed herein at fair value (see Note 14, “Financial Instruments and Risk Management”). In addition, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
The Company has only one reportable operating segment.
These condensed consolidated interim financial statements were approved and authorized for issuance by the Audit Committee (the “Audit Committee”) of the Board on November 26, 2024.
Consolidation
The consolidated financial statements include the accounts of the Company and:
| (a) | SalvaRx, a wholly-owned subsidiary, incorporated on May 6, 2015 in the British Virgin Islands; |
| (b) | iOx, a wholly-owned subsidiary incorporated in the U.K. on February 10, 2015. In September 2021, the Company,
through SalvaRx, exchanged certain notes, accrued interest, warrants and receivables in exchange for shares of iOx representing %
of the outstanding shares of iOx. As a result of this exchange, the Company, through SalvaRx, increased its ownership of iOx from |
| (c) | Saugatuck, a |
| (d) | Tarus Therapeutic Holdings Ltd., a wholly-owned subsidiary incorporated in the British Virgin Islands; |
| (e) | PDS, a |
| (f) | SalvaRx LLC, a wholly-owned subsidiary through SalvaRx incorporated in Delaware; |
| (g) | Saugatuck Rx LLC, a wholly-owned subsidiary of Saugatuck incorporated in Delaware; and |
| (h) | Tarus Therapeutics, LLC (“Tarus”), a wholly-owned subsidiary of Portage incorporated in Delaware. |
All inter-company balances and transactions have been eliminated in consolidation.
Non-controlling interest in the equity of a subsidiary
is accounted for and reported as a component of shareholders’ equity. As of September 30, 2024 and March 31, 2024, non-controlling
interest represents the
| F-8 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 3. BASIS OF PRESENTATION (Cont’d)
Functional and Presentation Currency
The Company’s functional and presentation currency is the U.S. Dollar.
Use of Estimates and Judgments
The preparation of the condensed consolidated interim 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 estimates are made include valuation of financial instruments, deferred tax assets and liabilities, warrant liabilities, research and development costs, contingent consideration assumed and measurement of share-based compensation. Significant areas where critical judgments are applied include in-process research and development and warrant liabilities.
Reclassifications
Certain prior year amounts between accounts payable and accrued liabilities have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
| F-9 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 4. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies are set out in Note 4 to the Company’s audited consolidated financial statements for Fiscal 2024. These policies have been applied consistently to all periods presented in these condensed consolidated interim financial statements.
Recent Accounting Pronouncements
IFRS Pronouncements Issued
Impact of Adoption of Significant New IFRS Standards in Fiscal 2025
| (a) | Amendments to IAS 1: Non-current Liabilities with Covenants |
The amendments to IAS 1, “Presentation of Financial Statements,” clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability. The amendments also aim to improve information an entity provides related to liabilities subject to these conditions.
The amendments to IFRS 16 and IAS 1 were effective for annual periods beginning on or after January 1, 2024. The adoption of these amendments did not have a material effect on the Company’s annual consolidated financial statements or the condensed consolidated interim financial statements for the three and six months ended September 30, 2024.
| (b) | Amendments to IAS 7 and IFRS 7: Supplier Finance |
The amendments to IAS 7 and IFRS 7, “Statement of Cash Flows,” require disclosures to enhance the transparency of supplier finance arrangements and their effects on an entity’s liabilities, cash flows and exposure to liquidity risk. The amendments to IAS 7 and IFRS 7 were effective for annual periods beginning on or after January 1, 2024 (with transitional reliefs in the first year). The adoption of these amendments did not have a material effect on the Company’s annual consolidated financial statements or the condensed consolidated interim financial statements for the three and six months ended September 30, 2024.
| F-10 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
New Accounting Standards, Interpretations and Amendments
Standards issued but not yet effective up to the date of issuance of the Company’s condensed consolidated interim financial statements is listed below. This is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt this standard when it becomes effective.
Amendments to IAS 21 – Lack of Exchangeability
An entity is impacted by the amendments to IAS 21, “The Effects of Changes in Foreign Exchange Rates,” when it has a transaction or an operation in a foreign currency that is not exchangeable into another currency at a measurement date for a specified purpose. A currency is exchangeable when there is an ability to obtain the other currency (with a normal administrative delay), and the transaction would take place through a market or exchange mechanism that creates enforceable rights and obligations. The amendments to IAS 21 are effective for annual periods beginning on or after January 1, 2025, unless earlier adopted. The Company is evaluating whether the adoption of the amendments to IAS 21 would have a material effect on the Company’s annual consolidated financial statements or its condensed consolidated interim financial statements.
