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Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
The condensed consolidated interim financial statements for Portage Biotech Inc. are comprised
of the condensed consolidated statements of financial position as of June 30, 2021 and March 31, 2021, and the condensed consolidated
interim statements of operations and comprehensive loss for the three months ended June 30, 2021 and 2020 and the statements of equity
and cash flows for each of the three months then ended and are the responsibility of the Company’s management.
The condensed consolidated interim financial statements have been prepared by 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.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30,
2021)
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 FH Chambers, P.O. Box 4649, Road Town, Tortola, BVI. Its Toronto agent, Portage Services Ltd., is located
at 6 Adelaide Street East, Suite 300, Toronto, Ontario, M5C 1H6, Canada.
The
Company is a reporting issuer with the securities commissions of the provinces of Ontario and British Columbia. Its ordinary shares were
listed on the Canadian Stock 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”. The Company voluntarily
delisted its common shares from the CSE at the market close on April 23, 2021, since the Company’s shares began trading on NASDAQ.
Portage
is a clinical stage immune-oncology company focused on overcoming immune resistance and currently managing 10 immuno-oncology assets
at various development stages. We source, nurture and develop the creation of early- to mid-stage, first- and best-in-class therapies
for a variety of cancers, by funding, implementing viable, cost effective product development strategies, clinical counsel/trial design,
shared services, financial and project management to enable efficient, turnkey execution of commercially informed development plans.
Our drug development pipeline portfolio encompasses products or technologies based on biology addressing known resistance pathways/mechanisms
of current check point inhibitors with established scientific rationales, including intratumoral delivery, nanoparticles, liposomes,
aptamers, and virus-like particles.
On
August 13, 2018, the Company reached a definitive agreement to acquire 100%
of SalvaRx Limited (“SalvaRx”) in exchange for 8,050,701
ordinary shares of the Company (the "SalvaRx
Acquisition"). The SalvaRx Acquisition was completed on January 8, 2019 (the “Acquisition Date”) upon receiving shareholder
and regulatory approval. In connection with the SalvaRx Acquisition, the Company acquired interests in SalvaRx’s five research
and development invested entities and subsidiaries: iOx Therapeutics Ltd. (“iOx”), Nekonal Oncology Limited (“Nekonal”),
Intensity Therapeutics, Inc. (“Intensity”), Saugatuck Therapeutics Ltd. (“Saugatuck”) and Rift Biotherapeutics
Inc. (“Rift”). In connection with the SalvaRx Acquisition, the Company also acquired an option in Nekonal SARL, a Luxembourg-based
company holding intellectual property rights for therapeutics and diagnostics in the field of autoimmune disorders and oncology, to participate
in the funding of its autoimmune programs. During fiscal 2021, the Company abandoned its interests in Nekonal.
On
June 5, 2020, the Company effected a 100:1 reverse stock split. All share and per share information included in the consolidated financial
statements have been retroactively adjusted to reflect the impact of the reverse stock split. The shares of ordinary shares authorized
remained at an unlimited number of ordinary shares without par value.
Portage
filed a registration statement and prospectus with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(2)
under which it may sell shares, debt securities, warrants and units that Portage may sell in one or more offerings from time to time,
which became effective on March 8, 2021 (“Registration Statement” or “Prospectus”). The Registration Statement
includes:
|
·
|
a
base prospectus, which covers the offering, issuance and sales by us of up to $200,000,000
in
the aggregate of the securities identified above from time to time in one or more offerings;
|
|
·
|
a
sales agreement supplemental prospectus covering the offer, issuance and sale by us of up
to a maximum aggregate offering price of up to $50,000,000
of
our ordinary shares that may be issued and sold from time to time at-the-market, under sales
agreement, or sales agreement, with Cantor Fitzgerald & Co., or Cantor Fitzgerald, the
sales agent; and
|
|
·
|
a
prospectus supplement dated June 24, 2021, for the offer, issuance and sale by us of 1,150,000
ordinary shares for gross proceeds of approximately $26.5 million in a firm commitment underwriting
with Cantor Fitzgerald.
|
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30,
2021)
NOTE 1. NATURE OF OPERATIONS (Cont’d)
The
specific terms of any securities to be offered through the sales agreement with Cantor Fitzgerald, in the at the market offering, are
specified in the sales agreement prospectus. The $50,000,000 of ordinary shares that may be offered, issued and sold under the sales
agreement prospectus is included in the $200,000,000 of securities that may be offered, issued and sold by us under the base prospectus.
The sales under the prospectus will be deemed to be made pursuant to an “at the market offering” as defined in Rule 415(a)(4)
promulgated under the Securities Act of 1933 (the Securities Act). Upon termination of the sales agreement, any portion of the $50,000,000
included in the sales agreement prospectus that is not sold pursuant to the sales agreement will be available for sale in other offerings
pursuant to the base prospectus, and if no shares are sold under the sales agreement, the full $50,000,000 of securities may be sold
in other offerings pursuant to the base prospectus. See Note 2, “Liquidity” and Note 14, “Capital Stock” for
a further discussion.
NOTE
2. LIQUIDITY
As
of June 30, 2021, the Company had cash and cash equivalents of $28.6
million and total current liabilities of $2.5
million 2,506 (inclusive
of $0.7 million warrant liability settleable on a non-cash basis). For the three months ended June 30, 2021, the Company is reporting
a net loss of ($3.2) million 3,223 and
cash used in operating activities of $1.6 million(1,580).
As of July 31, 2021, we had approximately $28.0 million
of cash on hand.
During the quarter ended June 30, 2021, the Company commenced an “at the market” offering, under which
it sold 90,888 shares generating gross proceeds of approximately $2.6 million ($2.5 million, net of commissions). Further,
the Company initiated an offering pursuant to the Prospectus. On June 24, 2021, the Company completed a firm commitment underwritten
public offering of 1,150,000 ordinary shares at a public offering price of $23.00 per share for gross proceeds of approximately $26.5
million and was settled June 28, 2021. The Company incurred aggregate offering expenses for the public offering of approximately $1.8
million, including approximately $1.6 million of management, underwriting and selling expenses. The Company will use the net proceeds
raised to fund its research and development activities and support operations. The amount raised is sufficient to fund operations through
September 2022. Funds may be used to accelerate development activities to advance the Company’s product portfolio, working capital
and general corporate purposes.
The
Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the
foreseeable future and may never become profitable. The losses result primarily from its conduct of research and development activities.
The
Company historically has funded its operations principally from proceeds from issuances of equity and debt securities and would expect
to enter the capital markets if additional funding is required.
Portage Biotech Inc.
