Portage Biotech (PRTG) - 2024 Q1 - Quarterly Report

Condensed Consolidated Interim Financial Statements This section presents the company's financial position, performance, equity changes, and cash flows for the interim period Condensed Consolidated Interim Statements of Financial Position As of June 30, 2023, total assets slightly decreased to $98.37 million, driven by lower cash, while liabilities increased and equity declined Condensed Consolidated Interim Statements of Financial Position (in thousands USD) | Account | June 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $7,698 | $10,545 | | Total current assets | $10,892 | $13,676 | | In-process research and development | $81,683 | $81,683 | | Total non-current assets | $87,477 | $85,453 | | Total assets | $98,369 | $99,129 | | Liabilities and Equity | | | | Total current liabilities | $2,638 | $1,865 | | Total non-current liabilities | $23,081 | $21,869 | | Total liabilities | $25,719 | $23,734 | | Total equity | $72,650 | $75,395 | | Total liabilities and equity | $98,369 | $99,129 | Condensed Consolidated Interim Statements of Operations and Other Comprehensive Income (Loss) For the three months ended June 30, 2023, the net loss significantly increased to $5.9 million, primarily due to higher R&D expenses and a lower income tax benefit Statement of Operations Highlights (in thousands USD, except per share amounts) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Research and development | $3,627 | $1,876 | | General and administrative expenses | $1,370 | $2,211 | | Loss from operations | $(4,997) | $(4,087) | | Net loss | $(5,926) | $(1,625) | | Net loss attributable to owners | $(5,919) | $(1,729) | | Basic and diluted loss per share | $(0.33) | $(0.13) | | Weighted average shares outstanding | 17,701 | 13,351 | - The company recognized a net unrealized gain on investments of $1.77 million in Q1 2023, compared to none in the prior year period, contributing to a total comprehensive loss of $4.16 million[8] Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Total equity decreased to $72.7 million by June 30, 2023, primarily due to a net loss, partially offset by share-based compensation and share issuances Changes in Shareholders' Equity for the Three Months Ended June 30, 2023 (in thousands USD) | Description | Amount | | :--- | :--- | | Balance, April 1, 2023 | $75,395 | | Share-based compensation expense | $769 | | Shares issued under ATM, net | $613 | | Net unrealized gain on investments | $1,769 | | Net loss for period | $(5,926) | | Balance, June 30, 2023 | $72,650 | Condensed Consolidated Interim Statements of Cash Flows Cash and cash equivalents decreased by $2.8 million, with $3.5 million used in operations and $0.6 million provided by financing activities, resulting in an ending balance of $7.7 million Cash Flow Summary (in thousands USD) | Cash Flow Activity | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,453) | $(2,176) | | Net cash provided by financing activities | $606 | $ - | | Decrease in cash and cash equivalents | $(2,847) | $(2,176) | | Cash and cash equivalents at beginning of period | $10,545 | $23,352 | | Cash and cash equivalents at end of period | $7,698 | $21,176 | Notes to Condensed Consolidated Interim Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated interim financial statements Note 1: Nature of Operations Portage Biotech Inc. is a clinical-stage immuno-oncology company developing therapies for invasive cancers, with nine product candidates across four platforms - The company's portfolio consists of four platforms, including invariant natural killer T-cell (iNKT) engagers and treatments targeting the adenosine pathway[16] - Portage has 9 product candidates in development, with multiple clinical readouts expected through the end of calendar year 2024[16] Note 2: Going Concern The company faces significant going concern doubt, with current cash of $7.7 million projected to last only until October 2023, necessitating additional funding - As of July 31, 2023, the Company had approximately $6.4 million of cash and cash equivalents on hand[19] - Current cash and cash equivalents are anticipated to be sufficient to meet cash requirements only through the end of October 2023[22] - These factors raise significant doubt about the Company's ability to continue as a going concern within one year after the date that these financial