NOTE 5. PREPAID EXPENSES AND OTHER RECEIVABLES
At September 30, 2024 and March 31, 2024, prepaid expenses and other receivables were comprised of the following (in thousands):
| September 30, 2024 (Unaudited) | March 31, 2024 | |||||||
| Prepaid clinical research costs | $ | $ | ||||||
| Refund from Parexel | ||||||||
| Prepaid insurance | ||||||||
| Tax deposits | ||||||||
| Other prepaid expenses | ||||||||
| Other receivables | ||||||||
| Security deposit on office lease expiring in May 2025 | ||||||||
| Total prepaid expenses and other receivables | $ | $ | ||||||
The decrease in prepaid expenses and other receivables
from $
| F-11 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 6. WARRANT LIABILITY
On August 15, 2024, the Company effected a reverse stock split of its ordinary shares at a ratio of 1-for-20. The number of warrants and exercise price information herein have been retroactively adjusted to reflect the impact of the reverse stock split. See Note 1 “Nature of Operations” and Note 9, “Capital Stock and Reserves” for further discussion on the reverse stock split.
The following table summarizes the changes in the warrant liability during the three and six months ended September 30, 2024:
| Exercise Price | Warrants | Fair Value Balance | ||||||||||
| In 000’$ | ||||||||||||
| Warrant liability as of April 1, 2023 | $ | $ | ||||||||||
| Fair value of warrants at issuance on October 3, 2023: | ||||||||||||
| Class B Warrants | $ | |||||||||||
| Class C Warrants | $ | |||||||||||
| Placement Agent Warrants | $ | |||||||||||
| Change in fair value of warrant liability | ( | ) | ||||||||||
| Warrant liability as of March 31, 2024 | – | |||||||||||
| Change in fair value of warrant liability | ( | ) | ||||||||||
| Warrant liability as of June 30, 2024 | ||||||||||||
| Change in fair value of warrant liability | ||||||||||||
| Warrant liability as of September 30, 2024 | – | $ | ||||||||||
On September 29, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional and accredited investor in connection with a registered direct offering (the “the Registered Direct Offering”) and a concurrent private placement (the “Private Placement”) and together with the Registered Direct Offering, the “Offerings”). The Offerings closed on October 3, 2023.
Pursuant to the Purchase Agreement, in the Registered
Direct Offering, the Company sold (i)
| F-12 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 6. WARRANT LIABILITY (Cont’d)
In the Private Placement, the Company issued to such
institutional and accredited investor unregistered warrants to purchase up to ordinary shares (the “Series A Warrants”),
unregistered warrants to purchase up to ordinary shares (the “Series B Warrants”), and unregistered warrants to purchase
up to ordinary shares (the “Series C Warrants,” together with the Series A Warrants and the Series B Warrants, the
“Private Warrants”), together exercisable for an aggregate of up to 473,685 ordinary shares (the “Private Warrant Shares”).
Pursuant to the terms of the Purchase Agreement, for each ordinary share and Pre-Funded Warrant issued in the Registered Direct Offering,
an accompanying Series A Warrant, Series B Warrant and Series C Warrant were issued to such institutional and accredited investor. Each
Series A Warrant is exercisable for one Private Warrant Share at an exercise price of $ per share, is immediately exercisable and
will expire 18 months from the date of issuance. Each Series B Warrant is exercisable for one Private Warrant Share at an exercise price
of $ per share, is immediately exercisable and will expire three years from the date of issuance. Each Series C Warrant is exercisable
for one Private Warrant Share at an exercise price of $ per share, is immediately exercisable and will expire five years from the
date of issuance. The net proceeds to the Company from the Offerings were approximately $ million, after deducting placement agent’s
fees and estimated offering expenses of approximately $
Pursuant to an engagement letter, dated as of August 26, 2023, between the Company and H.C. Wainwright & Co., LLC (the “Placement Agent”), the Company paid the Placement Agent a total cash fee equal to % of the aggregate gross proceeds received in the Offerings, or $ million. The Company also paid the Placement Agent in connection with the Offerings a management fee equal to % of the aggregate gross proceeds raised in the Offerings ($ million), $ for non-accountable expenses and $ for clearing fees. In addition, the Company issued to the Placement Agent, or its designees, warrants to purchase up to ordinary shares (the “Placement Agent Warrants,” and together with the Pre-Funded Warrants and the Private Warrants, the “Warrants”), which represented % of the aggregate number of ordinary shares and Pre-Funded Warrants sold in the Registered Direct Offering. The Placement Agent Warrants have substantially the same terms as the Series B Warrants and the Series C Warrants, except that the Placement Agent Warrants have an exercise price equal to $, or 125% of the offering price per ordinary share sold in the Registered Direct Offering and will be exercisable for five years from the commencement of the sales pursuant to the Offerings. The Private Warrants, Private Warrant Shares, Placement Agent Warrants and ordinary shares underlying the Placement Agent Warrants were registered for resale under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to a registration statement on Form F-1 that was declared effective by the SEC on November 7, 2023 (the “Resale Registration Statement”).