Notes to Condensed Consolidated Interim Financial Statements
(U.S. Dollars)
(Unaudited – See Notice to Reader dated August 30,
2021)
NOTE 2. LIQUIDITY (Cont’d)
COVID-19 Effect
Beginning
in early March 2020, the COVID-19 pandemic and the measures imposed to contain this pandemic have disrupted and are expected to continue
to impact the Company's business operations. The magnitude of the impact of the COVID-19 pandemic on the Company's productivity, results
of operations and financial position, and its disruption to the Company's business and clinical programs and timelines, will depend,
in part, on the length and severity of these restrictions and on the Company's ability to conduct business in the ordinary course.
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”), 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, 2021.
These
condensed consolidated interim financial statements have been prepared on an historical cost basis except for items disclosed herein
at fair value (see Note ----19, 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 and Board of Directors
on August 26, 2021.
Consolidation
The
condensed consolidated interim financial statements include the accounts of the Company and,
(a)
SalvaRx Limited (“SalvaRx”), a wholly-owned subsidiary, incorporated on May 6, 2015 in the British Virgin Islands.
(b)
iOx Therapeutics Ltd. (“iOx”), a United Kingdom based immune-oncology company, a 60.49%
subsidiary, incorporated in the United Kingdom on February 10, 2015.
(c)
Saugatuck Therapeutics, Ltd. (“Saugatuck”), a 70%
owned subsidiary incorporated in the British Virgin Islands.
(d)
Portage Developmental Services, a 100% owned subsidiary incorporated in Delaware, which provides human resources, and other services
to each operating subsidiary via a shared services agreement.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
3. BASIS OF PRESENTATION (Cont'd)
Consolidation
(Cont’d)
The
following companies were disposed of on March 3, 2021 (see Note 8, “Disposition of PPL”):
|
·
|
Portage
Pharmaceuticals Ltd. (“PPL”), a wholly-owned subsidiary acquired in a merger
on July 23, 2013, incorporated in the British Virgin Islands.
|
|
·
|
EyGen
Limited, (“EyGen”), a wholly-owned subsidiary of PPL, incorporated on September
20, 2016, in the British Virgin Islands.
|
|
·
|
Portage
Glasgow Ltd. (“PGL”), a 65%
subsidiary of PPL, incorporated in Glasgow, Scotland.
|
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 stockholders’ equity. Non-controlling interests
represent the 39.51%
shareholder ownership interest in iOx and the 30%
shareholder ownership interest in Saugatuck, which are consolidated by the Company. In years prior to March 31, 2021, non-controlling
interest also included 35%
in PGL.
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, research and development costs, fair value used for acquisition
and measurement of share-based compensation. Significant areas where critical judgments are applied include assessment of impairment
of investments and goodwill and the determination of the accounting acquirer and acquiree in the business combination accounting.
Reclassifications
Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on
the reported results of operations.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
4. SIGNIFICANT ACCOUNTING POLICIES
The
accounting policies are set out in Note 4 to the fiscal 2021 audited consolidated financial statements. These policies have been applied
consistently to all periods presented in these condensed consolidated interim financial statements.
Recent
Accounting Pronouncements
Impact of Adoption
of Significant New IFRS Standards in 2020
|
(a)
|
IAS
1: Presentation of Financial Statements, and IAS 8: Accounting Policies, Changes in Accounting
Estimates and Errors (Amendment)
|
The
amendments to IAS 1 and IAS 8 clarify the definition of material and seek to align the definition used in the Conceptual Framework with
that in the standards themselves, as well as ensuring the definition of material is consistent across all IFRS. The Company adopted these
amendments effective January 1, 2020. The adoption of these amendments did not have a significant impact on the Company’s annual
consolidated financial statements.
|
(b)
|
Conceptual
Framework for Financial Reporting
|
Together
with the revised Conceptual Framework published in March 2018, the IASB also issued Amendments to References to the Conceptual Framework
in IFRS Standards. The Company adopted the Revised Conceptual Framework effective January 1, 2020. The adoption of these amendments did
not have a significant impact on the Company’s annual consolidated financial statements.
IFRS Pronouncements
Issued But Not Yet Effective
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 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.
|
(c)
|
Annual
Improvements to IFRS Standards 2018-2020
|
The
annual improvements process addresses issues in the 2018-2020 reporting cycles including changes to IFRS 9, “Financial Instruments,”
IFRS 1, “First Time Adoption of IFRS,” IFRS 16, “Leases,” and IAS 41, “Biological Assets”.
i)
The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities.
ii)
The amendment to IFRS 1 allows a subsidiary adopting IFRS at a later date than its parent to also measure cumulative translation differences
using the amounts reported by the parent based on the parent’s date of transition to IFRS.
iii)
The amendment to IFRS 16’s illustrative example 13 removes the illustration of payments from the lessor related to leasehold improvements.
These
amendments will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance
and impacts on its consolidated financial statements.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
4. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
|
(d)
|
IAS
37: Onerous Contracts - Cost of Fulfilling a Contract
|
The
amendment to IAS 37 clarifies the meaning of costs to fulfil a contract and that before a separate provision for an onerous contract
is established, an entity recognizes any impairment loss that has occurred on assets used in fulfilling the contract, rather than on
assets dedicated to the contract. This amendment will be effective for annual periods beginning on or after January 1, 2022. The Company
is currently evaluating the new guidance and impacts on its consolidated financial statements.
|
(e)
|
IAS
16: Proceeds Before Intended Use
|
The
amendment to IAS 16 prohibits an entity from deducting from the cost of an item of Property, plant and equipment any proceeds received
from selling items produced while the entity is preparing the assets for its intended use (for example, the proceeds from selling samples
produced when testing a machine to see if it is functioning properly). It also clarifies that an entity is testing whether the asset
is functioning properly when it assesses the technical and physical performance of the asset. The amendment also requires certain related
disclosures. This amendment will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating
the new guidance and impacts on its consolidated financial statements.
|
(f)
|
IAS
1: Presentation of Financial Statements
|
The
amendment to IAS 1 clarifies how to classify debt and other liabilities as either current or non-current. The amendment will be effective
for annual periods beginning on or after January 1, 2023. The Company is currently evaluating the new guidance and impacts on its consolidated
financial statements.
|
(g)
|
Amendments
to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and Its Associate
or Joint Venture
|
The
amendment addresses the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed
to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that
constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognized in full. Any gain
or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognized only to the extent
of unrelated investors' interests in the associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely,
but an entity that early adopts the amendments must apply them prospectively. The Company is evaluating whether the adoption of the above
amendment will have a material impact on its financial statements.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
5. PREPAID EXPENSES AND OTHER RECEIVABLES
Schedule
of prepaid expenses and other receivables
|
|
|
|
|
(In
thousands)
|
|
As
of
June 30, 2021
|
|
As
of
March 31, 2021
|
|
|
|
|
|
Prepaid
insurance
|
|
$
|
1,032
|
|
|
$
|
1,445
|
|
Research
& development tax credits
|
|
|
849
|
|
|
|
649
|
|
Other
prepaid expenses
|
|
|
80
|
|
|
|
48
|
|
Other
receivables
|
|
|
34
|
|
|
|
34
|
|
Total
prepaid expenses and other receivables
|
|
$
|
1,995
|
|
|
$
|
2,176
|
|
In
October 2016, the Company's wholly-owned subsidiary, PPL, agreed to a settlement, from a claim made against a supplier, to receive $120,000
in annual instalments of $11,250.