statements are issued[22] Note 9: Acquisition of Tarus On July 1, 2022, the company acquired Tarus Therapeutics for $17.2 million in shares and up to $32 million in milestones, allocating $28.2 million to IPR&D - Consideration for the Tarus acquisition included 2,425,999 ordinary shares of Portage, valued at $17.2 million[60][62] - Milestone payments of up to $32 million in cash or shares are contingent upon achieving future development and sales milestones, including a $15 million payment upon enrolling the first patient in a Phase 2 trial[60][64] Tarus Purchase Price Allocation (in thousands USD) | Assets Acquired | Fair Value | | :--- | :--- | | Identifiable intangible assets | $28,200 | | Goodwill | $538 | | Total assets | $28,738 | Note 10: In-Process Research and Development (IPR&D) and Deferred Tax Liability IPR&D assets remained at $81.7 million as of June 30, 2023, primarily from iOx and Tarus acquisitions, following significant impairment charges in the prior fiscal year IPR&D Breakdown as of June 30, 2023 (in thousands USD) | Project Group | Description | Value | | :--- | :--- | :--- | | iOx (PORT 2 & 3) | iNKT Engagers | $57,890 | | Oncomer/Saugatuck | DNA Aptamers | $178 | | Tarus (PORT 6-9) | Adenosine Receptors | $23,615 | | Total IPR&D | | $81,683 | - In the year ended March 31, 2023, the company recognized an impairment of $59.3 million for iOx assets and $4.6 million for Tarus assets[66] Note 12: Capital Stock The company issued 171,000 ordinary shares for $0.6 million via its ATM program and has a $30 million committed purchase agreement, both limited by trading volume - From April 1, 2023, to June 30, 2023, the Company sold 171,504 ordinary shares under the ATM program, generating net proceeds of approximately $0.6 million[87] - The company has a Committed Purchase Agreement with Lincoln Park to sell up to $30 million in ordinary shares over 36 months, initiated in July 2022[84] - Access to both the ATM program and the Committed Purchase Agreement is limited based on the company's trading volume on Nasdaq, as noted in the 'Going Concern' section[85] Note 15: Commitments and Contingent Liabilities The company has significant commitments, including an $11.5 million agreement with Parexel and a $12.1 million agreement with Fortrea for clinical services, plus contingent milestone payments for acquisitions - A Master Services Agreement with Parexel for a Phase 2 trial has a budget of $11.5 million[108] - A clinical service agreement with Fortrea Inc. (formerly Labcorp) has a budgeted cost of approximately $12.1 million through August 2025[109] - The company is obligated to pay earnouts for the Tarus and iOx acquisitions upon achievement of certain milestones[116] Note 16: Related Party Transactions This note details related party transactions, including the iOx acquisition, executive compensation, and board remuneration, outlining salaries, bonuses, and share-based payments - On July 18, 2022, the company acquired the remaining ~22% non-controlling interest in iOx by issuing 1,070,000 Portage ordinary shares and assuming a contingent obligation for an additional $25 million in shares or cash upon reaching a Phase 3 milestone[122][124][125] - The CEO's compensation for Fiscal 2024 is a base salary of $642,700 with a target bonus of 59%[129] - In December 2022, the Board approved executive bonuses totaling $0.6 million As of June 30, 2023, approximately $0.4 million of this amount remains accrued and unpaid, pending a new financing[141] Note 17: Financial Instruments and Risk Management The company faces significant liquidity risk due to its early development stage and lack of cash flow, with contingent acquisition liabilities classified as Level 3 and an investment reclassified to Level 1 after IPO - The investment in public company (Intensity) was transferred from Level 3 to Level 1 of the fair value hierarchy due to its IPO on June 30, 2023[157] - Liquidity risk is a major concern, as the company is an early-stage biotech without significant internally generated cash flows Global market uncertainty could impact future access to capital[160][163] Fair Value of Key Financial Liabilities (in thousands USD) | Liability | Fair Value (June 30, 2023) | Fair Value Hierarchy | | :--- | :--- | :--- | | Deferred purchase price payable - Tarus | $7,864 | Level 3 | | Deferred obligation - iOx milestone | $4,552 | Level 3 |