The Series B Warrants, the Series C Warrants and the
Placement Agent Warrants include the obligation, in the event of a Fundamental Transaction, as defined in the Series B Warrants, the Series
C Warrants and the Placement Agent Warrants, for the Company or the successor entity to purchase the warrants from the holder at the discretion
of the holder and at the Black-Scholes value, as defined in the warrant agreements. As a result, management concluded that, in line with
IAS 9, “Financial Instruments” and IAS 32, “Financial Instruments: Presentation,” such warrants will be accounted
for as financial liabilities on the condensed consolidated interim statement of financial position with the changes in fair value recognized
in the condensed consolidated interim statement of operations and other comprehensive income (loss). The Company allocated the net proceeds
of $
The Company filed the Resale Registration Statement to register for the resale of the Private Warrant Shares and the ordinary shares issuable upon the exercise of the Placement Agent Warrants, which was declared effective by the SEC on November 7, 2023. Pursuant to the terms of the Purchase Agreement, the Company is obligated to use its commercially reasonable efforts to keep the Resale Registration Statement effective at all times until such institutional and accredited investor (and its successors and assigns) no longer owns any Private Warrants or ordinary shares issuable upon exercise thereof.
| F-13 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 6. WARRANT LIABILITY (Cont’d)
On May 29, 2024, Armistice Capital Master Fund Ltd. exercised its Pre-Funded Warrants at an exercise price of $ per share increasing the Company’s total shares outstanding to .
The accounting for the Series A Warrants and the Pre-Funded Warrants is detailed below in Note 9, “Capital Stock and Reserves.”
Series B Warrants
A fair value of $ per each Series B Warrant was identified at the issue date of October 3, 2023. A fair value of $ per each warrant has been identified as of September 30, 2024.
The inputs associated with calculating the fair value are reflected below.
| October 3, 2023 | September 30, 2024 | |||
| Exercise price | $ | $ | ||
| Share price | $ | $ | ||
| Expected life | years | years | ||
| Expected volatility | % | % | ||
| Risk-free interest rate | % | % | ||
| Dividend yield |
Series C Warrants
A fair value of $ per each Series C Warrant was identified at the issue date of October 3, 2023. A fair value of $ per each warrant has been identified as of September 30, 2024.
The inputs associated with calculating the fair value are reflected below.
| October 3, 2023 | September 30, 2024 | |||
| Exercise price | $ | $ | ||
| Share price | $ | $ | ||
| Expected life | years | years | ||
| Expected volatility | % | % | ||
| Risk-free interest rate | % | % | ||
| Dividend yield |
Placement Agent Warrants
A fair value of $ per each Placement Agent Warrant was identified at the issue date of October 3, 2023. A fair value of $ per each warrant has been identified as of September 30, 2024.
The inputs associated with calculating the fair value are reflected below.
| October 3, 2023 | September 30, 2024 | |||
| Exercise price | $ | $ | ||
| Share price | $ | $ | ||
| Expected life | years | years | ||
| Expected volatility | % | % | ||
| Risk-free interest rate | % | % | ||
| Dividend yield |
| F-14 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At September 30, 2024 and March 31, 2024, accounts payable and accrued liabilities were comprised of the following (in thousands):
| September 30, 2024 (Unaudited) | March 31, 2024 | |||||||
| Accounts payable and amounts accrued to CRO | $ | $ | ||||||
| Accrued bonuses and other payroll-related expenses | ||||||||
| Accrued accounting and auditing fees | ||||||||
| Accrued legal fees | ||||||||
| Accrued other professional fees | ||||||||
| Other accounts payable | ||||||||
| Accrued clinical and R&D services | ||||||||
| Other | ||||||||
| Total accounts payable and accrued liabilities | $ | $ | ||||||
The decrease in accounts
payable and accrued liabilities from $
NOTE 8. INCOME TAXES
The Company is a BVI business company. The BVI government does not, under existing legislation, impose any income or corporate tax on corporations.
PDS is a U.S. corporation and is subject to U.S. federal, state and local income taxes, as applicable.
iOx is subject to U.K. taxes.
The following is a reconciliation of the U.S. taxes to the effective income tax rates for the six months ended September 30, 2024 and 2023 (in thousands, except percentages):
| Six Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Loss before income taxes | $ | $ | ||||||
| Income tax benefit | $ | $ | ||||||
| Effective tax rate | % | % | ||||||
The Company’s effective tax rates were
| F-15 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 9. CAPITAL STOCK AND RESERVES
Authorized ordinary shares: Unlimited number of Portage ordinary shares without par value.