Through June 30, 2021, the Company has collected $86,250.
The balance of $33,750
was classified $11,250 as a current asset in
prepaid expenses and other receivables and $22,500
as a long-term receivable as of each of June
30, 2021 and March 31, 2021. The installment receivable was assigned to Portage by PPL prior to the disposition of PPL (see Note 8, “Disposition
of PPL”). The installment note was repaid in full in July 2021.
NOTE
6. INVESTMENT IN MARKETABLE EQUITY SECURITIES
As
of March 31, 2020, the Company’s investment in marketable equity securities was comprised of 2,000
shares in Biohaven Pharmaceutical Holding Company
Limited (“Biohaven”), a public company listed on the New York Stock Exchange. The Company accounted for its investment in
Biohaven as a financial asset classified as fair value through the statement of other comprehensive income (“FVTOCI”).
In
August 2020, the Company sold the shares of Biohaven for proceeds of $140,000
resulting in a gain of $72,000.
The
following table is a roll-forward of the investment in Biohaven as of June 30, 2021 and 2020:
Schedule
of investment in marketable equity securities
|
|
|
|
|
|
|
Three
Months Ended June 30,
|
(In
thousands)
|
|
2021
|
|
2020
|
|
|
|
|
|
Balance,
beginning of period
|
|
$
|
–
|
|
|
$
|
68
|
|
Unrealized
gain on investment
|
|
|
–
|
|
|
|
78
|
|
Balance,
end of period
|
|
$
|
–
|
|
|
$
|
146
|
|
NOTE
7. INVESTMENT IN ASSOCIATE
Details
of the Company’s associate as of June 30, 2021 and March 31, 2021 are as follows:
Schedule
of investment associate
|
|
|
|
|
|
|
|
|
Name
|
|
Principal
Activity
|
|
Place
of Incorporation and
Principal Place of Business
|
|
Voting
Rights Held as
of June 30, 2021
|
|
Voting
Rights Held as
of March 31, 2021
|
Associate:
Stimunity S.A.
|
|
Biotechnology
|
|
Paris,
France
|
|
44.0%
|
|
44.0%
|
The
abovementioned associate is accounted for using the equity method in these condensed consolidated interim financial statements.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
7. INVESTMENT IN ASSOCIATE (Cont’d)
The
following table is a roll-forward of the Company’s investment in Stimunity S.A. as of June 30, 2021 and 2020:
Schedule
of investment in Stimunity S.A.
|
|
|
|
|
|
|
Three
Months Ended June 30,
|
(In
thousands)
|
|
2021
|
|
2020
|
|
|
|
|
|
Balance,
beginning of period
|
|
$
|
1,735
|
|
|
$
|
1,225
|
|
Additional
investment
|
|
|
–
|
|
|
|
1,000
|
|
Share
of (loss) income
|
|
|
(44
|
)
|
|
|
440
|
|
Balance,
end of period
|
|
$
|
1,691
|
|
|
$
|
2,665
|
|
On
June 1, 2020, the Company made an additional $1.0
million investment in Stimunity upon Stimunity's
achievement of certain agreed milestones, increasing its equity share in Stimunity to 44%
(see Note 17, “Commitments and Contingent Liabilities”).
The
Company accounts for its investment in Stimunity under the equity method and accordingly, records its share of Stimunity’s earnings
or loss based on its ownership percentage. The Company recorded equity in (loss) income in Stimunity of ($44,000)
and $440,000
for the three months ended June 30, 2021 and
2020, respectively.
Under
the shareholders agreement, Portage has (i) a preferential subscription right to maintain its equity interest in Stimunity in the event
of a capital increase from the issuance of new securities by Stimunity, except for issuances of new securities for stock options under
a merger plan or for an acquisition, or (ii) the right to vote against any (a) issuances of additional securities that would call for
the Company to waive its preferential subscription right, or (b) any dilutive issuance.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
8. DISPOSITION OF PPL
On
March 3, 2021, the Company disposed of 100%
of its interest in PPL, which includes PPL’s interest in PGL and EyGen for $10
to an entity controlled by one of the Company’s
current directors and one of the Company’s former directors (the “Purchaser’s Executives”). Under the terms of
the arrangement, all outstanding payable obligations were assumed by the purchaser. Simultaneously, the Company and the Purchaser’s
Executives entered into a Revenue Share Deed with PPL under which they will be entitled to certain revenue shares based on the achievement
of milestones defined in the Revenue Share Deed. The Company may also be entitled to recover an intercompany receivable from the purchaser
in the amount of $229,848
on the fourth anniversary of the Revenue Share
Deed. The Company valued its interest in the Revenue Share Deed and the recovery of the $229,848 at zero for financials statement purposes.
All other intercompany balances were cancelled. The Company no longer has any interest or obligations associated with PPL, PGL and EyGen,
other than the interests provided for in the Revenue Share Deed.
NOTE
9. INVESTMENTS IN PRIVATE COMPANIES
The
following is a discussion of our investments in private companies as of June 30, 2021 and March 31, 2021.
Sentien
In
August 2015, the Company acquired 210,210
shares of Series A preferred stock in Sentien
(“Preferred Stock”), a Medford, MA based private company for $700,000 of cash. The Preferred Stock is fully convertible into
an equal number of common shares. The Company’s holdings represent 5.06%
of the equity of Sentien on a fully diluted basis as of June 30, 2021 and March 31, 2021, respectively. The investment in Sentien has
been irrevocably designated as a financial asset recorded at fair value with changes in fair value recorded through other comprehensive
income. As of March 31, 2020, the Company recorded an unrealized loss of $0.7
million after determining that cost no longer
was the best estimate of fair value due to a significant change in the strategy of Sentien and determined that the investment in Sentien
no longer had any fair value as Sentien was no longer pursing the proposed indication from the time of the Company's initial investment.