On August 15, 2024, the Company effected a reverse stock split of its ordinary shares at a ratio of 1-for-20. The reverse stock split decreased the number of ordinary shares outstanding as of September 30, 2023, from to . All share and per share information included in the condensed consolidated interim financial statements and in the Notes to the condensed consolidated interim financial statements have been retroactively adjusted to reflect the impact of the reverse stock split unless otherwise noted. The number of ordinary shares authorized remained at an unlimited number of common shares without par value.
Any fractional shares resulting from the reverse stock split were rounded up to the nearest whole post-split ordinary share. As a result of this round up provision, the Company issued an additional 52,254 shares.
Portage filed a shelf registration statement with the SEC in order to sell ordinary shares, debt securities, warrants and units in one or more offerings from time to time, which became effective on March 8, 2021 (“March 2021 Registration Statement”). In connection with the March 2021 Registration Statement, Portage has filed with the SEC:
| · | a base prospectus, which covered the offering, issuance and sale by Portage of up to $200 million in the aggregate of the securities identified above from time to time in one or more offerings; |
| · | a prospectus supplement, which covered the offer, issuance and sale by Portage in its ATM offering of up to a maximum aggregate offering price of $50 million of Portage’s ordinary shares that may be issued and sold from time to time under a Controlled Equity Offering Sales Agreement, dated February 24, 2021 (the “Sales Agreement”), with Cantor Fitzgerald & Co., the sales agent (“Cantor Fitzgerald”); |
| · | a prospectus supplement dated June 24, 2021, for the offer, issuance and sale by Portage of 57,500 ordinary shares for gross proceeds of approximately $26.5 million in a firm commitment underwritten public offering with Cantor Fitzgerald; |
| · | a prospectus supplement dated August 19, 2022, for the resale of up to $30 million in ordinary shares that Portage may sell from time to time to Lincoln and an additional 4,726 shares that were issued to Lincoln; and |
| · | a prospectus supplement dated September 29, 2023 for the offer, issuance and sale by Portage in a registered direct public offering through H.C. Wainwright & Co., the placement agent, to an institutional and accredited investor of (i) 98,500 ordinary shares at a purchase price of $38.00 per share; and (ii) Pre-Funded Warrants to purchase up to 59,395 ordinary shares, at a purchase price of $37.98 per Pre-Funded Warrant Shares, for aggregate gross proceeds of approximately $6 million. All Pre-Funded Warrants, which were exercisable for one ordinary share at an exercise price of $0.02 per share, were exercised in full on May 29, 2024. |
| F-16 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 9. CAPITAL STOCK AND RESERVES (Cont’d)
On July 6, 2022, the Company entered into a Purchase Agreement (the “Committed Purchase Agreement”) with Lincoln, under which it may require Lincoln to purchase ordinary shares of the Company having an aggregate value of up to $30 million (the “Purchase Shares”) over a period of 36 months. Upon execution of the Committed Purchase Agreement, the Company issued to Lincoln ordinary shares, representing a 3% commitment fee. Pursuant to the Committed Purchase Agreement, Lincoln will be obligated to purchase the Purchase Shares in three different scenarios that are based on various market criteria and share amounts. The Company has the right to terminate the Committed Purchase Agreement for any reason, effective upon one business day prior written notice to Lincoln. Lincoln has no right to terminate the Committed Purchase Agreement. The requirement that Lincoln must make a purchase will be suspended based on various criteria such as there not being an effective registration statement for Lincoln to be able to resell the ordinary shares it is committed to purchase and market criteria such as the Company continuing to be Depository Trust Company eligible, among other things. The Committed Purchase Agreement does not impose any financial or business covenants on the Company, and there are no limitations on the use of proceeds. The Company may raise capital from other sources in its sole discretion; provided, however, that the Company shall not enter into any similar agreement for the issuance of variable priced equity-like securities until the three-year anniversary of the date of the Committed Purchase Agreement, excluding, however, an ATM transaction with a registered broker-dealer, which includes any sales under the Sales Agreement with Cantor Fitzgerald.
During the six months ended September 30, 2023, the
Company sold
ordinary shares under the ATM program, generating net proceeds of approximately $
The Company’s March 2021 Registration Statement expired on March 8, 2024. In order to issue additional shares under its ATM program or the Committed Purchase Agreement in the future, the Company would be required to file a new registration statement, which must be declared effective by the SEC prior to use, and to file a prospectus supplement related to the ATM program and the Committed Purchase Agreement, as the case may be.
Furthermore, the ATM program and the Committed Purchase
Agreement with Lincoln are generally limited based on, among other things, the Company’s Nasdaq trading volume. Under General Instruction
I.B.5 to Form F-3 (the “Baby Shelf Rule”), the amount of funds the Company can raise through primary public offerings of securities
in any 12-month period using a registration statement on Form F-3 is limited to one-third of the aggregate market value of the ordinary
shares held by the Company’s non-affiliates, which limitation may change over time based on its stock price, number of ordinary
shares outstanding and the percentage of ordinary shares held by non-affiliates. Accordingly, the Company is limited by the Baby Shelf
Rule as of the filing of this Form 6-K, until such time as its non-affiliate public float exceeds $
On September 29, 2023, the Company entered into the Purchase Agreement with an institutional and accredited investor in connection with the Registered Direct Offering and the Private Placement. The Offerings closed on October 3, 2023.
| F-17 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 9. CAPITAL STOCK AND RESERVES (Cont’d)
The Company filed the Resale Registration Statement to register for resale the Private Warrant Shares and the ordinary shares issuable upon the exercise of Placement Agent Warrants, which was declared effective by the SEC on November 7, 2023. Pursuant to the terms of the Purchase Agreement, the Company is obligated to use its commercially reasonable efforts to keep the Resale Registration Statement effective at all times until such institutional and accredited investor (and its successors and assigns) no longer owns any Private Warrants or ordinary shares issuable upon exercise thereof.
If a Fundamental Transaction (as defined in the Warrants) occurs, then the successor entity will succeed to, and be substituted for the Company, and may exercise every right and power that the Company may exercise and will assume all of the Company’s obligations under the Warrants with the same effect as if such successor entity had been named in the Warrants themselves. If holders of ordinary shares are given a choice as to the securities, cash or property to be received in such a Fundamental Transaction, then the holders of the Warrants shall be given the same choice as to the consideration they would receive upon any exercise of the Warrants following such a Fundamental Transaction. Additionally, as more fully described in the Series B Warrants, Series C Warrants and Placement Agent Warrants, in the event of certain Fundamental Transactions, the holders of the Series B Warrants, Series C Warrants and Placement Agent Warrants will be entitled to receive cash consideration in an amount equal to the Black-Scholes value of the Series B Warrants, Series C Warrants and Placement Agent Warrants, as the case may be, upon the consummation of such Fundamental Transaction.
See Note 6, “Warrant Liability,” for a discussion of the Registered Direct Offering.
Series A Warrants and Pre-Funded Warrants
The Series A Warrants and the Pre-Funded Warrants are classified as a component of equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the ordinary shares with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of ordinary shares upon exercise. In addition, the Series A Warrants and the Pre-Funded Warrants do not provide any guarantee of value or return.
On the October 3, 2023 issue date, the calculated fair value of the Series A Warrants and the Pre-Funded Warrants as of March 31, 2024 was $ million ($ per such warrant). Because the fair value of the warrants accounted for as liabilities exceeded the net proceeds from the Registered Direct Offering, the proceeds allocated to the Common Shares, the Pre-Funded Warrants and the Series A warrants was zero.
Series A Warrants
The inputs associated with calculating the fair value are reflected below.
| October 3, 2023 | |||
| Exercise price | $ | ||
| Share price | $ | ||
| Expected life | years | ||
| Expected volatility | % | ||
| Risk-free interest rate | % | ||
| Dividend yield | |||
| F-18 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 9. CAPITAL STOCK AND RESERVES (Cont’d)
Nature and Purpose of Reserves
Stock Option Reserve
The stock option reserve reflects the reserve of compensation expense recognized over the vesting period based upon the grant date fair value of the Company’s equity settled grants calculated in accordance with IFRS 2, “Share-based Payment”. See Note 10, “Stock Option Reserve,” below for a further discussion.
Amended and Restated 2021 Equity Incentive Plan and Grants of Stock Options and Restricted Stock Units
The following table provides the activity for the Company’s stock option reserve for the six months ended September 30, 2024 and 2023 (in thousands):
| Six Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Share-based compensation expense | ||||||||
| Balance, end of period | $ | $ | ||||||
On August 15, 2024, the Company effected a reverse stock split of its ordinary shares at a ratio of 1-for-20. All share and per share information have been retroactively adjusted to reflect the impact of the reverse stock split unless otherwise noted. See Note 1 “Nature of Operations” and Note 9, “Capital Stock and Reserves” for further discussion on the reverse stock split.
| F-19 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 10. STOCK OPTION RESERVE (Cont’d)
As of September 30, 2024, shares were reserved for awards previously granted and shares were available for future awards under the Amended and Restated 2021 Equity Incentive Plan.