Intensity
In
connection with the SalvaRx Acquisition in fiscal 2019, the Company acquired a $4.5 million interest in Intensity, a clinical stage biotechnology
company, of 1.0
million shares, which represented a 7.5%
equity interest in Intensity. The investment was recorded at fair value (which approximates cost) at the acquisition date. The investment
in Intensity has been irrevocably designated as a financial asset recorded at fair value with gains and losses recorded through other
comprehensive income. The fair value of the asset is determined by considering other comparable equity funding transactions by Intensity
with unrelated investors.
On
July 11, 2019, the Company entered into an agreement with Fast Forward Innovations Limited ("Fast Forward") to purchase Intensity
Holdings Limited ("IHL"), a wholly-owned subsidiary of Fast Forward. The Company paid $1.3
million for IHL through the issuance of 129,806
ordinary shares. The sole asset of IHL consists
of 288,458
shares of the private company, Intensity. This
transaction increased the Company's ownership to 1,288,458
shares of Intensity.
During
the year ended March 31, 2020, the Company recorded an unrealized gain of $1.6
million with respect to its investment in Intensity
based upon Intensity’s then most recent valuation. There were no unrealized gains or losses recognized in the three-month periods
ended June 30, 2021 and 2020.
As
of each of June 30, 2021 and March 31, 2021, the Company owned approximately 8%
of the outstanding shares of Intensity, on a fully diluted basis.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
10. GOODWILL
Schedule
of IPR&D projects
|
|
|
|
|
(In
thousands)
|
|
As
of
June 30, 2021
|
|
As
of
March 31, 2021
|
|
|
|
|
|
Balance,
beginning of period
|
|
$
|
43,324
|
|
|
$
|
43,324
|
|
Balance,
end of period
|
|
$
|
43,324
|
|
|
$
|
43,324
|
|
The
Company’s goodwill arose from the acquisition of SalvaRx and its portfolio of several projects and investments.
As
of June 30, 2021, the Company determined that it has only one cash-generating unit (“CGU”), the consolidated Portage Biotech,
Inc.
Impairment
Review
On
an annual basis, pursuant to IAS 36, “Impairment of Assets,” the Company assesses its long-lived assets with definite lives,
which are not yet available for use, for potential indicators of impairment.
If
any such indication exists, the Company estimates the recoverable amount of the asset or CGU and compares it to the carrying value.
The
Company performed its annual impairment test in each of fiscal 2021 and fiscal 2020 and estimated the recoverable amount of the above-noted
CGU based on its value in use, which was determined using a capitalized cash flow methodology and categorized within level 3 of the fair
market value hierarchy.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
10. GOODWILL (Cont’d)
The
recoverable amount of the CGU has been determined based on its value in use. The recoverable amount considered assumptions based on probabilities
of technical, regulatory and clinical acceptances and financial support. Further, Management uses risk-adjusted cash flow projections
based on financial budgets. Management believes that any reasonably possible change in the key assumptions on which the recoverable amount
is based would not cause the carrying amount to exceed its recoverable amount. The discount rate has been determined based on the Company’s
best estimate of a risk adjusted discount rate.
The
key assumptions used in the calculation of the recoverable amount include forecasts of the following:
(b)
|
|
normalized
operating expenses;
|
(d)
|
|
capital
expenditures.
|
Discounted
cash flows are determined with reference to undiscounted risk adjusted cash flows, and the discount rate approximated 20.0%
and 20.5%
as of March 31, 2021 and 2020, respectively, based on the individual characteristics of the Company’s CGU, the risk-free rate of
return and other economic and operating factors.
Additionally,
at the end of each reporting period, the Company is required to assess whether there is any indication that an asset may be impaired.
Pursuant to IAS 36, the Company reviewed its assets for any indicators of impairment and considered underlying fundamentals, execution,
de-risking/advancement of assets and the value creation activities during the three months ended June 30, 2021.
As
of June 30, 2021, management assessed whether any indications of impairment existed for the Company’s CGU and concluded no indicators
were present. Therefore, a test for impairment was not required and no impairment was recorded for the three months ended June 30, 2021.
NOTE
11. IN-PROCESS RESEARCH AND DEVELOPMENT AND DEFERRED TAX LIABILITY
In-process
research and development (“IPR&D”) consists of the following projects (in 000’$):
Schedule
of In process research and development
|
|
|
|
|
|
|
Project
#
|
|
Description
|
|
Value
as of
June 30, 2021
|
|
Value
as of
March 31, 2021
|
iOx:
|
|
|
|
|
|
|
|
|
|
|
IMM 60
|
|
Melanoma
& Lung Cancers
|
|
$
|
84,213
|
|
|
$
|
84,213
|
|
IMM 65
|
|
Ovarian/Prostate
Cancers
|
|
|
32,997
|
|
|
|
32,997
|
|
|
|
|
|
|
117,210
|
|
|
|
117,210
|
|
Oncomer/Saugatuck
|
|
DNA
Aptamers
|
|
|
178
|
|
|
|
178
|
|
|
|
|
|
$
|
117,388
|
|
|
$
|
117,388
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liability
|
|
|
|
$
|
24,171
|
|
|
$
|
24,050
|
|
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
11. IN-PROCESS RESEARCH AND DEVELOPMENT AND DEFERRED TAX LIABILITY (Cont’d)
As
of June 30, 2021, management assessed whether any indications of impairment existed for the Company’s IPR&D and concluded no
indicators were present. Therefore, a test for impairment was not required and no impairment was recorded for the three months ended
June 30, 2021.
Deferred
tax liability (DTL) represents iOx’s estimated tax on the difference between book and tax basis of the IPR&D which is taxable
in the United Kingdom. As of June 30, 2021, the Company recorded deferred tax expense of $0.1
million to reflect the effect of the change in
currency translation rate during the three months ended June 30, 2021 for this obligation settleable in Great British Pounds.
NOTE
12. UNSECURED NOTES PAYABLE
Following
is a roll-forward of notes payable:
Schedule
of notes payable
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
CURRENT
|
|
NON-CURRENT
|
|
|
(In
thousands)
|
|
PPL
|
|
iOx
|
|
SalvaRx
|
|
Total
|
|
|
|
|
|
|
|
|
|
Balance, April
1, 2020
|
|
$
|
200
|
|
|
$
|
100
|
|
|
$
|
3,361
|
|
|
$
|
3,661
|
|
Repayment
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,020
|
)
|
|
|
(1,020
|
)
|
Amortization
of debt discount
|
|
|
–
|
|
|
|
–
|
|
|
|
76
|
|
|
|
76
|
|
Value of notes exchanged in
warrant exercise
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,640
|
)
|
|
|
(2,640
|
)
|
Settlement
in connection with disposition of PPL
|
|
|
(200
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(200
|
)
|
Loss on extinguishment
of debt
|
|
|
–
|
|
|
|
–
|
|
|
|
223
|
|
|
|
223
|
|
Proceeds
from loan payable
|
|
|
–
|
|
|
|
50
|
|
|
|
–
|
|
|
|
50
|
|
Balance,
March 31, 2021
|
|
$
|
–
|
|
|
$
|
150
|
|
|
$
|
–
|
|
|
$
|
150
|
|
Proceeds
from loan payable
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Balance,
June 30, 2021
|
|
$
|
–
|
|
|
$
|
150
|
|
|
$
|
–
|
|
|
$
|
150
|
|
PPL
and EyGen Unsecured Notes Payable
During
the year ended March 31, 2017, the Company's subsidiaries, PPL and EyGen, completed a private placement of unsecured notes (the "PPL
Unsecured Notes"). The balance outstanding as of March 31, 2020 was $0.2
million.
The
PPL Unsecured Notes were settled as part of the disposition of PPL in March 2021 (see Note 8, “Disposition of PPL”).
SalvaRx Unsecured
Notes Payable and Warrants
In
connection with the SalvaRx Acquisition in January 2019, the Company assumed $3.96
million of principal in unsecured notes due on
March 2, 2021 (or earlier upon a qualifying event), that bear interest at 7%
per annum (the "SalvaRx Notes"). The fair value of the SalvaRx Notes was determined to be $3.4 million at January 2019. As the
SalvaRx Acquisition was a qualifying event, the SalvaRx Notes became due upon the acquisition. In December 2019, the maturity date of
the SalvaRx Notes was extended to June 2021.
The
holders of the SalvaRx Notes received $7,500 of warrants in respect of each $10 thousand of principal issued. The warrants vest in the
event of a qualifying transaction and are exercisable at a 30% discount to the implied valuation of SalvaRx. On the Acquisition Date,
the fair value of the warrants, which are included in non-controlling interest, was determined to be $2.5
million
using the Black Scholes Model.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
12. UNSECURED NOTES PAYABLE (Cont’d)
During
September 2020, the Company settled the SalvaRx Notes obligations originally due in June 2021 in an aggregate principal amount of approximately
$3.7 million, plus accrued interest of $0.75 million in exchange for cash payments totaling $1.77
million and 397,604
of the associated SalvaRx warrants with an exercise
price of $6.64
per share.
The noteholders who
accepted the offer exchanged their SalvaRx warrants for an equal number of Portage shares at the same price per share. The
Company accounted for the contractual value of the exercised and outstanding warrants of $2.64 million (397,604 shares at $6.64 per share)
as accrued equity issuable at September 30, 2020. The Company also recorded a loss of $1.26 million during the year ended March 31, 2021,
to recognize the discount between the fair value of the underlying shares on October 13, 2020, the settlement date, ($9.80 per share)
and the warrant exercise (contract) price of $6.64 per share.
Four
of the Company's directors, Gregory Bailey, James Mellon (former director), Steven Mintz (in trust) and Kam Shah, received, in total,
363,718 of
the warrants pursuant to this transaction. Subsequent to the exercise of the warrants in October 2020, Portage had 12,083,395
and 49,701
issued and outstanding shares and warrants, respectively.
The
Company also recorded a loss on early extinguishment of debt of $0.22
million in the year ended March 31, 2021.
iOx Unsecured
Notes Payable
In
connection with the SalvaRx Acquisition in January 2019, the Company
assumed $2.0 million of 7% convertible notes issued by iOx, a wholly owned subsidiary of SalvaRx (the “Convertible Notes”),
of which the Company holds $1.9 million. As a
result of the SalvaRx Acquisition, iOx became a subsidiary of the Company during the year ended March 31, 2019. In accordance with IFRS
3, the fair value, including interest receivable, of the Convertible Notes were effectively settled against the note receivable upon
the business combination. $0.15 million Convertible Notes were outstanding at each of June 30, 2021 and March 31, 2021. The holder of
the Convertible Notes can convert the notes and accrued interest into ordinary shares of iOx at any time before maturity at £120
per share. There is an automatic conversion in the event iOx raises $2.0
million, and the conversion price will be determined
based on the timing of the capital raised and the price at which the money was raised. iOx has the right to repay the Convertible Notes
together with accrued interest at any time.
NOTE
13. WARRANT LIABILITY
Below
is the roll-forward of warrants issued by entity (see Note 12, “Unsecured Notes Payable”):
Schedule
of warrant liability
|
|
|
|
|
|
|
|
|
PBI
|
|
|
Exercise
Price
|
|
Warrants
|
|
Amount
|
|
|
|
|
In
000’
|
|
In
000’$
|
Warrants
outstanding, April 1, 2021
|
|
$
|
6.64
|
|
|
|
49,701
|
|
|
$
|
1,120
|
|
Fair
value adjustment as of June 30, 2021 (1) (2)
|
|
|
–
|
|
|
|
–
|
|
|
|
(369
|
)
|
Warrants
outstanding, June 30, 2021
|
|
$
|
6.64
|
|
|
|
49,701
|
|
|
$
|
751
|
|
(1)
|
|
Portage
warrant liability valued at contract price, adjusted for fair value using the Black Scholes
model.
|
The Black
Scholes assumptions used in the fair value calculation of the warrants as of June 30, 2021 were:
Risk free
rate: 0.11%
Expected
Dividend: $0
Expected
Life: 1.28 years
Volatility:
92.6%
(2)
|
|
The
Company recognized a gain of $0.4 million in the three months ended June 30, 2021 to reflect
the change in fair value of the underlying warrants. The warrants were not outstanding during
the three months ended June 30, 2020.
|
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
14. CAPITAL STOCK
|
(a)
|
Authorized
ordinary shares: Unlimited number of common shares without par value.
|
|
(b)
|
Following
is a roll-forward of ordinary shares as of June 30, 2021, and 2020:
|
Common
shares: Unlimited number of common shares without par value
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
|
Ordinary
Shares
|
|
Amount
|
|
Ordinary
Shares
|
|
Amount
|
|
|
In
000’
|
|
In
000’$
|
|
In
000’
|
|
In
000’$
|
Balance,
beginning of period
|
|
|
12,084
|
|
|
$
|
130,649
|
|
|
|
10,988
|
|
|
$
|
117,817
|
|
Shares
issued in a private placement, net of share issue costs
|
|
|
1,241
|
|
|
|
27,216
|
|
|
|
698
|
|
|
|
6,732
|
|
Shares
issued for services
|
|
|
1
|
|
|
|
30
|
|
|
|
–
|
|
|
|
–
|
|
Balance,
end of period
|
|
|
13,326
|
|
|
$
|
157,895
|
|
|
|
11,686
|
|
|
$
|
124,549
|
|
|
(c)
|
Number
of ordinary shares have been retroactively adjusted to reflect the impact of 100:1 reverse
stock split on June 5, 2020.
|
On
June 16, 2020, the Company completed a private placement of 698,145
restricted ordinary shares at a price of $10.00
per share for gross proceeds of $6.98
million to accredited investors. Directors of
the Company subscribed for 215,000
shares, or approximately 30.8% of the private
placement, for proceeds of $2.15
million. The Company incurred costs of approximately
$0.25 million in connection with the offering, which was treated as contra-equity on the Company’s balance sheet.