The changes in the number of stock options issued and outstanding for the six months ended September 30, 2024 and 2023 were as follows:
| Six Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Balance, beginning of period | ||||||||
| Expired or forfeited | ( | ) | ||||||
| Balance, end of period | ||||||||
| Exercisable, end of period | ||||||||
The table above does not include fully vested
restricted stock units (“RSUs”) granted to certain executives in January 2021 and January 2022. In January 2024, the
company issued
shares for the exercise of
RSUs net of
shares repurchased into treasury to pay for an employee’s payroll taxes. In September 2024, the company issued
shares for the exercise of
RSUs net of
shares repurchased into treasury to pay for an employee’s payroll taxes. As September 30, 2024, there were
RSUs granted and outstanding of which
The following is the weighted average exercise price and the remaining contractual life for outstanding options as of September 30, 2024 and 2023:
| As of September 30, | ||||||||
| 2024 | 2023 | |||||||
| PBI Amended and Restated 2021 Equity Incentive Plan | ||||||||
| Weighted average exercise price | $ | |||||||
| Weighted average remaining contractual life (in years) | ||||||||
The vested options can be exercised at any time in accordance with the applicable option agreement. The exercise price was greater than the market price for all options outstanding as of September 30, 2024 and March 31, 2024.
The Company recorded approximately $ million and $ million of share-based compensation expense with respect to the Amended and Restated 2021 Equity Incentive Plan in the three months ended September 30, 2024 and 2023, respectively. The Company recorded approximately $ million and $ million of share-based compensation expense with respect to the Amended and Restated 2021 Equity Incentive Plan in the six months ended September 30, 2024 and 2023, respectively.
| F-20 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
Basic earnings per share (“EPS”) is calculated by dividing the net loss attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period.
Diluted EPS is calculated by dividing the net loss attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Shares issuable under Pre-Funded Warrants are considered outstanding for this purpose.
The calculation of Basic and Diluted EPS reflects the Pre-Funded Warrants as outstanding shares.
The following table reflects the loss and share data used in the basic and diluted EPS calculations (in thousands, except per share amounts):
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Numerator | ||||||||||||||||
| Net loss attributable to owners of the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator | ||||||||||||||||
| Weighted average number of shares – Basic and Diluted | ||||||||||||||||
| Basic and diluted loss per share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
Number of ordinary shares are retroactively adjusted to reflect the impact of the 1-for-20 reverse stock split on August 15, 2024.
The inclusion of the Company’s share purchase warrants (other than Pre-Funded Warrants, as described above), stock options and RSUs 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 for the three and six months ended September 30, 2024 and 2023. The following table reflects the Company’s outstanding securities by year that would have an anti-dilutive effect on loss per share and, accordingly, were excluded from the calculation.
| As of September 30, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Stock options | ||||||||
| Restricted stock units | ||||||||
| F-21 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES
iOx – Parexel Master Services Agreement
Effective March 15, 2022, iOx entered into a Master Services Agreement (the “MSA”) with Parexel under which Parexel agreed to act as a clinical service provider (“CRO”) pursuant to a work order (“Work Order”) effective June 1, 2022. Under such Work Order, Parexel planned to operate a Phase 2 trial of IMM60 and pembrolizumab in advanced melanoma and non-small lung cancer. The MSA provided for a five-year term, and the Work Order provided for a term to end upon the completion of the services required. The budget provided for service fees and pass-through expenses and clinical sites totaling $11.5 million. During the year ended March 31, 2023 (“Fiscal 2023”), the Company executed two change orders resulting in a $0.6 million increase in the overall estimated budgeted costs. As a result of the Company’s decision to discontinue the development with respect to this program, on December 20, 2023, the Company provided Parexel notice of termination of the contract, with a planned termination date of April 18, 2024.
As the ongoing CRO services were wound down, the Company
noticed that expenses incurred under the CRO agreement were higher than originally budgeted. Parexel agreed to refund the Company $
Tarus – Fortrea Clinical Service Agreement
On March 1, 2023, Tarus entered into a clinical service
agreement with Fortrea Inc. (formerly Labcorp Drug Development Inc.), a third-party CRO. The term of the agreement is through the earlier
of August 14, 2025 or the completion of provision of services and the payment of contractual obligations. The budgeted costs for the services
to be provided is approximately $
| F-22 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 13. RELATED PARTY TRANSACTIONS
SalvaRx Acquisition
Two of the Company’s directors are also directors of SalvaRx Group plc, a company which owns approximately 4.1% of the Company’s issued and outstanding ordinary shares as of September 30, 2024.
Investments
The Company has entered into related party transactions and certain services agreements with its investees. Key management personnel of the Company have also entered into related party transactions with investees. Key management personnel are those people who have the authority and responsibility for planning, directing and controlling the activities of the Company, including directors and senior management of the Company.