During
the quarter ended June 30, 2021, the Company commenced an “at the market” offering, under which it sold 90,888
shares generating gross proceeds of approximately
$2.6 million
($2.5 million,
net of commissions). Further, the Company initiated an offering pursuant to the Prospectus. On June 24, 2021, the Company
completed a firm commitment underwritten public offering of 1,150,000 ordinary shares at a public offering price of $23.00 per share
for gross proceeds of approximately $26.5 million and was settled June 28, 2021. The Company incurred aggregate offering expenses for
the public offering of approximately $1.8 million, including approximately $1.6 million of management, underwriting and selling expenses.
The Company will use the net proceeds raised to fund its research and development activities and support operations. The amount raised
is sufficient to fund operations through at least September 2022. Funds may be used to accelerate development activities to advance the
Company’s product portfolio, working capital and general corporate purposes.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
15. STOCK OPTION RESERVE
|
(a)
|
The
following table provides the activity for the Company’s stock option reserve for the
three months ended June 30, 2021 and 2020:
|
Disclosure
Of Terms Stock Option Reserve Explanatory
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30,
|
|
|
2021
|
|
2020
|
(In
thousands)
|
|
Non-Controlling
Interest
|
|
Stock
Option Reserve
|
|
Non-Controlling
Interest
|
|
Stock
Option Reserve
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$
|
11,468
|
|
|
$
|
7,977
|
|
|
$
|
10,618
|
|
|
$
|
58
|
|
Share-based
compensation expense
|
|
|
98
|
|
|
|
2,082
|
|
|
|
295
|
|
|
|
–
|
|
Balance,
end of period
|
|
$
|
11,566
|
|
|
$
|
10,059
|
|
|
$
|
10,913
|
|
|
$
|
58
|
|
Stock Options
The
Board of Directors of the Company (the "Board") established a stock option plan (the "2013 Option Plan") under which
options to acquire ordinary shares of the Company are granted to directors, employees and consultants of the Company. The maximum number
of ordinary shares issuable under the 2013 Option Plan shall not exceed 10% of the total number of issued and outstanding ordinary shares,
inclusive of all shares presently reserved for issuance pursuant to previously granted stock options. If a stock option was surrendered,
terminated or expired without being exercised, the ordinary shares reserved for issuance pursuant to such stock option were available
for new stock options granted under the 2013 Option Plan. The options vest on a schedule determined by the Board of Directors, generally
over two to four years, and expire after five years.
As
of March 31, 2019, the Board decided to discontinue the 2013 Option Plan and during the year ended March 31, 2021, 2,980
outstanding options issued under the plan expired
unexercised and no options remained outstanding under the 2013 Option Plan.
On
June 25, 2020, at the annual meeting of shareholders, the Company’s new incentive stock option plan (the “2020 Stock Option
Plan”) was approved, which authorized the directors to fix the option exercise price and to issue stock options under the plan
as they see fit. The Company's 2020 Stock Option Plan is a 10% rolling stock option plan under which the directors are authorized to
grant up to a maximum of 10% of the issued and outstanding ordinary shares on the date of grant.
Effective
January 13, 2021, the Company amended and restated its 2020 Stock Option Plan to permit the grant of additional types of equity compensation
securities, including restricted stock units and dividend equivalent rights (the "2021 Equity Incentive Plan"). The aggregate
number of equity securities, which may be issued under the 2021 Equity Incentive Plan has not been changed. Pursuant to the 2021
Equity Incentive Plan, on January 13, 2021, the Company granted an aggregate of 868,000
stock options exercisable
at a price of US$17.75
per share, representing
the closing price of the shares on the day immediately preceding the grant date, which expire on January 13, 2031 to various directors,
officers and consultants of the Company. 350,000
options granted to members
of the board of directors vest 1/3 on grant date, 1/3 on the first anniversary of the grant and 1/3 on the second anniversary of the
grant. 518,000
options granted to consultants
(one of whom is also a director) vest 1/3 on each of the first three anniversaries of the date of grant.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
15. STOCK OPTION RESERVE (Cont’d)
Additionally,
the Company granted 243,000
restricted stock units
on January 13, 2021, with a fair value of $17.75
per share, which was
the closing price on the day immediately preceding the grant date. The restricted stock units vested on the date of grant but underlying
shares cannot be sold until one of four conditions are met. In accordance with IFRS 2, “Share-based Payment,” the Company
recognized compensation expense of $4.3
million in the year
ended March 31, 2021, in connection with the RSU grants.
|
(b)
|
The
movements in the number of options issued were:
|
Schedule
of outstanding stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PBI 2021 Equity Incentive
Plan
|
|
PBI
2013 Option Plan
|
|
iOx Option Plan
(Subsidiary Plan)
|
|
|
Three
Months Ended June 30,
|
|
Three
Months Ended June 30,
|
|
Three
Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Balance,
beginning of period
|
|
|
868,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,980
|
|
|
|
1,924
|
|
|
|
2,599
|
|
Granted
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Expired
or forfeited
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Balance,
end of period
|
|
|
868,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,980
|
|
|
|
1,924
|
|
|
|
2,599
|
|
Exercisable,
end of period
|
|
|
116,666
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,980
|
|
|
|
1,764
|
|
|
|
1,723
|
|
The
Board discontinued the 2013 Option Plan in fiscal 2019.
|
(c)
|
Following
are the weighted average exercise price and the remaining contractual life for outstanding
options by plan:
|
Schedule
of weighted average exercise price and the remaining contractual life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PBI 2021 Equity Incentive
Plan
|
|
PBI 2013 Option Plan
|
|
iOx Option Plan
(Subsidiary Plan)
|
|
|
As
of June 30,
|
|
As
of June 30,
|
|
As
of June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Weighted
average exercise price
|
|
$
|
17.75
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
15.00
|
|
|
$
|
165.20
|
|
|
$
|
152.74
|
|
Weighted
average remaining contractual life (in years)
|
|
|
9.54
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1.47
|
|
|
|
0.70
|
|
|
|
1.24
|
|
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 on the date of the grants for all options outstanding as of June 30, 2021 and March 31, 2021.