The following subsidiaries and associates are considered related parties:
| (a) | Stimunity. The Chief Executive Officer (“CEO”) of Portage is one of three members of the board of directors of Stimunity. The Company wrote-off its investment in Stimunity to nil in the Fiscal 2024 period. |
| (b) | iOx. Upon execution of the iOx Share Exchange on July 18, 2022, the non-Portage director resigned from the iOx board leaving two Portage insiders as directors. The CEO of Portage is also the CEO of iOx, and the management team of Portage comprises the management team of iOx. |
| (c) | Saugatuck. The Chairman and CEO of the Company is the sole director of Saugatuck. Saugatuck is 70% owned by the Company and is controlled by Portage. |
| (d) | Intensity. The CEO of Portage previously served as a part-time officer of Intensity until becoming
a consultant in 2023. Additionally, Intensity provided services (primarily rent) to Portage through April 2023. For the six months ended
September 30, 2023, the Company paid $ |
| (e) | Portage Development Services Inc. PDS provides human resources and other services to each operating subsidiary of Portage through shared services agreements. |
Transactions between the parent company and its subsidiaries, which are related parties, have been eliminated in consolidation and are not disclosed in this note.
Board Resignations and Appointments
On April 25, 2024, Mark Simon resigned all of his positions on the Board of Directors, and on April 26, 2024, Linda Kozick and Dr. Robert Glassman resigned all of their positions on the Board of Directors. On April 30, 2024, Dr. Jean -Christophe Renondin and Dr. Justin Stebbing were elected to the Board.
| F-23 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 13. RELATED PARTY TRANSACTIONS (Cont’d)
Bonuses & Board Compensation Arrangements
In December 2022,
the Board approved executive performance bonuses, as recommended by the Compensation Committee, totaling $
Effective January 1, 2022, each non-employee Board
member is entitled to receive cash Board fees of $40,000 per annum, payable quarterly in arrears. Additionally, each non-employee
Board member is entitled to an annual grant of 345 options to purchase Portage ordinary shares, which would vest the first annual
anniversary of the grant date. The Company incurred Board fees totaling nil and $
Non-employee Board chairpersons are entitled to an annual
cash fee of $30,000, payable quarterly in arrears. In lieu of a non-executive chairperson, the lead director is entitled to an annual
cash fee of $20,000 per annum paid quarterly in arrears.
Retention Agreements and General Releases
On July 22, 2024, the Company and Portage Development Services, Inc. entered into a Retention Agreement and General Release (“Retention Agreement”) with each of Allan Shaw (“Employee”) and Joseph Ciavarella (“Consultant”). Under the terms of each of the Retention Agreements, Employee’s current employment agreement and Consultant’s current consulting agreement both terminated on July 22, 2024, except with respect to certain provisions. In return for continuing to provide services to the Company and its affiliates and completing certain Applicable Retention Events, as defined in the respective Retention Agreements, the Company paid an aggregate $0.2 million (the “Retention Amount”) to Employee and Consultant, in addition to their monthly pay through September 30, 2024.
The Company accrued the Retention Amount, as well as the monthly pay totaling $0.2 million through September 30, 2024, in the condensed consolidated interim financial statements for the three months ended June 30, 2024, as the material terms of the Retention Agreements were known and agreed upon at June 30, 2024. In accordance with the terms of the Retention Agreements, the Company paid in full the Retention Amount and issued 14,348 ordinary shares to the Employee and Consultant in lieu of cash bonuses accrued in Fiscal 2023 totaling $0.1 million by September 30, 2024, the date on which the Employee’s employment and the Consultant’s consulting relationship with the Company and its affiliates ended.
| F-24 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company’s financial instruments recognized in the Company’s condensed consolidated interim statements of financial position consist of the following:
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; and therefore, these estimates cannot be determined with precision. Changes in assumptions could significantly affect these estimates.
The following table summarizes the Company’s financial instruments as of September 30, 2024 and March 31, 2024 (in thousands):
| September 30, 2024 (Unaudited) | March 31, 2024 | |||||||||||||||||||||||
| Amortized Cost | FVTOCI | FVTPL | Amortized Cost | FVTOCI | FVTPL | |||||||||||||||||||
| Financial assets | ||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Prepaid expenses and other current assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| September 30, 2024 (Unaudited) | March 31, 2024 | |||||||||||||||
| Amortized Cost | FVTPL | Amortized Cost | FVTPL | |||||||||||||
| Financial liabilities | ||||||||||||||||
| Accounts payable and accrued liabilities | $ | $ | $ | $ | ||||||||||||
| Warrant liability | $ | $ | $ | $ | ||||||||||||
| F-25 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Cont’d)
A summary of the Company’s risk exposures as it relates to financial instruments are reflected below.
Fair value of Financial Instruments
The Company’s financial assets and liabilities are comprised of cash and cash equivalents, receivables and investments in equities and public entities, accounts payable and accrued liabilities, lease liability, and warrant liability.
The Company classifies the fair value of these transactions according to the following fair value hierarchy based on the amount of observable inputs used to value the instrument:
| · | Level 1 – Values are based on unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date. |
| · | Level 2 – Values are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as of the reporting date. |
| · | Level 3 – Values are based on prices or valuation techniques that are not based on observable market data. Investments are classified as Level 3 financial instrument. |
Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy.
Management has assessed that the fair values of cash and cash equivalents, other receivables and accounts payable approximate their carrying amounts largely due to the short-term maturities of these instruments.
The following methods and assumptions were used to estimate their fair values:
Warrant Liability: The fair value is estimated using a Black-Scholes model and in certain cases, a Monte Carlo simulation (Level 3) (see Note 6, “Warrant Liability”).
| F-26 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Cont'd)
Credit Risk, Liquidity Risk and Foreign Currency Risk
Our financial instruments are exposed to certain financial risks: Credit Risk, Liquidity Risk and Foreign Currency Risk.
Credit Risk
Credit risk is the risk of loss associated with a counterparty’s inability to 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 as reflected in the Company’s condensed consolidated interim statements of financial position.
Cash and cash equivalents: Cash and cash equivalents comprise cash on hand and amounts invested in underlying treasury and money market funds that are readily convertible to a known amount of cash with three months or less from date of acquisition and are subject to an insignificant risk of change in value. As of September 30, 2024 and March 31, 2024, cash equivalents was comprised of a money market account with maturities less than 90 days from the date of purchase. Cash and cash equivalents are held with major international financial institutions and therefore the risk of loss is minimal.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due.
| F-27 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Cont'd)
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company’s reputation. The Company holds sufficient cash and cash equivalents to satisfy current obligations under accounts payable and accruals.
The Company monitors its liquidity position regularly to assess whether it has the funds necessary to meet its operating needs and needs for investing in new projects.
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 capital 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. See Note 9, “Capital Stock and Reserves,” for a discussion of the Company’s share offering.
Foreign Currency Risk
While the Company operates in various jurisdictions, substantially all of the Company’s transactions are denominated in the U.S. Dollar, except the deferred tax liability in the U.K. settleable in British pound sterling.
NOTE 15. CAPITAL MANAGEMENT
The Company considers the items included in shareholders’
equity as capital. The Company had accounts payable and accrued liabilities of approximately $
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.
Nasdaq Listing Rule 5550(b)(1) requires companies listed on the Nasdaq Capital Market to maintain shareholders’ equity of at least $ million for continued listing. As of September 30, 2024, shareholders’ equity attributable to the owners of the Company was approximately $ million (approximately $.0 million as of March 31, 2024). As a result, the Company is not currently in compliance with Nasdaq Listing Rule 5550(b)(1). Accordingly, the Company expects Nasdaq to notify it of such non-compliance. The Company does not anticipate that the notification will have an immediate effect on the listing of the Company’s ordinary shares on the Nasdaq Capital Market. In accordance with the Nasdaq Listing Rules, the Company expects to have 45 calendar days from the date of the notification to submit a plan to regain compliance with Nasdaq Listing Rule 5550(b)(1). If the Company’s compliance plan is accepted, it may be granted up to 180 calendar days from the date of the initial notification to evidence compliance. If the compliance plan is not accepted or the Company is otherwise unable to provide evidence of compliance within Nasdaq’s allotted timeframe, Nasdaq may take steps to delist the Company’s ordinary shares. There can be no assurance that the Company will be able to increase its shareholders’ equity in the future.
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 six months ended September 30, 2024 and 2023.
| F-28 |
PORTAGE BIOTECH INC.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated November 26, 2024)
NOTE 16. NON-CONTROLLING INTEREST
The details of non-controlling interest for the six months ended September 30, 2024 and 2023 are as follows (in thousands):
| Saugatuck and subsidiary | |||||
| Non-controlling interest as of April 1, 2024 | $ | ( | ) | ||
| Net loss attributable to non-controlling interest | ( | ) | |||
| Non-controlling interest as of September 30, 2024 | $ | ( | ) |
| Saugatuck and subsidiary | |||||
| Non-controlling interest as of April 1, 2023 | $ | ( | ) | ||
| Net loss attributable to non-controlling interest | ( | ) | |||
| Non-controlling interest as of September 30, 2023 | $ | ( | ) |
Saugatuck and subsidiary includes Saugatuck and its wholly-owned subsidiary, Saugatuck Rx LLC.
F-29