The
Company recorded approximately $2.1
million of stock-based compensation expense with
respect to the 2021 Equity Incentive Plan in the three months ended June 30, 2021. There were no stock options outstanding in the prior
year period under this plan. The Company expects to record additional stock-based compensation expense of $8.9 million through January
2024 with respect to the 2021 Equity Incentive Plan. Additionally, the intrinsic value of the stock options granted under the 2021 Equity
Incentive Plan was approximately $2.8 million at June 30, 2021, of which $0.4 million is associated with vested exercisable options.
The
Company recorded $0.1 million
and $0.3 million
of stock-based compensation expense related to the iOx stock option plan for the three months ended June 30, 2021 and 2020, respectively.
The Company expects to record $0.1 million of aggregate stock-based compensation expense through the remaining vesting period of outstanding
iOx options. Additionally, the intrinsic value of the iOx stock options was approximately $0.1 million at June 30, 2021, substantially
all of which is associated with vested exercisable options.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
16. (LOSS) PER SHARE
Basic
earnings per share ("EPS") is calculated by dividing the net income (loss) attributable to ordinary equity holders of the Company
by the weighted average number of ordinary shares outstanding during the year.
Diluted
EPS is calculated by dividing the net income (loss) attributable to ordinary equity holders of the Company by the weighted average number
of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion
of all the dilutive potential ordinary shares into ordinary shares.
The
following table reflects the loss and share data used in the basic and diluted EPS calculations (dollars in thousands, except per share
amounts):
Schedule
of basic and diluted EPS calculations
|
|
|
|
|
|
|
Three
Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
Numerator
(in 000’$)
|
|
|
|
|
|
|
|
|
Net
loss attributable to owners of the Company
|
|
$
|
(3,066
|
)
|
|
$
|
(696
|
)
|
Denominator
(in 000’)
|
|
|
|
|
|
|
|
|
Weighted
average number of shares – Basic and Diluted
|
|
|
12,213
|
|
|
|
11,104
|
|
Basic
and diluted (loss) per share (Actual)
|
|
$
|
(0.25
|
)
|
|
$
|
(0.06
|
)
|
The
inclusion of the Company's stock options, restricted stock units 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 for the three months ended June 30, 2021, and 2020. The following table reflects
the outstanding securities by year that would have an anti-dilutive effect on loss per share, and accordingly, were excluded from the
calculation.
Schedule
of Anti-Dilutive effect on Loss Per Share
|
|
|
|
|
|
|
As
of June 30,
|
|
|
2021
|
|
2020
|
Stock
options
|
|
|
868,000
|
|
|
|
2,980
|
|
Restricted
stock units
|
|
|
243,000
|
|
|
|
–
|
|
Warrants
|
|
|
49,701
|
|
|
|
–
|
|
Inclusion
of outstanding options or other common stock equivalents 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.
NOTE
17. COMMITMENTS AND CONTINGENT LIABILITIES
The
Company is committed to invest approximately €1.5 million ($1.9
million) in Stimunity upon Stimunity’s
achievement of certain agreed milestones. During the year ended March 31, 2019, the Company made a discretionary investment of €600,129
($688,359)
and on June 1, 2020, the Company made an additional discretionary investment of €800,000 ($1.0
million) investment towards the commitment. The
remaining commitment was €100,000 as of March 31, 2021 (see Note 7, “Investment in Associate”).
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
18. RELATED PARTY TRANSACTIONS
Investments
The
Company has entered into related party transactions and certain services agreements with its investees. Key management of the Company
has also entered into related party transactions with investees. Key management personnel are those persons having the 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.
The
following subsidiaries and associates are considered related parties:
|
(a)
|
Stimunity.
One of the three directors on the Board of Directors of Stimunity is controlled by Portage
(see Note 7, “Investment in Associate”).
|
|
(b)
|
iOx.
Two of the five directorships on the Board of Directors of iOx is controlled by Portage.
Additionally, Portage has an observer on the Board of iOx. The CEO of the Company is also
the CEO of iOx, and the management team of the Company comprise the management team of iOx.
|
|
(c)
|
Saugatuck.
One of the three directorships on the Board of Directors of Saugatuck is controlled by Portage.
Additionally, the CEO of the Company is also the CEO of Saugatuck and the management team
of the Company comprise the management team of Saugatuck.
|
|
(d)
|
Intensity.
One of the four directorships on the Board of Directors of Intensity is represented by Portage.
Additionally, the CEO of the Company is an officer and employee of Intensity (see Note 9,
“Investments in Private Companies”).
|
|
(e)
|
PGL.
PPL holds 65% equity in PGL, committed to provide financing and also handles financial and
administrative matters of PGL. The Company disposed of 100% of its interests in PPL and PGL
on March 3, 2021 (see Note 8, “Disposition of PPL”).
|
|
(f)
|
Portage
Development Services. A 100% owned subsidiary incorporated in Delaware, which provides
human resources, and other services to each operating subsidiary via a shared services agreement.
|
The
following are significant related party balances and transactions other than those disclosed elsewhere in the condensed consolidated
interim financial statements:
Interest
expense includes $0.06 million
interest incurred on notes issued to directors during the three months ended June 30, 2020.
In
January 2020, a board member of the Company advanced the Company $1.0
million, which was repaid in July 2020. There
was no interest or fees associated with this advance.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
18. RELATED PARTY TRANSACTIONS (Cont’d)
Transactions
between the parent company and its subsidiaries, which are related parties, have been eliminated in consolidation and are not disclosed
in this note.
NOTE
19. 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, therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
The
following table summarizes the Company’s financial instruments as of June 30, 2021 and March 31, 2021:
Schedule
of financial instruments
|
|
|
|
|
|
|
|
|
|
|
As
of June 30, 2021
|
|
As
of March 31, 2021
|
(In thousands)
|
|
Amortized
Cost
|
|
Fair
Value through Other Comprehensive
Income (FVTOCI)
|
|
Amortized
Cost
|
|
FVTOCI
|
|
|
|
|
|
|
|
|
|
Financial
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
28,617
|
|
|
$
|
–
|
|
|
$
|
2,770
|
|
|
$
|
–
|
|
Prepaid
expenses and other receivables
|
|
$
|
1,995
|
|
|
$
|
–
|
|
|
$
|
2,176
|
|
|
$
|
–
|
|
Investments
|
|
$
|
–
|
|
|
$
|
9,100
|
|
|
$
|
–
|
|
|
$
|
9,144
|
|
|
|
Amortized
Cost
|
|
Fair
Value through Profit or Loss (FVTPL)
|
|
Amortized
Cost
|
|
FVTPL
|
Financial
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
1,605
|
|
|
$
|
–
|
|
|
$
|
1,938
|
|
|
$
|
–
|
|
Unsecured
notes payable
|
|
$
|
150
|
|
|
$
|
–
|
|
|
$
|
150
|
|
|
$
|
–
|
|
Warrant
liability
|
|
$
|
–
|
|
|
$
|
751
|
|
|
$
|
–
|
|
|
$
|
1,120
|
|
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, receivables and investments in equities and private entities,
accounts payable, warrant liability and unsecured notes payable.
The
Company classifies the fair value of these transactions according to the following fair value hierarchy based on the amount of observable
inputs used to value the instrument:
|
·
|
Level
1 – Values are based on unadjusted quoted prices available in active markets for identical
assets or liabilities as of the reporting date.
|
|
·
|
Level
2 – Values are based on inputs, including quoted forward prices for commodities, time
value and volatility factors, which can be substantially observed or corroborated in the
marketplace. Prices in Level 2 are either directly or indirectly observable as of the reporting
date.
|
|
·
|
Level
3 – Values are based on prices or valuation techniques that are not based on observable
market data. Investments are classified as Level 3 financial instrument.
|
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Cont’d)
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:
Investment
in Biohaven: Fair value was based on a quoted market price of $34.03
per share as of March 31, 2020 (Level 1). The
investment was sold in August 2020.
Investment
in Sentien: Fair value of the asset is determined by considering strategy changes by Sentien (Level 3).
Investment
in Intensity: Fair value of the asset is determined by considering other comparable equity funding transactions by Intensity with
unrelated investors (Level 3).
Accrued
equity issuable: The fair value is estimated based on the average of the quoted market prices for the period in which the shares
were earned (Level 1).
Unsecured
notes payable: The fair value is estimated using a Black Scholes model (Level 3) (see Note 12, Unsecured Notes Payable”).
Warrant
Liability: The fair value is estimated using a Black Scholes model (Level 3) (see Note 13, “Warrant Liability”).
There
have been no transfers between levels of the fair value hierarchy for the three months ended June 30, 2021 and the year ended March 31,
2021.
The
Company’s financial instruments are exposed to certain financial risks: credit risk and liquidity risk.
Credit Risk
Credit
risk is the risk of loss associated with a counterparty’s inability to fulfil its payment obligations. The credit risk is attributable
to various financial instruments, as noted below. The credit risk is limited to the carrying value as reflected in the Company’s
condensed consolidated interim statements of financial position.
Cash.
Cash is held with major international financial institutions and therefore the risk of loss is minimal.
Other
receivables. The Company was exposed to credit risk attributable to its debtor since a significant portion of this amount represents
the amount agreed on a settlement of a claim by PPL (see Note 5, “Prepaid Expenses and Other Receivables”), originally payable
over the next four years. The installment note was repaid in full in July 2021 (see Note 22, “Events After the Balance Sheet Date
– Installment Note Receivable”).
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Cont’d)
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 meet its operating needs and needs
for investing in new projects. The Company believes that it has sufficient funding to finance the committed drug development work, apart
from meeting its operational needs for the foreseeable future.
However,
as a biotech company at an early stage of development and without significant internally generated cash flows, there are inherent liquidity
risks, including the possibility that additional financing may not be available to the Company, or that actual drug development expenditures
may exceed those planned. The current uncertainty in global markets could have an impact on the Company’s future ability to access
capital on terms that are acceptable to the Company. There can be no assurance that required financing will be available to the Company.
NOTE
20. CAPITAL DISCLOSURES
The
Company considers the items included in shareholders’ equity as capital. The Company had accounts payable and accrued expenses
of approximately $1.6 million
as of June 30, 2021 (approximately $1.9 million
as of March 31, 2021) and current assets of approximately $30.6 million 30,612
as of June 30, 2021 (approximately $4.9 million
as 4,946 of
March 31, 2021). 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.
As
of June 30, 2021, shareholders’ equity attributable to the owners of the company was approximately $127.7 million 127,711
(approximately $101.4 million 101,449
as of March 31, 2021).
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 three months ended June 30,
2021 and 2020.
Portage
Biotech Inc.
Notes
to Condensed Consolidated Interim Financial Statements
(U.S.
Dollars)
(Unaudited
– See Notice to Reader dated August 30, 2021)
NOTE
21. NON-CONTROLLING INTEREST
Schedule
of non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
PGL
|
|
SalvaRx
|
|
iOx
|
|
Saugatuck
|
|
Total
|
Non-controlling
interest as of April 1, 2021
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
46,173
|
|
|
$
|
(20
|
)
|
|
$
|
46,153
|
|
Stock-based
compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
98
|
|
|
|
–
|
|
|
|
98
|
|
Net
(loss) attributable to non-controlling interest
|
|
|
–
|
|
|
|
–
|
|
|
|
(140
|
)
|
|
|
(17
|
)
|
|
|
(157
|
)
|
Non-controlling
interest as of June 30, 2021
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
46,131
|
|
|
$
|
(37
|
)
|
|
$
|
46,094
|
|
(In
thousands)
|
|
PGL
|
|
SalvaRx
|
|
iOx
|
|
Saugatuck
|
|
Total
|
Non-controlling
interest as of April 1, 2020
|
|
$
|
(81
|
)
|
|
$
|
2,451
|
|
|
$
|
46,712
|
|
|
$
|
28
|
|
|
$
|
49,110
|
|
Stock-based
compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
295
|
|
|
|
–
|
|
|
|
295
|
|
Net
income attributable to non-controlling interest
|
|
|
–
|
|
|
|
–
|
|
|
|
41
|
|
|
|
|
|
|
|
41
|
|
Non-controlling
interest as of June 30, 2020
|
|
$
|
(81
|
)
|
|
$
|
2,451
|
|
|
$
|
47,048
|
|
|
$
|
28
|
|
|
$
|
49,446
|
|
NOTE
22. EVENTS AFTER THE BALANCE SHEET DATE
Installment
Note Receivable
The
installment note receivable of approximately $0.034
million described in Note 5, “Prepaid Expenses
and Other Receivables,” was repaid in full in July 2021.
F-27